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



 
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2006

                              ----------                              


                        TUESDAY, APRIL 12, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:35 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Robert F. Bennett (chairman) 
presiding.
    Present: Senators Bennett, Cochran, Bond, Burns, Craig, 
Brownback, Kohl, Harkin, Dorgan, and Johnson.

                       DEPARTMENT OF AGRICULTURE

                        Office of the Secretary

STATEMENT OF HON. MIKE JOHANNS, SECRETARY
ACCOMPANIED BY:
        KEITH COLLINS, CHIEF ECONOMIST
        LAWRENCE WACHS, ACTING BUDGET OFFICER


             opening statement of senator robert f. bennett


    Senator Bennett. Good morning, all. The subcommittee will 
please come to order.
    We want to welcome Secretary Johanns. This is his first 
appearance before the subcommittee, and we welcome along with 
him Dr. Collins and Mr. Wachs, who have been here before.
    We appreciate, Mr. Secretary, your changing your schedule 
to meet our accommodation of time. The full committee schedule 
has forced us to move this hearing from last week, and we are 
grateful that you were as flexible as you were.
    The USDA request for our subcommittee is about $15.3 
billion. That excludes the Forest Service, which is in the 
Interior Subcommittee that Senator Burns chairs. And this 
represents the third year of declining budgets for the 
Department. It coincided with my assuming the chairmanship of 
this subcommittee. I do hope there is not a cause-and-effect 
relationship there. I have said to Senator Cochran that when he 
moved from this subcommittee to Homeland Security, he took all 
the money with him. But that does represent a challenge for us, 
having the third year of a lower number to work with.
    The budget eliminates about $470 million in research and 
conservation projects, adds $177 million in new user fees, and 
transfers $300 million in Public Law 480 funds currently in the 
USDA budget to USAID.
    The President's budget calls for an increase of $275 
million in WIC, and FSA would get a $67 million increase for 
staff support and information technology. Mr. Secretary, I 
think we may discuss some of those numbers and whether or not 
there might be some flexibility.
    Now, before I turn to Senator Kohl, I would hope that all 
members of the subcommittee would have any written questions 
that they might have from this or the subsequent two hearings 
in to the subcommittee by the close of business on April 22.
    So, with that, we will hear from Senator Kohl, the ranking 
member, after which I would like to open with a round of 
questions following the Secretary's statement at 5 minutes 
each.
    Senator Kohl.


                     STATEMENT OF SENATOR HERB KOHL


    Senator Kohl. Thank you very much, Senator Bennett. I would 
like to start by saying how much I am pleased that I will be 
working with you and your staff again this year. I know the 
agriculture community recognizes the hard work you do every 
year on their behalf.
    Secretary Johanns, this is your first appearance before our 
committee, and we welcome you. There is no doubt that you 
stepped into a difficult job. We all understand that. And we do 
admire your willingness to take on the many challenges that you 
will face. So we all wish you the best of luck, and we look 
forward to a good working relationship.
    We would also like to welcome back Dr. Collins, with whom 
we have worked over the years, and it is very good to see you 
again here. And we also welcome Mr. Wachs.
    Gentlemen, I regret the fact that the budget proposal again 
will place serious constraints on rural America. You mentioned 
a need to cut spending, but I must point out that this 
subcommittee's resources have been reduced, as Senator Bennett 
has said, every year for the past several years in spite of 
increased demands.
    There are a few highlights in this budget. For example, I 
am pleased to see increases for the WIC and child nutrition 
programs. I also want to comment on the President's proposal to 
extend the MILC program, which is vitally necessary to protect 
dairy farmers in my State and all across the country from 
volatile price fluctuations. I look forward to working with you 
to see that this MILC extension program is reached this year.
    However, in this budget there are many programs that our 
farmers, ranchers, and all of rural America depend on that have 
been deeply cut, if not eliminated entirely. In rural 
development, the RCAP program is cut by nearly $200 million, 
including a reduction of nearly $80 million for water and waste 
grants for low-income communities. Despite the President's 
campaign to provide broadband services to all communities by 
2007, this budget proposes to scale back the loan program by 
more than $180 million and eliminate the broadband grant 
program altogether.
    Congressional priorities throughout the bill have been 
eliminated. Research funding through ARS and CSREES has been 
cut by $370 million. Funding for conservation projects 
throughout the country is cut by $190 million. Although it is 
not unusual for the President's budget to cut congressional 
priorities, for the first time programs funded through formulas 
or competitive awards are also being cut.
    In addition, this budget includes deeper farm bill cuts 
than we have ever seen before, and these are only a few 
examples of the types of cuts found throughout the USDA budget.
    It is difficult to conclude that this budget will not be 
very harmful to many parts of rural America. I am afraid that 
if these cuts continue, the programs will eventually be not 
able to function. I remain hopeful, however, that this year is 
not that time, and I intend to work hard with the chairman to 
protect the important programs funded by USDA.
    So we welcome you here again today, and we look forward to 
your testimony.
    Secretary Johanns. Thank you, sir.
    Senator Bennett. All right. Unless some member of the 
subcommittee has a schedule problem and wants to make an 
opening statement before we go to your testimony, I would 
prefer to leave the opening statements with the chairman and 
the ranking member and go directly to the witness.
    Senator Burns. Mr. Chairman, I have sort of a time thing.
    Senator Bennett. All right. That is why I--go ahead.


                   STATEMENT OF SENATOR CONRAD BURNS


    Senator Burns. I will just make a statement on where this 
budget, I think, is right now pretty much--the way they have 
allocated their money is a little wrong-headed right now. But 
we will finally get there.
    I know that we have not used a lot out of farm programs the 
last couple of years because of market conditions. And just 
like any other bureaucracy and any other department, the monies 
that we allocate for programs become a ceiling rather than a 
floor. We look at those dollars as a floor, and you look at 
them as a ceiling, and we have got to work those things out.
    No, we did not use all the farm programs the last couple of 
years because of market conditions. That is not to say that 
negative market conditions could not happen in this next year. 
And I am not willing to see money come out of those programs, 
your agencies and programs, the Farm Service Agency and the 
Risk Management Agency, I don't want to see those dollars come 
out. I want those dollars there in the event that we need them. 
And I run on the theory that if you have got a healthy rural 
America, you do not need this other rural development business. 
That money will be out there. Everything else kind of takes 
care of itself.


                           PREPARED STATEMENT


    So that is my statement, and if I have to leave early, then 
I will have some questions to submit to the Secretary, and I 
appreciate that.
    [The statement follows:]

               Prepared Statement of Senator Conrad Burns

    Mr. Chairman, thank you for holding this hearing today to begin the 
process of examining USDA's budget for fiscal year 2006. As you well 
know, this is a tough budget year, and the President's budget includes 
a lot of difficult choices. I look forward to working with you to make 
fiscally responsible decisions that treat our farmers and ranchers 
fairly, and keep the Farm Bill intact.
    I do want to briefly touch on a few issues that are of particular 
concern to me. First, of course, are the proposed cuts to commodity 
programs. Federal spending needs to be reduced--there is no question 
about that. But cuts to commodity programs are coming at a particularly 
difficult time. Montana is entering its 7th year of drought. Diesel 
prices are well over $2 per gallon, and the cost of fertilizer is 
through the roof. Farmers who are relying on Farm Bill programs just 
can't afford to absorb any more costs. I worked with Chairman Gregg and 
Chairman Chambliss on the floor to limit the impact of budget cuts as 
much as possible, and I will continue to work with this Committee to 
ensure our farmers and ranchers are not unfairly harmed by the need to 
cut the budget.
    Second, I was disturbed to see the substantial cuts proposed for 
formula funding for land grant universities. Hatch Act and McIntire-
Stennis funds are highly valued by Montana's universities. The research 
conducted at land grant universities contributes greatly to the 
advancement of science for agriculture, forestry, and rural 
development. I appreciate the intent of the changes--to bring about 
performance and accountability through competitive grants. Competitive 
grants have their place in the larger scheme of Federal research funds, 
but they can't be the total package. A long-term investment our land 
grant universities is needed to create high quality, fundamental 
programs. Competitive grants too often focus on exciting, trendy, 
cutting edge research, leaving less exciting topics understudied. 
Formula funds allow universities to engage in long-term planning, and 
to devote research dollars to ``meat-and-potatoes'' research that still 
needs attention, even as the ``next best thing'' appears on the 
horizon.
    Finally, I am concerned about the direction of USDA's efforts to 
implement a National Animal ID system. In my opinion, clear goals and 
expectations are missing. Some funds for pilot projects have been 
distributed, but it is unclear what those projects are expected to 
achieve. It is also not clear how the Department expects to connect a 
patchwork of pilot projects together into a national system. And if a 
national system is put together, how does USDA intend to protect the 
confidentiality of data? Will the information be held by the Federal 
Government, or--as I would prefer--by the States, accessible by USDA as 
needed in times of disease outbreak? I am not comfortable appropriating 
funds to a project as murky as Animal ID seems to be right now, and I 
hope to learn more about the Department's plans during these hearings.
    With those concerns in mind, I will conclude. I look forward to 
hearing testimony today, and throughout the week, on USDA's budget 
proposals.

    Senator Bennett. Thank you.
    Senator Bond indicates he has a conflict as well. Senator 
Johnson, can you wait for the round?
    Senator Johnson. Absolutely.
    Senator Bennett. Okay. Senator Bond.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you, Mr. Chairman, Senator Kohl, and I 
do want to hear the Secretary's testimony, but I do have to be 
someplace at 10:00.
    I welcome you to the subcommittee. I think there is a point 
that needs to be made about the budget. Everybody is talking 
about, well, we need to cut farm programs, the price support 
programs. Well, we should not be unilaterally disarming our 
farmers when we are facing subsidies and competition from our 
trading competitors who provide similar subsidies.
    If the Trade Representative is successful in negotiating 
away those subsidies from others, then I think that the 
President's proposed cuts in farm payment supplements can be 
removed. But I hope that we realize doing that we have to 
maintain the quantitative and qualitative edge that our farmers 
have. And, number one, the most important thing we can do for 
farmers is continue research--research across a broad area. I 
have already mentioned to you my enthusiasm for plant 
biotechnology, and we welcome you at any time you want to come 
to Missouri and look at that. We need to have the research and 
we need to have the transportation.
    And I hope that you can weigh in with your fellow Cabinet 
members. This is not going to take money out of your budget, 
but last week, Mr. Connor testified before the Committee on 
Agriculture on his nomination to be deputy. My colleague asked 
him if he would be an advocate in the administration for 
modernizing our Mississippi and Illinois river locks. His 
response was, I will. It is not important, Senator. It is 
absolutely essential. We flat out have to get our agricultural 
bulk commodities out of the Midwest, down to New Orleans to a 
point of export, or we are absolutely dead in the water. So I 
will be an advocate of that within the administration, I assure 
you.
    We heard his answer. We liked his answer. But OMB has not 
heard it. We have introduced bipartisan legislation. It will be 
marked up tomorrow in WERDA. The folks in the Corps of 
Engineers who manage to keep the most efficient, effective 
means of transporting bulk commodities going into the world 
market where we enjoy a trade surplus depend upon replacing our 
70-year-old locks on the Mississippi and Illinois River that 
were designed to last 50 years and are leaking worse than 
sieves. So that area I hope you can help us.
    I thank you, Mr. Chairman, for the time.
    Senator Bennett. Senator Craig, we are foregoing opening 
statements except for those who have conflicts. Do you have a 
conflict or can you go with the program?
    Senator Craig. I will forego.
    Senator Bennett. Okay. Thank you.
    Senator Craig. I am just sitting here thinking: Am I 
conflicted?

                          PREPARED STATEMENTS

    No, not really. I have problems I want to discuss with the 
Secretary. I will ask that my full statement be a part of the 
record, Mr. Chairman. Thank you.
    Senator Bennett. Without objection.
    The subcommittee has received statements from Senators 
Cochran, Craig, and Johnson which will be placed in the record.
    [The statements follow:]

               Prepared Statement of Senator Thad Cochran

    Mr. Chairman, thank you for holding this hearing on the fiscal year 
2006 Agriculture Appropriations programs and I welcome Secretary 
Johanns to the Committee. Since Secretary Johanns' swearing in on 
January 21, he has shown great leadership in moving the interests of 
America's agriculture industries forward.
    I am especially pleased by the recent announcement that Iraq will 
purchase 60,000 tons of U.S. rice. Historically, Iraq has long been an 
important market for the U.S. rice industry. This purchase is an 
indication that regaining the export markets in the Persian Gulf area 
is a tangible benefit of our foreign policy. I want to thank Secretary 
Johanns and the USDA staff for their help in making this purchase of 
U.S. rice possible.
    I am also pleased to see the recent news that Taiwan will reopen 
its border to U.S. beef. During Secretary Johanns's nomination hearing 
before the Senate Agriculture Committee, much discussion centered on 
reopening U.S. beef export markets to Asia, especially Japan. U.S. 
cattle producers appreciate the continued effort you have made to 
reopen these markets and I hope that other countries such as Japan will 
follow Taiwan's lead and reopen their borders.
    An important aspect of the Agriculture Appropriations bill is the 
funding it provides for agriculture research. This research is a 
critical part of ensuring U.S. producers remain the leaders in food and 
fiber production.
    I recently attended the opening of the Agriculture Research 
Service's National Biological Control Laboratory in Stoneville, 
Mississippi. This is a world class facility that will focus research in 
perfecting and expanding methods for controlling insects, weeds, and 
microbial pests by using beneficial control technologies. Although the 
research conducted at many of the Agricultural Research Service's 
facilities center on agricultural applications, the research goals of 
facilities like the National Biological Control Laboratory will touch 
the lives of almost every citizen. Research focused on the treatment 
and the control of kudzu, fire ants, subterranean termites, and 
mosquitoes will be conducted at the laboratory. It is important that we 
continue to support this research.
    Once again, I want to thank Secretary Johanns, for his dedication 
to America's farmers and ranchers and look forward to the testimony.
                                 ______
                                 

               Prepared Statement of Senator Larry Craig

    Thank you for appearing before the Committee today to discuss the 
U.S. Department of Agriculture's fiscal year 2006 proposed budget. In 
your short time as Secretary, you have already had to tackle some very 
difficult issues, and I appreciate the resolve and straightforward 
approach you have given these issues.
    We are in a time of restrictive spending where hard decisions must 
be made. While I am a major proponent of comprehensive spending 
cutbacks, I am very concerned about the disproportionate cuts to 
agriculture funding in the President's fiscal year 2006 budget when 
compared to other areas in the government. Recently, I joined 50 other 
Senators in a letter to Budget Chairman Gregg and Senator Conrad 
highlighting this issue.
    As you know, Congress is close to conferencing the budget, and I am 
supportive of the Senate's proposal on agriculture savings. The budget 
will continue to work its way through the process, and hopefully the 
outcome will bring agriculture savings to a more proportionate level 
with cuts in other areas of the government.
    Whatever the budget outcome, I would like to point to some 
important issues I believe are important to my State of Idaho and to 
our Nation's agriculture industry, food consumers, and rural 
communities.
    Again, thank you for your work over the first few months of your 
term, and for your willingness to consider some of the items of concern 
to Idaho.
                                 ______
                                 

               Prepared Statement of Senator Tim Johnson

    Thank you Chairman Bennett and Ranking Member Kohl, it is my 
pleasure to participate in today's hearing concerning the fiscal year 
2006 United States Department of Agriculture (USDA) budget, and I 
appreciate the Secretary's time and attention to this important 
subject.
    I am deeply concerned for what I perceive to be a sorely inadequate 
proposed USDA budget. Agriculture is a crucial industry in South 
Dakota, with sales of agriculture commodities accounting for $3 billion 
each year. By this same token, USDA programs and Federal funding are 
crucial for producers when markets are challenging and prices are 
depressed. The Farm Bill that was hammered out in 2002 is a contract 
with rural America, with South Dakota, to ensure adequate safety nets 
and increased opportunities for rural communities. Numerous members of 
Congress, as well as agricultural organizations concerned with the 
President's proposed budget, have pointed out that the Farm Bill has 
come in at $16 billion under projected costs because of solid commodity 
prices. It is astonishing to me, then, that at a time when producers 
need the contract negotiated by Congress and signed into law by this 
President, this Administration would propose limiting the benefits 
promised to producers. We cannot, I repeat, we cannot, balance the 
national deficit on the backs of our Nation's producers.
    We've seen a drastic shift in population concentration in South 
Dakota, which is reflected in U.S. Census Bureau and the 2002 Census of 
Agriculture data. While the net population of South Dakota continues to 
increase, thousands of residents in rural counties have had to relocate 
to find economic opportunities. USDA programs are crucial for 
maintaining status quo, and there are no substitutes for these 
initiatives.
    One especially troublesome proposal is the Administration's 
treatment of our Federal formula funds. South Dakota State University 
(SDSU), a land-grant university in Brookings, South Dakota, relies 
heavily on Hatch, McIntire-Stennis, and Animal Health Federal formula 
funds. SDSU is especially concerned for the impact of the President's 
proposed cuts on their research centers and ability to function in an 
effective manner. The President's proposed budget would cut 45 faculty 
and staff at SDSU, with a 25 to 50 percent reduction in graduate 
students. These cuts will result in the closure of at least one SDSU 
research farm, and at least one SDSU public service laboratory. The 
Administration's emphasis on competitive grants is a bad idea for our 
land-grant institutions, and as a member of this subcommittee, I will 
work with my colleagues to rectify this flawed proposal.
    The Resource, Conservation, and Development Program (RC&Ds) are 
funded at only $25 billion, a reduction from fiscal year 2005 funding 
at $51 billion. RC&Ds are important options in rural communities that 
foster economic activity, and use resources available to our rural 
communities to accomplish this. Decreased funding means fewer 
opportunities for economic growth.
    While the Special Supplemental Nutrition Program for Women, 
Infants, and Children (WIC) will see a proposed increase from fiscal 
year 2005 funding levels of $5.2 billion to $5.5 billion for fiscal 
year 2006, I am concerned that this increase will not actually provide 
the dollars necessary to ensure our nutrition programs are fully 
funded. We're seeing a drastically increased need for these types of 
programs and a marginal increase in funding that doesn't offset that 
need.
    The Commodity Supplemental Food Program (CSFP) that impacts so many 
of our Nation's seniors, and impacts a significant number of South 
Dakotans, was funded at only $106 million in the President's proposed 
budget, when nearly $146 million is needed to maintain the current 
caseloads. This proposed hit would drastically impact the number of 
folks, including seniors who rely on this program for vital nutrients 
in addition to social contact, in South Dakota who could participate in 
the program. A proactive agenda on programmatic dollars with nutrition 
programs is crucial, as increased costs on the front end lead to 
decreased expenses with health care--maintaining quality of life should 
be a priority by this United States Congress.
    Last year, $33 million was devoted to an animal identification 
system via the Omnibus spending bill, and for fiscal year 2006, the 
President has proposed an additional $33 million for the initiative. 
Given the tremendous size and scale of this program, and the projected 
costs, I fail to see how this dollar value will be significant. If USDA 
is going to lead the charge, especially without a Congressional 
mandate, the Department needs to ensure adequate communication with 
Congress and consideration of stakeholder concerns.
    I retain significant concerns for the proposal to cut marketing 
loan gains, direct, and counter-cyclical programs by 5 percent across 
the board. The Loan Deficiency Payment (LDP) program is an incredibly 
popular program in my State. The Administration's proposal to base this 
program on historical production penalizes a producer. It prevents the 
producer from recouping anything after a good year.
    I am encouraged that the President, and this Administration, has 
proposed common-sense payment limitations. I introduced legislation 
with Senators Grassley, Dorgan, and Hagel that would lower the payment 
limitation to $250,000, from its current level of $360,000. Lowering 
the payment limit would save millions of dollars, and would allow Farm 
Bill programs to be targeted to producers who truly need these payments 
to stay in the fold. In my home State of South Dakota, in 2002, 20,259 
farms with subsidies received an average of $16,518--a far cry from the 
hundreds of thousands of dollars some farms receive. While I realize 
the differences in production input costs depending on commodity, it is 
my hope that $250,000 can be seen as an equitable proposal and as a 
practical solution to our funding shortfall.
    Once again, I would like to thank Secretary Johanns for appearing 
before the Subcommittee and Chairman Bennett and Ranking Member Kohl 
for holding today's hearing on the fiscal year 2006 Agriculture Budget.

    Senator Bennett. Mr. Secretary, thank you for being here, 
and we turn to you for your comments.

                       STATEMENT OF MIKE JOHANNS

    Secretary Johanns. Thank you very much, Mr. Chairman.
    Mr. Chairman and distinguished members of the Committee, I 
want you to know it is a great honor for me to be here the 
first time as Secretary of Agriculture to discuss the fiscal 
year 2006 budget. I look forward to serving as Secretary, but I 
also look forward to working with this Committee to carry out 
our work to serve the interests of agriculture.
    As you have noted, I am joined by two very experienced 
individuals: Larry Wachs, the Acting Budget Director, and Dr. 
Keith Collins, our Chief Economist.
    I will summarize my statement, and then I would ask that my 
full written remarks be included in the record.
    Senator Bennett. Without objection.
    Secretary Johanns. While I am new to the Federal budget 
process, I do know firsthand the challenges presented in 
enacting budgets at the State level, and the local level, for 
that matter. As a Governor, I had the experience of making 
difficult decisions.
    Mr. Chairman, I can relate. I left Nebraska in January. The 
Forecasting Board met right after I left and raised the 
forecast and said more revenues would be coming in. Some of my 
friends asked why it took me so long to leave the State.
    I know that the President and the Congress are facing 
similar challenges. I am here to say that I support the 
President's budget. It meets our most important priorities 
while exercising the fiscal discipline that is necessary to 
deal with the deficit.
    Reducing the deficit is a critical part of the President's 
economic plan. The long-term stability of the economy depends 
on whether we act now. Farmers and ranchers know the importance 
of a healthy economy. It raises income. It increases the demand 
for their products.
    At the same time as we reduce the deficit, we must work 
hard to leverage our other tools, such as an aggressive trade 
agenda and tax policy to maintain a strong farm economy.
    In his February 2nd State of the Union address, the 
President underscored the need to restrain spending in order to 
sustain economic prosperity. The budget savings and reforms in 
the budget are important components of achieving the 
President's goal of cutting the budget deficit in half by 2009, 
and we urge Congress to support the reforms.
    The fiscal year 2006 budget includes more than 150 
reductions, reforms, and terminations in nondefense, 
discretionary programs government-wide. The Administration 
wants to work with Congress to achieve these savings.
    The President's budget, which was released on February 7, 
indicates that the USDA outlays are estimated to increase from 
about $72 billion in 2004 to nearly $95 billion in 2005 and 
then to remain roughly at that level in 2006. The increase in 
2005 was due to higher mandatory outlays in farm programs as 
well as nutrition assistance programs.
    For the Department's discretionary budget, the overall 
budget authority request is $19.4 billion. This compares to $22 
billion provided in 2005, which included $1 billion in one-time 
disaster funding for wildfire management and hurricane 
assistance. That is not continued in the 2006 budget. The 
appropriation request pending before the Committee, which does 
not include the Forest Service, is $15.3 billion.
    Because the discretionary budget is very tight, we have had 
to make recommendations for the reduction or termination of 
some programs based upon best judgment concerning priorities in 
program effectiveness, and these proposals are detailed in my 
formal statement. I will offer a few specific highlights.
    I have stated that my immediate top priority as Secretary 
is to get American beef exports moving back into Japan. We need 
to do all we can, however, to prevent a further incident of 
BSE. We want to ensure that our agricultural imports and 
exports are safe for consumers, not only at home but abroad as 
well.
    The Department has been engaged in a one-time enhanced 
testing program during 2004-2005. I can tell you that we 
checked just before the hearing started today, and we have 
tested about 314,000 animals in this program, all negative.
    The Department is also in the process of implementing a 
National Animal Identification System. For 2006, the budget 
proposes continued funding for the implementation of the System 
and for ongoing BSE testing. Once we have evaluated the 
enhanced testing program, a decision on the number of animals 
needed to be tested in the future will be made.
    The budget provides $7.5 million in additional 
appropriations to increase our scientific understanding of the 
disease and to develop the technology needed by regulatory 
agencies to establish science-based policies and control 
programs.
    Turning to the threats to our food supply, the budget 
proposes a government-wide effort of nearly $600 million for 
the President's Food and Agriculture Defense Initiative. For 
USDA's part, the budget proposes $317 million for program 
activities and $59 million to complete construction of the 
National Center for Animal Health in Ames, Iowa. Program 
funding includes a $140 million increase above 2005 to 
strengthen the networks for responding to food emergencies and 
plant and animal diseases, conducting additional research, and 
enhancing monitoring and surveillance efforts to quickly detect 
pests and disease.
    The President's budget proposes that the Department's farm 
programs also contribute to the government-wide deficit 
reduction effort. There are several proposals cited in the 
budget to accomplish that objective. These proposals are 
equitably spread across the agriculture production sector, 
designed to work within the existing structure of the 2002 Farm 
Bill, and to achieve savings between 3 and 5 percent from 
baseline spending over the 10-year period. Together, our 
proposals would save about $587 million in 2006 and $5.7 
billion over 10 years. The majority of the savings from these 
proposals would be attained through the across-the-board 
reduction in program payments.
    We believe the President has presented a budget that has 
some reasonable suggestions for reducing the cost of farm 
programs. However, we acknowledge that many of these policy 
proposals, such as the reduction in the payment limit, are 
quite sensitive. We recognize Congress may have other proposals 
to achieve these savings, and we are willing to work with the 
Congress on other cost savings recommendations.
    The budget proposes that starting in 2007, the crop 
insurance program also make a contribution to deficit 
reduction. Net outlays for crop insurance have grown nearly 50 
percent between 2001 and 2006, with the implementation of crop 
insurance reforms in 2000. In addition, since 2000 we have seen 
four ad hoc disaster programs covering 6 crop years; the total 
cost of that was $10 billion. In this regard, the budget 
includes proposals to enhance crop insurance coverage and 
reduce program delivery costs so that crop insurance will 
provide coverage that is sufficient to sustain most farmers in 
times of loss. Our proposals together would save an estimated 
$140 million annually in this area, beginning in 2007, 
contributing about $1.3 billion to deficit reduction over the 
10 years.
    Based on the 2002 Farm Bill, this Administration has 
implemented the largest conservation program in history. The 
Farm Bill provided in excess of $17 billion in new conservation 
funding over 10 years. The budget includes $3.8 billion in 
mandatory funding to continue implementation of the 
conservation programs authorized by the Farm Bill. Total 
acreage covered by these programs would increase from 159 
million acres to 184 million acres in 2006.
    The budget also includes $814 million in discretionary 
funding for ongoing conservation work that forms the foundation 
of the Department's conservation partnership with farmers and 
ranchers. This is a decrease of $177 million below the 2005 
enacted level and reflects the elimination of Public Law 566 
and 534 watershed programs, conservation operations earmarks, 
and a reduction of $25 million in funding for the Resource 
Conservation and Development Program. Within the total for 
conservation program operations, priority will be placed on 
other high-priority conservation activities, such as providing 
more conservation technical assistance to livestock producers 
to help them develop nutrient-management plans, and to meet the 
regulatory challenges they face.
    Participation levels in the Department's three major food 
nutrition assistance programs--Food Stamps, WIC, and Child 
Nutrition--have been growing in recent years, as you know, and 
the budget needs to keep pace with the trend. WIC participation 
has been growing more than 3 percent each year. Food Stamp 
participation is actually up about 10 percent each year and 
School Lunch participation has reached a new record level of 
29.8 million children per day.
    The budget contains sufficient resources to fully fund 
expected participation for these programs. It also provides 
contingency funding in the event that additional resources 
would be needed.
    The Department not only provides food assistance 
domestically; it also assists 2.6 million women and children in 
developing countries through preschool and school feeding 
programs carried out under the McGovern-Dole International Food 
for Education and Child Nutrition Program. The budget increases 
funding for the McGovern-Dole program by more than 15 percent 
over the 2005 enacted level.
    Research to improve the quality and productivity of 
America's food production and distribution system was the 
central reason why USDA was founded in 1862. America has led 
the world in innovation and efficiency through our research, 
and that work must continue, especially if we want to maintain 
our lead.
    The 2006 budget places a high priority on critical research 
issues facing American agriculture and strengthening the 
quality of research by focusing on competitive programs. The 
Administration strongly believes that research should be funded 
through peer-reviewed competitive programs. Therefore, over the 
next 2 years, research formula funds will be redirected on a 
merit-based competitive process. As part of the change, the 
2006 budget includes a $70 million increase for the National 
Research Initiative and a new $75 million competitive research 
grant program targeted to regional, State, and local needs.
    Mr. Chairman, my full written statement includes additional 
details on many areas of the USDA budget, including a total 
program level of $973 million for food safety for meat and 
poultry and egg products, partially funded by a proposed new 
user fee; $6 billion for international activities such as trade 
promotion; and $13.5 billion in rural development funding, 
which includes $4.5 billion for homeownership opportunities.
    In addition, USDA continues to make improvements to our 
management to ensure that the Department is efficient, that it 
is effective and guided by equality for all customers and 
employees. As a former Governor, I am well aware of the need 
for good management as well as accountability for taxpayer 
funds, and I look forward to working with this committee and 
the Congress to ensure the best possible stewardship of our 
resources.

                           PREPARED STATEMENT

    In conclusion, while the President is serious about 
reducing the deficit so that the economy can continue to grow 
over the longer term, it is still a robust budget and it 
continues to fund key priorities. No Department or sector is 
being singled out, and USDA is part of a team that will do its 
part to produce savings that will strengthen the economy while 
adopting reforms that improve our programs.
    Thank you very much, Mr. Chairman. We would be happy to 
answer any questions.
    [The statement follows:]

                   Prepared Statement of Mike Johanns

    Mr. Chairman and distinguished members of this Committee, it is 
indeed a great honor for me to appear before you as Secretary of 
Agriculture to discuss the fiscal year 2006 budget for the Department 
of Agriculture (USDA).
    I am joined today by Larry Wachs, our Acting Budget Officer and 
Keith Collins, our Chief Economist.
    This is my first appearance before this Committee. Let me say that 
I am grateful to the President for nominating me for this position. I 
look forward to serving as Secretary of Agriculture and working 
together with this Committee to carry out our work to serve the 
interests of agriculture, rural communities and consumers of food 
worldwide. I am no stranger to agriculture or to public service. I grew 
up on a dairy farm in Mitchell County, Iowa, and I have always had a 
deep passion for agriculture. As Governor of Nebraska, I have been 
actively involved in agricultural issues affecting my State. 
Agriculture is a key economic driver in Nebraska since it is the 
Nation's largest beef processing State and the fourth largest exporter 
of agricultural products. As Governor, I led trade missions all across 
the world to market our food products. I also worked aggressively on 
drought issues and drought policy as well as pursuing value added 
opportunities, such as ethanol production.
    While I am new to the Federal budget process, I know first hand the 
challenges related to presenting and enacting budgets at the State 
level. As a Governor, I had the experience of having to make some 
difficult decisions related to the budget since State law required the 
budget to be balanced. I know the President and the Congress are facing 
similar challenges. I am here to say that I support the President's 
budget for the Department. It meets our most important priorities, 
while exercising the kind of fiscal discipline that is absolutely 
necessary to reduce the Federal deficit. Reducing the deficit is a 
critical part of the President's economic plan. The long-term stability 
of the economy depends on whether we have the will to act now. Farmers 
and ranchers know the importance of a healthy economy, which raises 
incomes and increases demand for their products. At the same time as we 
reduce the deficit, we must work hard to leverage other tools, such as 
our aggressive trade agenda, to maintain the strong farm economy.
    It is now my responsibility to pick up where Secretary Veneman left 
off and work with the Congress on the 2006 budget. I want to assure the 
Committee that the Department will be fully engaged to provide whatever 
assistance Congress may need as it carries out its responsibility 
related to the 2006 budget.
    Because of the overriding need to reduce the Federal deficit, USDA, 
like every Federal agency, will share the governmentwide burden of 
controlling Federal spending. There are proposals in the budget for 
USDA that will produce real savings in both mandatory and discretionary 
spending. With that said, the President's 2006 budget request for USDA 
does meet our priorities by promoting economic opportunity and 
ownership for farmers and rural residents, protecting America's 
agriculture and food supply, and providing important assistance to the 
needy at home and abroad. It also makes government more effective by 
improving management and accountability and by eliminating, reforming, 
or phasing out programs that are not cost-effective or do not show 
measurable results.
    The President's Budget, which was released on February 7, indicates 
that USDA outlays are estimated to increase from about $72 billion in 
2004 to nearly $95 billion in 2005 and then to remain roughly at that 
level in 2006. The increase in 2005 was due to higher mandatory outlays 
in the farm programs as well as in the nutrition assistance programs. 
For the Department's discretionary budget, the overall budget authority 
request is $19.4 billion. This compares to the $22 billion provided in 
2005, which included $1 billion in one-time disaster funding for 
wildfire management and hurricane assistance not continued in the 2006 
budget. The appropriation request pending before this Committee, which 
does not include the Forest Service, is $15.3 billion.
    I would now like to focus on some specific program highlights.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    I have stated that my immediate top priority as Secretary is to get 
American beef exports moving again to Japan. We also need to do all we 
can do to prevent a further incident of BSE. We want to ensure that our 
agricultural imports and exports are safe for consumers at home and 
abroad.
    For 2006, the budget proposes funding for BSE testing and 
implementation of the National Animal Identification System (NAIS). The 
Department has been engaged in a one-time, enhanced testing program 
during 2004 and 2005. As of late March, we have tested about 295,000 
animals so far, all of which have been negative. Once we have evaluated 
the results of the enhanced testing program, a decision on the number 
of animals needed to be tested in the future will be made. The 
Department is also in the process of implementing the NAIS. As of late 
March, 44 States have the ability to register livestock production 
operations in the System. The goal is to have all States operational 
for premises registration by the middle of 2005. In addition, the 
budget provides an increase of $7.5 million in appropriations for 
increasing our scientific understanding of the disease and developing 
the technology needed by regulatory agencies to establish science-based 
policies and control programs.
    BSE is the disease that is now getting much of the attention. Of 
course, there are other diseases and pests that can affect livestock 
and crops that we need to guard against. We need to be constantly 
vigilant to prevent the deliberate or unintentional introduction or 
spread of plant and animal diseases and pests that can cause severe 
economic or environmental damage. Our budget request for 2006 continues 
the Department's efforts to find and control the spread of deleterious 
animal and plant pests and diseases.

                FOOD AND AGRICULTURE DEFENSE INITIATIVE

    In order to protect American agriculture and the food supply from 
intentional terrorist threats and unintentional introductions, the 
budget proposes a governmentwide effort of nearly $600 million for the 
President's Food and Agriculture Defense Initiative. For USDA's part, 
the budget proposes $317 million for ongoing program activities and $59 
million to complete construction of the National Center for Animal 
Health in Ames, Iowa. Program funding for these ongoing programs 
includes a $140 million increase, 79 percent above 2005, to strengthen 
the networks for responding to food emergencies and plant and animal 
diseases, conduct additional research and enhance monitoring and 
surveillance efforts to quickly detect pest and disease threats.

                              FOOD SAFETY

    The Nation's current food safety inspection system has demonstrated 
that our food supply is the safest in the world and continues to show 
improvements based on historical reductions in the incidence of 
foodborne illness. The 2006 budget provides for continued protection of 
the Nation's supply of meat, poultry and egg products. The budget 
includes a program level of $973 million for the Food Safety and 
Inspection Service. This is an increase of $36 million over 2005. The 
additional funds are requested to maintain Federal support of State 
inspection programs, and to provide for a more effective front-line 
inspection workforce to improve our ability to detect and respond to 
intentional and unintentional contamination in the food supply. The 
budget requests an appropriation of $850 million and $123 million in 
existing fees. Of the $850 million requested to be appropriated, the 
budget assumes $139 million will be derived from new user fees.

                         FARM PROGRAM SPENDING

    The U.S. farm economy has never been stronger. Record harvests and 
a strong livestock sector have contributed to the growing strength of 
the farm sector. Since 2003, producers have experienced record crops, 
record cash receipts, and record net farm income. The large crops that 
boosted farm income in 2003 and 2004 are now impacting domestic markets 
with heavy supplies that are weakening prices and driving up farm 
program costs. For 2005 and 2006, Commodity Credit Corporation (CCC) 
outlays are now estimated to total $24 billion and $19 billion, 
respectively, compared to only about $11 billion in 2004.
    The prospect of higher budget outlays for the commodity programs 
may complicate the job of reducing the Federal deficit. In this regard, 
the President's budget proposes that the farm programs contribute to 
the governmentwide deficit reduction effort. There are several 
proposals cited in the budget to accomplish that objective. These 
proposals are designed to work within the existing structure of the 
2002 Farm Bill and achieve savings of between 3 and 5 percent from 
baseline spending over 10 years. The proposals which are equitably 
spread across the agriculture production sector include: reducing farm 
program payments across the board by 5 percent, basing marketing loan 
benefits on historical production, tightening payment limits, lowering 
dairy program costs and reinstituting a small sugar marketing 
assessment.
    Last October, President Bush committed to working with Congress to 
extend the Milk Income Loss Contract (MILC) program for 2 years. The 
budget includes additional funding to meet this commitment and continue 
this program that provides a safety net for small diary producers.
    Together, these proposals would save about $587 million in 2006 and 
$5.7 billion over 10 years. The majority of savings from these 
proposals is obtained through the across the board reduction in program 
payments. We are willing to work with the Congress in order to achieve 
the savings estimated in the President's budget.

                                 TRADE

    Expanding markets for agricultural products is critical to the 
long-term health and prosperity of our agricultural sector. The budget 
provides $6 billion for the Department's international activities to 
ensure that we can continue our important work of expanding access to 
overseas markets and developing long-term trading relations with those 
markets. Of particular importance, funding for the Foreign Agricultural 
Service is increased so the agency is able to maintain its overseas 
presence and continue to represent and advocate for U.S. agricultural 
interests on a global basis.

                             CROP INSURANCE

    The budget proposes that starting in 2007 the crop insurance 
program also make a contribution to deficit reduction. Net outlays for 
crop insurance will have grown nearly 50 percent between 2001 and 2006 
with the implementation of crop insurance reforms in 2000. In addition, 
since 2002 we have seen four ad hoc disaster programs covering 6 crop 
years for a total cost of $10 billion. In this regard, the budget 
includes proposals to enhance crop insurance coverage and reduce 
program delivery costs so that crop insurance will provide coverage 
that is sufficient to sustain most farmers in times of loss. Proposals 
include a higher minimum coverage level, tying the receipt of direct 
payments for program crops to the purchase of crop insurance and 
changes in fees, premiums rates and delivery expenses. These proposals 
together would save an estimated $140 million annually, beginning in 
2007, contributing about $1.3 billion to deficit reduction over the 
next 10 years.

                              CONSERVATION

    Based on the 2002 Farm Bill, this Administration has implemented 
the largest conservation program in history. The Farm Bill provided 
more than $17 billion in new conservation funding over 10 years. The 
budget includes $3.8 billion in mandatory funding to continue 
implementation of the conservation programs as authorized in the Farm 
Bill. Total acreage covered by these programs would increase from 159 
million acres to 184 million acres in 2006. The Conservation Security 
Program would receive an additional $72 million to extend the program 
to approximately 200 additional watersheds in 2006. For the 
Conservation Reserve Program, USDA's largest conservation program, 
enrollment of 37.2 million acres is projected for 2006 up from the 
current enrollment level of 34.7 million acres.
    The budget also includes $814 million in discretionary funding for 
ongoing conservation work which forms the foundation of the 
Department's conservation partnership with farmers and ranchers. This 
is a decrease of $177 million below the 2005 enacted level and reflects 
the elimination of the Public Law 566 and Public Law 534 watershed 
programs, conservation operations earmarks, and a reduction of $25 
million in funding for the Resource Conservation and Development 
Program. Within the total for conservation operations priority will be 
placed on other high priority conservation activities, such as 
providing more conservation technical assistance to livestock producers 
to help them develop nutrient-management plans and to meet regulatory 
challenges.

                           RURAL DEVELOPMENT

    Rural America needs to share in the Nation's prosperity. It must 
have adequate financing for housing, community infrastructure, and 
rural businesses. The President's 2006 budget includes $13.5 billion in 
loan, grant, and related assistance for this purpose, including $4.5 
billion for providing homeownership opportunities. The 2006 budget also 
includes a major initiative to deal with the changing environment for 
the multi-family housing program. It provides $214 million for 
protecting the rents of tenants who live in projects that are eligible 
to prepay their loans and leave the program. The Administration will 
also be proposing legislation later this year to provide new 
authorities that would help meet the capital needs for necessary 
repairs and rehabilitations of projects that remain in the program.

                                RESEARCH

    Research to improve the quality and productivity of America's food 
production and distribution system was the central reason that USDA was 
created in 1862. America has led the world in innovation and efficiency 
through our research, and that work continues, especially if we seek to 
maintain the lead. The 2006 budget places a high priority on critical 
research issues facing American agriculture and strengthening the 
quality of the research by focusing on competitive programs. The 
Administration strongly believes that research should be funded through 
peer-reviewed competitive programs. Therefore, over the next 2 years, 
research formula funds will be redirected to a merit-based competitive 
process. As part of this change, the 2006 budget includes a $70 million 
increase for the National Research Initiative, and a new $75 million 
competitive research grant program targeted to regional, State, and 
local needs. In addition, the budget supports research's key role in 
previously mentioned high priority initiatives, including the 
President's Food and Agriculture Defense Initiative and responding to 
BSE.

                            FOOD ASSISTANCE

    Participation levels in the Department's three major nutrition 
assistance programs--Food Stamps, WIC and Child Nutrition--have been 
growing in recent years and the budget needs to keep pace with that 
trend. WIC participation has been growing at more than 3 percent each 
year, Food Stamp participation is up about 10 percent each year and 
School Lunch participation has reached a new record level of 29.8 
million children per day. The budget contains sufficient resources to 
fully fund expected participation for these programs and provides for 
contingency funding in the event additional resources are needed.
    For Food Stamps, legislation will be proposed to tie automatic 
eligibility for Temporary Assistance for Needy Families (TANF) 
recipients to those who receive actual cash assistance. This change 
will reduce food stamp costs by $57 million in 2006 and by about $1.1 
billion over 10 years. The 2006 budget will continue to exclude special 
military pay when determining food stamp benefits for deployed members 
of the armed services.
    The WIC request provides full funding for all those estimated to be 
eligible and seeking services. But, because food costs have risen 
sharply for the WIC program in recent years, the Department will be 
looking into ways to contain costs and continue to improve the 
program's performance.
    The Department not only provides food assistance domestically, it 
also assists some 2.6 millions of women and children in developing 
countries through preschool and school funding programs carried out 
through the McGovern-Dole International Food for Education and Child 
Nutrition Program. The budget increases funding for the McGovern-Dole 
Program by more than 15 percent over the 2005 enacted level.

                         DEPARTMENT MANAGEMENT

    As a former Governor, I know effective management is a critical 
part of what I want to accomplish in the coming years. I am looking 
forward to working with the Department's senior managers as we take up 
the challenge of managing the Department of Agriculture. This 
Department is a large and complex organization with a program level of 
over $100 billion and a staff of over 100,000. If USDA were a private 
corporation it would be ranked as one of America's largest 
corporations. So there are many challenges in the management area and 
our budget request takes this into account.
    It is crucial that the Department be as efficient, effective and 
discrimination-free as possible and that we deliver the best return on 
taxpayer's investments. In recent years, the Department has made 
significant progress in improving management. Some notable 
accomplishments include:
  --The Department's Strategic Plan is used throughout the Department 
        to communicate and drive our programmatic, budget and 
        management priorities. The Plan was used to guide the 2006 
        budget request.
  --The Department has developed a comprehensive set of performance 
        goals, measures, and targets for USDA activities.
  --The Department received its first-ever unqualified or ``clean'' 
        opinion on the fiscal year 2002 financial statements and has 
        received a clean opinion each year since.
  --USDA agencies are deploying new technologies that allow customers 
        to conduct business transactions over the Internet, saving both 
        customers and the Department time and money.
    The 2006 budget builds upon the progress made so far by providing 
the funding necessary to ensure there are staff and resources in place 
to continue improving customer service and providing efficient program 
delivery. As part of the 2006 budget, the Department would also 
continue efforts to modernize its field office service centers and to 
expand the use of Geographic Information Systems (GIS) to facilitate 
customer service. Funds to continue renovations of our headquarters 
facilities are also being requested in order to ensure that employees 
and customers have a safe and modern working environment.
    In summary, I want to emphasize that the President is serious about 
reducing the deficit so that the economy can continue to grow over the 
longer term. This budget moves us in the right direction while 
continuing to meet key priorities. No Department or sector is being 
singled out and USDA will do its part in producing savings that will 
strengthen the economy and adopt reforms that will improve our 
programs.
    That concludes my statement. I look forward to working with members 
and staff of the Committee and will be glad to answer questions you may 
have on our budget proposals.

    Senator Bennett. Thank you, Mr. Secretary. We appreciate 
your comments, and again we appreciate your willingness to 
serve in this highly challenging position that you have 
accepted. I think you are finding it probably a little more 
challenging than you may have thought the day before being 
sworn in.
    You said in your statement that you would be willing to 
work with the Congress and consider other recommendations 
besides those that were contained in the President's budget. 
And that is good news for us to hear because, as you have heard 
from those that did make opening comments, there may be some 
different priorities or different challenges that we would want 
to address. And so I just want to underscore your comment about 
your flexibility, your willingness to look at changes within 
this budget. Let's be clear about this. I am assuming you are 
not willing to deal with the top line.

                           DEFICIT REDUCTION

    Secretary Johanns. The top line is the goal. It is deficit 
reduction. You know, it appears to me that no matter which side 
of the aisle, which philosophical approach, deficit reduction 
is just critical to the future of this economy. The President 
has put out his suggestions, which I believe are reasonable 
suggestions, for cost reductions.
    We do acknowledge that the policy proposals, such as the 
reduction in the farm program payments limit, are sensitive 
issues. Mr. Chairman, I want to underscore to you that we will 
work with Congress to try to achieve the savings that were set 
out in the President's proposal.
    Senator Bennett. Okay. Thank you. I appreciate that. I am 
sure the other members of the subcommittee do.

                        CANADIAN BORDER CLOSURE

    Let me raise an issue that probably has some disagreement 
within the subcommittee, but for that reason I think it is 
important for us to at least understand it. I would like to 
discuss the situation with respect to the Canadian border. 
There are some who are rejoicing that the Canadian border is 
closed and hope that it stays closed forever and ever. And 
there are others who are in serious difficulty. We have a 
processing plant in Utah that now is operating only 3 days a 
week, where prior to the closing of the Canadian border with 
respect to live cattle was running a full 6-day full-time shift 
and doing well.
    We understand that many people are building facilities in 
Canada on the assumption that the permanent effect of this will 
be to destroy the market opportunities for processing plants in 
the United States and that we could see a permanent shift into 
Canada as the Canadians decide, well, we are not going to ship 
cattle to America anymore, we will process them ourselves and 
go overseas then from a Canadian base.
    Can you discuss this whole situation? What does it look 
like with respect to the Canadian border? I do understand that 
boxed beef is being imported into the United States, but 
discuss with us the question of the Canadian border and how 
soon you expect that it might be opened or if you feel there is 
a prospect that it could be delayed indefinitely.
    Secretary Johanns. I would offer a number of observations 
and, Mr. Chairman, I would start out and say I believe the 
observations you have made are accurate. Canada is killing 
probably about 80,000 animals a week. Every expectation is that 
that number will continue to grow. This year, it probably will 
surpass 100,000. They feel very, very strongly about their beef 
industry, as we do. They are very proud of their industry. They 
have done many of the same things that we have done in terms of 
the firewalls relative to BSE. In fact, they banned the 
ruminant-to-ruminant feeding on the same day we did. They are 
working hard and aggressively, as we are, to implement that 
ban.
    The whole goal here is for the USDA to make its decisions 
based upon good science, and the minimal risk rule allows for 
the importation of beef products from animals under 30 months 
and live animals headed to slaughter under 30 months from 
minimal-risk countries including Canada. And every indication 
is that that is safe. And I believe very, very strongly the 
science supports that.
    We were ready to proceed with the rule, as you know, in the 
first week of March. A decision was made by a Federal court 
judge in Montana to hold that up. That decision is now on 
appeal to the Ninth Circuit Court of Appeals. I believe our 
brief is due on Thursday of this week. So we are now working 
our way through the legal process. Once that is resolved, given 
the go-ahead, we are ready to proceed very, very quickly. But, 
of course, we need to work through the legal process.
    The other observation in your question that once the 
industry restructures in Canada, it is not likely to change 
again anytime soon. Canada's first preference would be to 
resume normal trade relations with the United States, but they 
also recognize that they have to diversify, which means they 
are aggressively pursuing foreign markets.
    It was interesting to me that Taiwan announced, as you 
know, that they would resume trade with the United States in 
beef recently. Egypt did also. I just noticed this morning that 
Taiwan indicated that they are very close to resuming trade 
with Canada. We see Canada out there in the international 
marketplace. They are becoming a bigger and bigger competitor.
    Then there is the other issue that you point out about the 
impact on our processing plants in this country, and, again, 
some will be able to hold on. They have the capital to do it. 
But for some of the small processors, I worry very much that if 
this market shift into Canada continues to go on, there is a 
point at which they cannot hold on and then processing will 
relocate, and people are out of work. All of the things that 
you are experiencing in your State start to happen.
    Again, I think what it comes back to is this: Base our 
decisions on sound science, make sure we are paying attention 
to the science, and that will lead to the right result.

                        CSREES BUDGET PROPOSALS

    Senator Bennett. Thank you. Let's talk about the budget 
proposals for CSREES and their impact on schools of agriculture 
or forestry. Do you think that there is a possibility that some 
of these schools will be shut down if these budget proposals 
are upheld? And you have been a Governor. What about the State 
legislatures and colleges? Do they have enough time to react to 
the changes in funding that are being proposed?
    Secretary Johanns. This is a program, as you know, where 
universities have, over a period of time, built these 
appropriations into their budget base. Part of the proposal 
here is that when we head out to do research, we should do it 
on a competitive-based approach, to try to do everything we can 
to ensure that we are getting the maximum impact for the 
Federal dollars that we put into this area. So the proposal is 
for a competitive, peer-reviewed, juried approach to decide 
where those research dollars should be allocated.
    It is hard to argue with the approach if you recognize that 
what we are really trying to do is take a limited resource, the 
money that we can put into research, and try to obtain the best 
possible research product we can get. This phases in, if I 
remember correctly, over 2 years, so my hope is that 
universities will adjust to this. Many are talking about the 
reductions they are going to face, but the reality is that I 
believe universities can compete in this process, compete for 
these research dollars, and secure the funding through the 
competitive juried process for science-based research.

                               USER FEES

    Senator Bennett. You propose a number of user fees, 
additional user fees. Do these come as a single package, or can 
you estimate the time basis on which they will hit?
    Secretary Johanns. I will ask our acting budget director to 
talk about the package here, and then I will offer a thought, 
if I could, Mr. Chairman.
    Senator Bennett. Surely.
    Mr. Wachs. Mr. Chairman, we have not yet submitted those 
user fee proposals. We are working on them now, but no decision 
has been made as to whether or not we will send them up as one 
unique piece of proposed legislation or individual pieces.
    Senator Bennett. I see. Okay. Well, get that to us as 
quickly as you can because there is a history that spans 
administrations and parties that says, well, if you have got a 
problem, you propose some tax increases or some user fees or 
something of that kind, which you know the Congress will never 
enact, but at least it gives you the number.
    Now, I am not accusing this administration of that 
practice, but I have seen past administrations, Republicans as 
well as Democrats, do that. So the more specificity you can 
give us, the more credibility you will have with respect to 
this issue.
    Mr. Wachs. Yes, sir.
    Senator Bennett. All right. Did you want to make a comment, 
Mr. Secretary?
    Secretary Johanns. User fees are something I have worked 
with in a past life, and properly administered and implemented, 
they do work and you can still have excellent programs, even 
though a portion of it would be financed with user fees. For 
example, for meat inspection, the proposal would allow one 
approved 8 hour shift to be paid for with government funds, and 
then anything beyond that would be paid for with the user fees. 
Again, I have seen some very, very excellent programs.
    Senator Bennett. Well, I am not opposed to user fees. I 
think user fees make sense. But we would like some specifics 
when we can have them. Thank you very much.
    Senator Kohl.
    Senator Kohl. Thank you, Mr. Chairman.

                            NONFAT DRY MILK

    Mr. Secretary, last year, I was able to work with Secretary 
Veneman to extend a very successful pilot program between USDA 
and the Milwaukee Hunger Task Force. This program allows them 
to turn nonfat dry milk into mozzarella cheese, which is then 
distributed to local food pantries. It has been in effect for 
over a year now, and we recently were able to extend the 
program until September at a minimum. However, there has been 
some question regarding the amount of nonfat dry milk 
available. I know the USDA Web page shows the total amounts of 
surplus nonfat dry milk, but it does not indicate, as you know, 
the quality or age of those stocks.
    So could you provide the committee with monthly reports on 
the age and quality of those stocks and how they are to be 
distributed, including domestic feeding programs, foreign aid, 
livestock assistance, and other purposes?
    Secretary Johanns. Yes, sir. This is a situation where I 
just want to represent to you that I know there was a bump in 
the road there, and, sir, I am sorry for that occurring. But 
the answer to your questions is yes. We will work with you and 
the members of the Committee to make sure that the information 
regarding nonfat dry milk supplies is at your disposal. If the 
information is not adequate, then we will work with you to 
solve that problem and get that information at your fingertips. 
So the answer to your question is very directly yes.
    Senator Kohl. I appreciate that.

                              FARM INCOME

    Mr. Secretary, in your statement you said, and I quote, 
``The U.S. farm economy has never been stronger.'' However, I 
have received an ERS document that headlines ``Farm households 
receive most of their income off the farm.'' The article 
confirms that farm household income has been at or above the 
national average in recent years, but largely because most of 
that income comes from off-farm jobs.
    So what is the real statistic? Is real farm income going 
up, or are more farmers and ranchers being forced to send out 
their wives or husbands, their children, and perhaps even 
themselves, to bring in the necessary income to keep their 
farms afloat?
    Secretary Johanns. You raise an excellent issue, and I have 
got an economist here that I am sure is probably anxious to 
offer a thought. But I will offer a thought based upon my 
experience.
    Your observation is accurate. There is just no question 
that there are more spouses and sometimes both husband and 
wife, out working in town.
    In my experience, there are a number of reasons for that. 
One of the reasons came home to me very vividly. We had opened 
a call center in a community in western Nebraska, and a woman 
came up to me and said, ``You know, Governor, we are so 
appreciative for these jobs. And the reason why is if I work 
here, I can get a health plan for my family.'' And she said, 
``As you know, out on the ranch the only health plan really is 
the one that we buy.''
    So there are some things like that going on out in rural 
America, but your observation is correct. We are seeing more 
and more people working off the farm now.
    In terms of the statistics, I will ask Dr. Collins to offer 
a thought.
    Mr. Collins. Senator Kohl, I would say that what you see in 
the farm economy is really no different than what you see in 
the national economy. We just had a year where the Gross 
Domestic Project GDP rose 4.4 percent, but we had unemployment 
of 5.5 percent. In fiscal year 2005, we had 24 million people 
on food stamps.
    That is not to say because those people have such financial 
difficulties that we did not have a well-performing national 
economy. We did. We have had a well-performing farm economy the 
last 2 years. We set a record for net cash farm income in 2003, 
another record in 2004, and we are predicting another record in 
2005 for farm income.
    A lot of that farm income, however, accrues to a small 
portion of the farms in the United States. When we survey 
farmers and we ask them what their principal occupation is, 
over half tell us it is something other than farming. Thus, a 
large proportion of the 2.2 million farms we have say they are 
non-farmers and they earn the bulk of their income off the 
farm. That can be looked at negatively as something they are 
forced to do to make ends meet. Or it can be looked at 
positively; that is, people can stay in farming as a small and 
medium-size farmer because they have an off-farm job and they 
can remain in farming. So you can look at that either way.
    In the aggregate, farm income represents only about 10 
percent of the total household income of all farm families; 90 
percent is off the farm. And that is largely because of the 
large number of lifestyle, retired farms and very small farms 
that we have.
    So it is a complicated picture, it is a mixed picture, and 
you can find different stories in those statistics.

                    AGRICULTURAL BORDER INSPECTIONS

    Senator Kohl. All right. Mr. Secretary, a few weeks ago, 
GAO issued a report on the potential threat of agroterrorism. 
GAO pointed out problems with USDA accreditation for 
veterinarians, rapid diagnostic tools, stockpiles of ready-to-
use vaccines, and the 8-percent decline in agricultural border 
inspections. I know you have seen this report.
    The decline in border inspections since USDA transferred 
much of this responsibility to the Department of Homeland 
Security is especially troubling. Why do you think there has 
been a decline in agriculture inspections at the border? And 
what steps do you propose in order to improve agricultural 
border security?
    Secretary Johanns. There have been changes, as you point 
out, and the key here, in terms of what I propose is that we 
really do everything we can to work with the Department of 
Homeland Security to make our efforts relative to the 
protection of our food system and our food supply as absolutely 
seamless as we possibly can, whether it is border inspection or 
otherwise.
    Many good things have happened over time. Again, having 
been a Governor on 9/11 and seeing the progress that has been 
made, many good things have happened especially with the 
assistance that has been provided by the President and Congress 
to the State and local levels. But there is always work to be 
done. I think this report pointed that out to us, and in some 
areas, quite honestly, it may call for us to just redouble our 
efforts, working together with the Department of Homeland 
Security.
    Again, I would not want anything I am saying today to 
downplay the positive impact that the support of Congress and 
the President has had on State and local governments in terms 
of our preparation for problems with terrorism, including 
bioterrorism.

                            AVIAN INFLUENZA

    Senator Kohl. Every day we read of potential threats that 
could devastate our agricultural sector and endanger human 
health. Avian flu in Asia is an example which, by some 
accounts, could result in a really terrible pandemic. What is 
USDA doing to help contain the avian flu? What other countries 
are you working with on this problem? And what other agencies, 
such as CDC, are you working with?
    Secretary Johanns. Your question is very timely. I have 
just asked for an extensive briefing on avian flu involving the 
Department of Health and Human Services and USDA. There are 
many predictions, some of them doomsday sort of predictions, 
about the potential for avian flu. And I will tell you that at 
the USDA, I am taking this very, very seriously. I want to do 
everything we can to be prepared.
    As you know, in our country we have a very robust response 
to any problems in this area. We are going to do everything we 
can to encourage our foreign trading partners to do likewise. 
But let me assure you, this is absolutely on my radar screen. 
It is a very important issue to me. And I am going to spend 
some time and effort to make sure we are doing all we can to 
deal with this issue. It is here and it is very real.

                         VETERINARIAN SHORTAGES

    Senator Kohl. Mr. Secretary, what about veterinarians? As 
you know, we have a shortage of veterinarians in rural areas, 
and they provide good surveillance of animal disease and 
potential agroterrorist threats. Do you have some thoughts on 
how we can do a better job of providing adequate veterinarians 
in our rural areas?
    Secretary Johanns. There are a number of programs out there 
at the State level relative to educating veterinarians. I will 
give you an example of one I am very familiar with.
    In the State of Nebraska, we did not have a veterinary 
school. Some years ago we made an attempt to make it happen, 
and it just did not come together, for a variety of reasons. So 
we entered into an agreement with a veterinary school in Kansas 
and basically what we did as a part of the State budget is buy 
down the out-of-State tuition for the student. They liked the 
program in Kansas, we liked the program in Nebraska, and we 
have been able to educate veterinarians. So there are some 
creative things going on out there to try to deal with this 
veterinarian shortage issue.
    Many States have programs that bring retired veterinarians 
into service. Another thought in terms of dealing with the 
whole issue is--let's say you have an outbreak where you really 
need veterinarian services. States have State veterinarians 
that we can work with. Many States have plans in place that 
they can activate.
    So the entire burden of providing veterinarian services is 
not being completely shouldered at the national level. The 
States are doing some very, very good, creative things, and I 
think whatever we can do to help them in that effort is very, 
very positive.
    But your observation is, again, very real. There is a need 
to maximize the veterinary resources we have out there and try 
to improve that situation. But there are some programs in place 
that can help do that.

                          MADCOW DISEASE (BSE)

    Senator Kohl. Mr. Secretary, on mad cow disease, you stated 
that your top priority is to get American beef moving again to 
Japan, and the USDA budget for this year will fund 
approximately 40,000 BSE inspections. This is a huge decrease, 
as you know, from the level of inspections since BSE was 
discovered in the United States.
    So how does this level compare to the level of BSE 
inspections USDA was performing prior to the discovery of BSE 
in the United States?
    Secretary Johanns. The request for BSE inspections is 
double what they were in 2004. Proposed inspections increased 
from 20,000 in 2004 to 40,000 in 2005 and the same number of 
inspections is proposed for 2006. However, for the last year, 
we have been doing an enhanced surveillance program, and as I 
mentioned, we checked just before this hearing started, and we 
have now tested about 314,000 animals in this enhanced 
surveillance program. And, Senator, I am very happy to report 
to you that everything is negative up to this point.
    We are going to evaluate this program. We are doing 
everything we can to make sure that we are conducting broad-
based testing in those areas of the country with increased risk 
and we will evaluate that and determine whether to continue 
this enhanced surveillance program.
    A couple of very important points. Although I think there 
is some misunderstanding about this, we have never argued that 
this was a food safety approach. It really is a surveillance 
approach. The whole idea of the USDA, when this was kicked off 
and enhanced, was to get a better idea of what the national 
herd condition was like relative to BSE.
    At the time when it was kicked off, the USDA made 
statements that we anticipated finding other BSE animals. But 
it has not happened and we are happy about that. But it was, 
again, never designed to be a food safety approach. It is an 
enhanced surveillance approach.
    My goal in the next couple of months is to make sure that 
we have done the testing in the regions of the country that we 
should be testing that we have touched the necessary bases, 
that we make an evaluation of where we are with this program 
and make a decision about where we go from there.
    Senator, I will tell you that in that effort, I will 
certainly consult with Congress and this Subcommittee and 
others who have an interest in this area about their thoughts 
and ideas.
    Senator Kohl. If we need more inspections, how do you plan 
to get them funded?
    Secretary Johanns. Of course, we would have to consider use 
of CCC funds or ask for an appropriation to make that happen.

                         BEEF EXPORTS TO JAPAN

    Senator Kohl. Well, are you convinced that our present 
level of testing is convincing our trading partners that we, in 
fact, are serious? When are we going to get our beef back into 
Japan? What do you anticipate?
    Secretary Johanns. There is a whole combination of things 
that are at work here. The surveillance, again, was our effort 
to get an idea of what our national herd looked like. But the 
removal of specific risk materials (SRMs), and allowing animals 
under 30 months, all of those things fit in together in terms 
of a risk analysis. And we believe very strongly that with 
those approaches, you really bring the risk down to practically 
nothing when it comes to BSE. And regardless of whether we are 
talking to Japan or Egypt or any other country the case we are 
making, is that based upon good science, when you consider all 
of the things that we have done, our beef supply is safe. And 
that is the case we are making to our trading partners.
    When will Japan be reopened? From the very first day I 
arrived, I have been pressing for a date. I do believe that the 
steps are in the right direction. I am encouraged. I wish, 
Senator, I could lay down a date in front of you and say that 
is the date. But the Japanese have said, look, this has to go 
through our science-based food safety process, and they are 
working their way through that. Again, every step they seem to 
take seems to be in the right direction, slowly, deliberately. 
I would argue too slowly, but it does seem like we are headed 
in the right direction. And we continue to pick countries off. 
We are very encouraged by Egypt's announcement, and very 
encouraged by Taiwan's announcement. We are still working with 
South Korea.
    So we are being very systematic about returning normal 
trade in beef markets worldwide.
    Senator Kohl. I thank you.
    I thank you, Mr. Chairman.
    Secretary Johanns. Thank you, sir.
    Senator Bennett. We can come back for a second round.
    Senator Burns.
    Senator Burns. Thank you, Mr. Chairman. I want to thank the 
Secretary, and I have a couple of questions here. You know, we 
learned a lot about the Japanese situation--for the information 
of the committee--that they have two quasi-government 
organizations that have to sign off on this thing. One of them 
is called Risk Assessment, the other is an Agency for Risk 
Management, and they make recommendations. Then the Japanese 
Government has got to operate. What does that sound like? It 
sounds like the United States Government to me. And that sounds 
like a bureaucracy maze that we have not been able to negotiate 
yet. But I will tell you somebody that has learned to negotiate 
it, and that is the Australians. So they are becoming very 
efficient at that.

                         CROP DISASTER PAYMENTS

    In last year's disaster package that you have been working 
on--and I appreciate the good work you have done--our farmers 
still have not gotten their checks, and here we are into the 
planting season, and I would wonder if there is an explanation 
for that and why that has not been accomplished. We have been 
working on that thing for a year now. Do you have anybody that 
wants to address that?
    Secretary Johanns. Dr. Collins.
    Mr. Collins. If you are referring to the crop disaster 
program, the sign-up just recently began. The main reason that 
takes a while to implement is because we have this cap on how 
much a producer can receive. They are limited to their crop 
insurance indemnities plus the crop disaster payment which 
cannot exceed 95 percent of the income they would have had 
otherwise.
    Because of that cap, we cannot write checks until we know 
how the insurance year has finished up, how it is settled out 
and we get the final database from the Risk Management Agency. 
That database was transmitted during the month of March, and so 
we are in a position now to make payments and will be making 
payments here imminently.
    Senator Burns. I would suggestion posthaste.
    Mr. Collins. Yes, sir.
    Senator Burns. That just does not seem like a problem that 
we cannot take care of, that we cannot address.
    Mr. Collins. In past crop disaster bills, we did not have 
that 95-percent cap.

                           FARM PROGRAM CUTS

    Senator Burns. In your budget, Mr. Secretary, when we start 
talking about cuts, I think our farm program cuts are doing 
more than their share of this particular part. Foreign markets 
are very important to us, and it was, as far as I am concerned, 
good news when Taiwan and Egypt decided to open up. And I would 
say that the only thing we have to do is just keep our head 
down and don't let our shirttail hit our backside until we get 
that done.
    Over in the risk management area, it just seems to me that 
we have got cuts there that maybe we ought to be taking a look 
at in some form. I like the idea of mandatory insurance. I like 
the idea that if risk management works, there would be no need 
for an emergency disaster program. And that has not been the 
case, that we have looked over there and said, well, we can get 
some savings over there, when basically we ought to be putting 
more emphasis on risk management as far as production 
agriculture is concerned.
    And that is where I am coming from. It is no wonder we have 
got people working in town for the simple reason that the 
commodities that they are selling today are at the same level 
they were 50 years ago. Now, we have got to figure out some 
way, gentlemen, to increase the income on the farm. User fees, 
like you mentioned, Mr. Secretary, are usually paid by those 
who can ill afford them. And yet they are important, the 
services that are rendered, to both the consumer and the 
producer. But right now the producers are picking up all of 
that. And so there ought to be some on the other side, whether 
it be in the processing, manufacturing, distributing, or 
whatever. There should be some in that part of it, too.
    So when we balance these things out, there is nothing wrong 
on the farm except the price. Now, cattle producers have done 
well in the last 2 years. There is no doubt about it. They have 
really done well. But when you come to the grain commodities, 
you know, the basic needs of what we produce in Montana and 
what you used to--you were pretty close to in Nebraska--there 
has been no increase. And our part of the consumer dollar 
continues to shrink. And then you wonder why we have got to 
work off the farm.
    The other day--and cost input, fertilizer costs, we cannot 
get the natural gas. We have got all these inputs that continue 
to go up. The other day I bought a pick-up that is 8 years old. 
And I gave as much for that pick-up, 8 years old, as I gave for 
our first house that Phyllis and I bought. That is our problem, 
is income. And yet in our programs that you treat as a ceiling, 
we treat as a floor. And I wish we could get in the mind-set 
that both of us are thinking on the same wavelength whenever we 
start allocating cuts or increases.
    But I think our main goal here should be we should look at 
risk management. I would a lot rather support premiums on risk 
management--and I think the farmer would too, because his 
results, he understands what he is getting there--than trying 
to pass emergency disaster legislation because that gets 
tougher and tougher all the time. But had it not been for them, 
then we would have lost a lot of people in our production 
agriculture.

                       COUNTRY-OF-ORGIN LABELING

    Country-of-origin labeling, we have done all the work. Why 
aren't we just putting the final rule into the Federal 
Register? That is a part of that decision that the judge made 
in Montana with regards to the lawsuit from R-CALF. He cited 
that the USDA has got the rules. How come they have not 
finalized them and put them in the Federal Register?
    Do you want to respond to that?
    Secretary Johanns. Yes, I can offer a thought on country-
of-origin labeling. As you know from my confirmation hearing, 
my support would be for a voluntary program, but the law makes 
it a mandatory program. As a matter of fact, fish and shellfish 
went into effect just within the last few days.
    Senator Burns. We do not produce a lot of shellfish in 
Montana.
    Secretary Johanns. Maybe not in Montana, but the COOL 
requirement is there in case you were to diversify into 
shellfish or something.
    The other thing I would say is that, as you know, the 
deadline for country-of-origin labeling is now September of 
2006 for all other covered commodities, and that was extended, 
I believe, by the last appropriations process. So, the time 
frame we are working toward is the beginning of fiscal year 
2007.
    When will the rules be published? To be very candid with 
you, Senator, my guess would be that they will be published in 
June of 2006.

                      CONSERVATION RESERVE PROGRAM

    Senator Burns. But here is the problem. Some of us in this 
industry are going to have to make some adjustments to be in 
line with the rules. I think the earlier, the better, because 
if adjustment has to be made, we should be doing that. And so I 
would take a look at that because in order to get people in 
compliance, why, we would have to--I have got other questions, 
and I have got to go up to an energy meeting, Mr. Chairman. But 
I just want to really focus on the income part of this thing. I 
don't know how long you expect American agriculture to compete 
with the result of the world. Are we going to put everything in 
Conservation Reserve? I don't know why a farmer who wants to 
farm has to compete with Government payments on CRP if he wants 
to expand his operation on a cash lease basis. I think we 
should look at that. There is a tremendous amount of savings 
there, and especially CRP basically has been devastating to our 
smaller communities. It has taken big chunks of land out of 
production. And I don't want to grow to rely on foreign sources 
for our foodstuffs in this country, our nutrition. I think that 
is very shortsighted.
    But we need some reform in those areas. Keep that little 
packing house down at Spanish Fork going.
    Senator Bennett. Hyrum.
    Senator Burns. Was it Hyrum?
    Senator Bennett. Hyrum.
    Senator Burns. Which is the same area, isn't it?
    Senator Bennett. I will introduce you to the geography of 
the State of Utah.
    Senator Burns. Well, we still have got one at Spanish Fork, 
too, don't we?
    Senator Bennett. Yes, I think so.
    Senator Burns. And I realize--and I like the idea of we get 
to add the value to the product. Everybody says we have got to 
add value. I subscribe to your thinking that we have to do 
that. But I think we have to look at RMA reform because I think 
there we can put some predictability into our risk management. 
And I would a lot rather do that than go through this business 
of emergency disaster legislation.
    So let's don't take any money out. Let's stay there, reform 
it. And I would subscribe that we would subsidize it to a point 
because that is a lot easier than going the other way. And it 
also would help us on our deficit spending also.
    I thank the chairman, and I have some more questions. I 
thank the Secretary because his willingness and his knowledge 
of agriculture is very, very good. And I certainly appreciate 
that.
    Secretary Johanns. It is always a pleasure, Senator. Thank 
you.
    Senator Bennett. Senator Dorgan.

                             TRADE DEFICIT

    Senator Dorgan. Mr. Chairman, thank you very much.
    Mr. Secretary, thank you for being here. When you were 
nominated, I said that anyone who grew up on a dairy farm in 
Iowa would do right well in this job, and I am glad you are 
there. But I recognize you pull the wagon for the 
administration and for OMB, and their policies must be your 
policies. I could not, I am sure, get much out of you today 
that would disagree with the policies that are coming from the 
administration. And I understand all that.
    But let me ask you a couple of questions and precede it by 
saying about 2 hours ago it was announced that last month's 
trade deficit was $61 billion--$61 billion, another record, 
another chapter in a book of trade failures. Uncle Sam is being 
played for Uncle Sucker all across the globe on trade policies, 
and this year might be the first year in 50 years that the 
agriculture trade surplus will have vanished. We are a country 
that imports food, we import oil, and we export jobs. And it is 
no wonder that things are going haywire.
    But having said all that, I want to ask you about two trade 
issues. One is the Canadian cattle issue and the other is 
CAFTA.

                            CANADIAN CATTLE

    On the Canadian cattle issue, you propose that we open the 
market to live cattle despite the recent discovery of two 
additional cases of BSE in Canada. And I would like to ask you 
about a statement you made. You indicated that you feel the 
Canadian feed issue is largely resolved, that the ban on animal 
parts in animal feed has been effective.
    As you know, there was a Freedom of Information Act request 
in Canada reported by the Vancouver Sun that said this: ``In 
the past year''--last year--``the Canadian Food Inspection 
Agency found prohibited animal materials in 41 of 70 samples.'' 
In other words, 58 percent of the cattle feed tested. Now, that 
comes from a Freedom of Information Act request from 
information that was in the Canadian Food Inspection Agency, 
inspections they had done last year, at least to my 
understanding. How does that square with USDA's insistence that 
things are going just swimmingly up in Canada with their 
testing program?
    Secretary Johanns. I am familiar with that article and the 
assertions that they made. There was additional work done on 
that. If I remember correctly, Senator, the situation there was 
that they had done testing, I believe, of feed samples with a 
microscope and detected protein--again, if I remember all this 
correctly.
    So then they started looking into that. What protein/what 
are they finding? The Canadian Food Inspection Agency had a 
very impossible time of verifying that the prohibited feed 
material was from cattle. And, in fact, I think they found that 
part of it was from mice, which, as you might expect, can 
happen. I think they found one sample that was actually a human 
hair. And we can get you that additional information. I am 
drawing this all up from memory, and it has been some weeks 
since I have looked at that article. But it caught my 
attention, too. I looked at it very carefully.
    The cattlemen, if you will remember, went up to Canada a 
couple months ago with a team, and they wanted to take a look 
at that article also. They actually filed a written report 
which they distributed at their convention in San Antonio and 
addressed that issue and pointed out some of the same things 
that I am pointing out today.
    Senator Dorgan. Which cattlemen are you describing at this 
point?
    Secretary Johanns. The National Cattlemen's Beef 
Association.
    Senator Dorgan. And are they pushing for reopening of the 
border?
    Secretary Johanns. It's probably not as simple to say that 
because they have put forth a number of criteria that they 
would like to see fulfilled for that border to be reopened. But 
I am familiar with the Vancouver Sun article. There is just 
more information to that article than the article itself. 
Again, we would be happy to provide that.
    Senator Dorgan. Mr. Chairman, what time limit are we on? I 
was surprised to see the light go on here.
    Senator Bennett. Since it is just you and me----
    Senator Dorgan. Mr. Secretary, that is probably not good 
news, is it?
    Secretary Johanns. That is fine with me.
    Senator Dorgan. Let me ask you, have you consulted with the 
Canadian Food Inspection Agency about these samples?
    Senator Bennett. I see Senator Brownback is coming back, so 
keep going, but it is not----
    Senator Dorgan. Is the chairman revoking that invitation?
    Senator Bennett. It is not unlimited, but keep going, by 
all means.
    Senator Dorgan. All right. Well, let me just say this: Our 
responsibility is to this country's farmers and ranchers and 
beef industry. I know there are some that would like to create 
a North American beef brand and so on and so forth. Our 
responsibility is to our industry, and you know and I know that 
the press was full of rumors last summer and fall when the 
President was going to Canada that he was going to assure the 
Canadians that after the election the border would be opened. 
And, frankly, I don't know the details of all of that, but I 
know that in spite of additional evidences of mad cow disease 
in Canada, there is this movement to reopen the border. And I 
frankly don't think it makes any sense. The Senate has already 
expressed itself strongly on that issue, and I wanted to 
express that to you.

                 CENTRAL AMERICAN FREE TRADE AGREEMENT

    Let me ask you about CAFTA, the Central American Free Trade 
Agreement. I described to you the $61 billion announcement this 
morning. This is a colossal failure in policy for this country. 
And it has happened under the watch of a number of parties and 
Presidents here, but it is getting worse and worse. And my hope 
is that the President would park the 747 and understand this is 
a crisis that we all must work on.
    Now, CAFTA was negotiated some long while ago. I do not 
support CAFTA, with full disclosure, of course. I do not 
support CAFTA, but I am anxious for it to come to the Hill. The 
old phrase ``Bring it on'' should apply to this, in my 
judgment. Let's have it. Let's have a debate on CAFTA on the 
floor of the Senate, the sooner, the better.
    So, Mr. Secretary, when can we expect CAFTA to be brought 
to the floor of the Senate, in your judgment?
    Secretary Johanns. I am not sure, Senator, that I have a 
judgment as to when that debate is. I know we disagree on this 
issue, in the spirit of full disclosure, although I am all over 
the newspapers supporting CAFTA and I supported it before I 
arrived here. I am working very hard on CAFTA and talking to 
people and groups about it. But, quite honestly, I cannot offer 
to you a date.
    Senator Dorgan. Who is making that call? Who will 
ultimately make the call when it is sent to Congress and when 
they want to vote on it?
    Secretary Johanns. The Administration, in working with the 
leadership. Again, that would be my guess. My role is to do 
everything I can because I believe very strongly in CAFTA. But 
the timing issue is just not an issue that I have been engaged 
in.
    Senator Dorgan. I believe that CAFTA is a first step in 
unraveling the sugar program, and I think we will have a 
potentially significant impact on beet growers and so on. But 
what I will do, if you don't mind, Mr. Chairman, is send some 
questions in writing.

                        CROP PAYMENT LIMITATION

    Then let me say one additional point. I support the 
administration's payment limit recommendations, or at least the 
suggestion there be payment limits. Senator Grassley and I have 
long worked on that in the Congress. I think, however, the 
recommendations on cuts in the market loan program and the 
across-the-board reduction in farm program payments is a 
horrible mistake and people should not confuse the two.
    I did not come here and do not believe that we ought to be 
supporting farm program payments of $30, $35 million over 5 
years to big corporate agrofactories. If our farm program is 
not to try to help keep families under a yard light out there 
working on the farm, then we do not need a farm program. So I 
do believe payment limits are important, and I support the 
administration in their discussion of payment limits.
    So, Mr. Chairman, I have more questions, but let me submit 
them in writing to the Secretary and say that I hope as we go 
through this process this year on appropriations that we can 
overcome the recommended cuts in farm program benefits. We have 
put a farm program out there. We vote on it, we debate it, and 
I think that ought to represent the bridge across price valleys 
and difficult problems that family farmers face. Farmers ought 
to expect that the Government keeps its word on these issues.
    Senator Bennett. Thank you.
    Senator Brownback.
    Senator Brownback. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Secretary Johanns. Thank you, Senator.
    Senator Brownback. I hope both of our football teams do 
better this next year.
    Secretary Johanns. Yes.
    Senator Brownback. That will be helpful out in the Midwest 
and to our part of the country.

                         BEEF EXPORTS TO JAPAN

    I have got a couple things I want to discuss with you. One 
is I am delighted to see your focus on Japan and opening up 
that beef market. Of course, that is key to much of us in the 
Midwest. You follow in the steps of another great Nebraskan, 
Clayton Yeutter, who I worked with over a decade ago to first 
open those markets. They were tough then because the Japanese 
threw up every barrier that they could think of, and then a few 
on top of it to stop us even--I remember one point in time some 
Japanese officials saying, well, the Japanese digestive system 
did not digest well U.S.-produced beef. It got to that absurd 
level of argument that they put forward.
    Do we need to do more up here? Do we need to pass laws 
going at Japan until they will open this market up? Some people 
are starting to propose that we do something like that to try 
to get Japan to open their beef market back up.
    Secretary Johanns. Well, Senator, I would answer this way: 
Every opportunity I have had in my meetings with the Japanese 
and I know every opportunity that Senators and House Members 
have had, we have all made the point that patience is just 
simply running very, very slim on Capitol Hill.
    I met with the Ambassador of Japan within the first few 
days of coming to the job and just said, look, if you watched 
my confirmation hearing, it became an airing of frustration 
over this issue, and I just worry that there is a point at 
which the frustration boils over.
    And then when the letter was signed by the 20 Senators--and 
I am sorry, I don't remember if you signed that, but I pointed 
that out to him and said, again, you have very, very thoughtful 
people who are signing the letter in frustration.
    So my belief is that the message has been delivered very 
loud and clear. I really appreciate the President's leadership 
here. He has talked to the Prime Minister, as you know. That 
was reported. Secretary Rice has raised the issue. Others 
across the Government have raised the issue. It does appear 
that the steps are in the right direction. A step forward that 
is very, very small. But it is in the right direction.
    Senator Brownback. I hope we can move. Recently, when a 
Congressman from Kansas proposed legislation regarding the 
Japanese on this issue, it garnered a fair amount of support, 
and I think things like that may start to move forward as we 
try to find vehicles, the blunt instrument approach that 
Congress typically uses to try to address something that should 
not be continuing at this point in time.
    Secretary Johanns. Right.

                          RAISING FARM INCOME

    Senator Brownback. I do want to follow up on what Senator 
Burns had mentioned on a couple of topics about we just need 
more farm income. I was raised on a farm. My family still 
farms. My brother farms with my dad, and you do see those 
commodity prices, particularly on grains--he says they have not 
improved in 50 years. They have actually gone down 
substantially. If you look at any sort of time value of money 
and inflation, they have gone substantially down. And people 
can say, well, there is great efficiencies and size and scale 
in your global marketplace and all those things. They have some 
applicability and accuracy. Still, you travel throughout rural 
America, and you see this in Nebraska, I see this: The 
farmhouses are deteriorating; the equipment may be in pretty 
good shape, but there has not been much net income. And much of 
the net income on farms now is off-farm income. A spouse works 
to provide the living expenses. You are hopeful that you can 
hit that 1 good year in 5 that you can make some decent return.

                        VALUE-ADDED AGRICULTURE

    I want to point to two areas, though, where it seems like 
we have had some reasonable opportunities for growth and hope 
of increasing farm income. One has been that new uses fee where 
we move outside of the food and fiber field, doing very nicely 
now in ethanol, a lot of expansions of plants throughout the 
Midwest. I know you have seen it in Nebraska. I think we have 
got a similar opportunity in soy diesel, good environmental 
qualities, renewable sources of it. And we have put a push on 
this at different times in different waves in U.S. agriculture.
    I would just suggest to you that now would be another good 
time to give another shoulder behind the wheel push to this 
conceptualized area and not just in the ones we have been in, 
the ethanol, the biodiesel, but also things like utensils, 
eating utensils out of corn or soybeans, a whole array of them.
    Once, about 12 years ago, I hosted a new uses expo in St. 
Louis along with USDA and a whole bunch of other groups--
Department of Energy. I think we had 150 different products 
there, from blue rocks made out of starch--I was hitting 
Senator Grassley up about this the other day, and he said, yes, 
they have got a shirt in a museum at Iowa State made out of 
soybeans. He said it was fine as a shirt, but when it got wet, 
it started smelling a little bit. That is why it is in the 
museum.
    Now, I am hopeful we can get through the odor issues with 
that, but my point in saying that is as a new Secretary coming 
in, coming in from the Midwest, you know these issues. People 
want hope. They want a chance to think they have got a chance 
to make some more income.
    What about resurrecting that and hosting a big new uses 
expo somewhere in the Midwest? I would offer Kansas City, but 
where you really try to bring those entrepreneurs, those 
innovators that are out there together, showcasing these new 
sets of products, and put another lean-to into that push where 
we really have had some modicum of success at other times. I 
would love to see us put that in your budget or you get behind 
it and say, yes, we need to do it to showcase--or maybe you do 
a couple of them at different places around the country to 
showcase those products.
    I don't know if you have had a chance to think about those 
areas, that is, an expo or even putting together a catalogue of 
these products so that people can see, well, gosh, you can make 
these plates out of wheat starch, you can do this disposable 
utensil, you can make this table out of wheat straw, and here 
is a nice-looking one. I hope you get a chance to look at that.
    Secretary Johanns. I will take a look at it. Again, your 
observations are correct. There is so much going on in value-
added agriculture, which is really what you are talking about. 
It is taking that basic agricultural product and enhancing its 
value to a broader marketplace. A perfect example of that, 
again, happens to be in the State I came from. Cargill-Dow 
joined in an effort in Blair, Nebraska, to literally create 
polymers. I have a tie that came from that initiative, and the 
potential exists to enter into the marketplace where plastics 
are and provide a product produced from corn, biodiesel and 
ethanol that you referenced. The success story in ethanol has 
been truly remarkable, and I believe that there is going to be 
that kind of growth in the biodiesel area.
    There may be an opportunity for us as we think about how to 
boost this effort to do something like you have suggested. I 
wouldn't necessarily suggest that it is budget issues so much 
as bringing the industries together.
    Senator Brownback. That is what it is.
    Secretary Johanns. Yes, I think they would be very 
supportive.
    Senator Brownback. And it is not just even industries. It 
is those entrepreneurs. A lot of them are just an ``in a 
garage'' guy that has come up with a different sort of idea, 
and they create jobs and opportunities in local markets within 
much of the rural areas, which we desperately need.
    Secretary Johanns. It is a very exciting area because when 
those jobs are created, they tend to be in the rural areas. 
Ethanol plants are not built in the middle of Kansas City or 
Omaha. They are built in rural areas near small towns, and the 
impact they have is very large.
    Senator Brownback. Biomass, electric generation I think is 
another one that looks like to me where you could go on large-
scale areas, and then you also get a two-fer. You are dealing 
with the carbon issue along with an agricultural job creation 
and market issue.
    I would be excited to work with you on something like that 
because I think to me it really just lends an opportunity to 
hope and optimism of we can do this, and you can be the chief 
and will be the chief cheerleader for that by driving around 
100 percent biodiesel-fueled truck that is running on soy. We 
even had them early on, on animal fats. That had a real sweet 
smell when the engine burned, going through like French fries 
or you are going by a McDonald's. But those could be real 
helpful and using those utensils, eating utensils at USDA that 
are made out of corn or soybeans.

                          CARBON SEQUESTRATION

    The second one I want to go into is the carbon area because 
I do think we have got another opportunity for substantial 
economic growth on carbon farming, carbon sequestration. We 
have got a lot of research going on at Kansas State--I think 
Nebraska has got some of this as well--to measure the carbon 
fixing of a ton of carbon, over what period of time, so you 
could measure and trade.
    As I look down the road, I think of this as being one of 
the great possibilities. The numbers I have seen, we have 
removed about half of the carbon from the soil that was there 
when the tall grass prairie was throughout much of the center 
of the country. But that means there is the opportunity to 
insert half of the carbon back in it. It will hold it. It will 
clearly hold it. But we have got to build or put into place 
trading systems, measurements. I think early on we need 
measurements and the rudimentary trading systems to start 
initiation. And there it looks like to me you are looking at a 
massive marketplace, in the billions if not even greater than 
that, for down the road when a number of countries are 
wrestling with the CO2 emissions issues.
    I really hope you can lean in aggressively on that one 
because I don't know of a bigger area that you could look at 
for market potential. And if we even get a decent slice of it, 
it is going to be a lot of income to rural America, and it has 
got the added benefit of generally always being good 
conservation practices, soil-enhancing practices, soil 
retention practices that we need in the farm areas, anyway.
    Secretary Johanns. I agree.
    Senator Brownback. Are you working on carbon?
    Secretary Johanns. Yes, we are. Maybe I can ask Keith to 
give a more specific update. It is an area that we had worked 
in, again before I came here, at the State level, but, Keith, 
go ahead.
    Mr. Collins. Senator, we know of your interest in this 
issue and the legislation you have proposed. Our biggest 
project right now is working with the Department of Energy 
under what is called their 1605(b) Greenhouse Gas Registry 
Program. As you may know, they just published their proposal 
for accounting rules and guidelines for greenhouse gas 
mitigation projects. The Department of Agriculture drafted the 
agriculture and forestry sections of that.
    The proposal is in a comment period now. We are holding a 
public meeting on May 5 in the Washington, DC area, over in 
Riverdale, to discuss just what you are talking about, 
measuring the unit of trade. You don't get a trading system 
going until you have a well-defined unit with standards that 
people would accept, and that is what is in this proposal. It 
establishes all the accounting rules and guidelines for 
agricultural projects and forestry projects.
    We think that when we finalize the 1605(b) registry 
program, which will be kept by the Department of Energy, any 
farmer or forester could voluntarily report their greenhouse 
gas offsets to that system. We think that will create a 
measurable unit which will create an opportunity for trading. 
We are not calling it a transferable credit, but conceivably it 
could function in that form. We are calling it a registered 
reduction, and that will be on file with the Department of 
Energy. And we think that can help kick start the kinds of 
markets that you are talking about.

                           FOOD AID PROGRAMS

    Senator Brownback. One final brief comment, Mr. Chairman, 
if I could, and that is just on the food aid area, and that is 
one I--we have been increasing, the chairman has been very 
interested in what we can do on food aid, school lunch programs 
here and overseas. I have done a lot of work overseas. That is 
just a critical component, but particularly we are seeing lots 
of needs in countries that just have poverty at a level that 
people just do not have food at all, and this has been a long 
historical effort, and I look forward to continue to working 
with you on that because we had the capacity to do it. It is 
always a difficulty getting the food aid there and getting it 
in decent conditions, and the budgetary constraints, but I 
really hope we can continue to do that. It is the right thing 
to do, to help those that are in such deep need.
    Thank you, Mr. Chairman.
    Senator Bennett. Thank you.
    Senator Harkin.
    Senator Harkin. Thank you very much, Mr. Chairman. I 
apologize to you and Mr. Secretary for being late to the 
hearing.

                      REDUCING THE FEDERAL DEFICIT

    I just have a couple of questions. I do not want to hold 
people up too much longer, but, Mr. Secretary, reading over 
your statement, you said because of the overriding need to 
reduce the Federal deficit, USDA, like every Federal agency, 
will share the Government-wide burden of controlling Federal 
spending.
    Well, that is all well and good, but, Mr. Secretary, I hope 
that you will use your voice and your position in cabinet 
meetings and in meetings with OMB, to point out that when we 
passed the last farm bill, we were given a budget with the 
concurrence of this administration. We stayed within that 
budget for 10 years in passing that farm bill. And in the last 
two, almost 3 years now, coming up 3 years, we have spent about 
$15 billion less than what we could have, what we were allowed 
to spend. We could have spent it. It was in the budget for us 
to spend, but we saved that $15 billion for the taxpayers of 
this country. We reduced the deficit by $15 billion. Those 
people at OMB got to know that, and the people that sit around 
that cabinet table up there with you and all those other 
departments, they have to know that too.
    And I am just asking you as a friend, as a neighbor, fellow 
former Iowan, get in there and punch them out a little bit and 
let them know how much money we have saved. We do not get 
credit for it. This committee, Senator Bennett ought to get 
some credit for it. We ought to get some credit for what we 
have done to fashion a farm bill that saved $15 billion under 
what we were allowed.
    So to say that we are going to be involved in controlling 
Federal spending, that is all well and good, but we have 
already done a big part of it in agriculture, and we ought to 
be proud of that, and we ought not to say, well, no one else is 
doing it, but now we are going to take more cuts and more hits. 
That is just preface to a couple of things that I want to talk 
to you about, and I hope you will continue to point that out to 
those people down there.

                     NATIONAL ANIMAL DISEASE CENTER

    Mr. Secretary, three brief things, Animal Disease Lab, 
Ames, Iowa. The National Animal Disease facilities is of 
critical importance for animal health, human health as well. 
The Congress, and this Administration and the previous 
Administration made the decision to upgrade these facilities. 
The work is under way. $404 million has already been 
appropriated for the project. The President's budget proposal 
calls for an additional $58.8 million, indicating that this 
amount of funds will complete the project. The remaining amount 
is dedicated to completing the so-called low-containment large 
animal facilities.
    There are strong indications that this figure of $58.8 
million proposed in the budget is not adequate to complete 
these animal holding facilities properly.
    I understand that because of the shortage of funds the 
Department has developed several options for asking for bids to 
construct only a part of the major lab building in this fiscal 
year. Mr. Secretary, I have had, I personally have had an 
extremely hard time getting to the bottom of this issue of what 
the correct figure is for the amount of funds needed to 
complete the modernization of these facilities. The renovation 
has to be done right, but my staff--and I have asked them to 
get me this--they have been unable to get documents and 
information that USDA has about what is really needed.
    So, Mr. Secretary, I am asking would you furnish to this 
subcommittee and to me--I am part of the subcommittee--without 
a lot of delay because these decisions have to be made in our 
appropriations process: (1) A copy of June 2003 program of 
requirements that laid out the need requirements for the Ames 
Animal Disease facilities; (2) a copy of the full report of the 
International Review Team in January 2001 that laid out their 
views of the adequacies of these facilities; and (3) exactly 
how will the current plans for low-containment holding 
facilities be short of the June 2003 program requirements?
    And lastly, Mr. Secretary, will you inform this 
subcommittee, prior to the conference on the bill: (1) if the 
bids received for constructing the main laboratory building 
show that costs will exceed cost estimates used to this point; 
and (2) if the Department is delaying any part of the bidding 
for constructing the main laboratory building because of cost 
concerns and budget concerns?
    That is a lot to throw at you. I will put it in writing.
    Secretary Johanns. Okay.
    Senator Harkin. That is a lot to throw at you, but I think 
you understand what I am saying. I am having a hard time 
finding out--on the one hand I am told that $58.8 million is 
not adequate to complete it, on the other hand we are told that 
it is, and I am just having a hard time figuring this thing out 
and trying to get to the bottom of it. That is all.
    Secretary Johanns. We will provide that information. We 
will work with your staff.
    [The information follows:]

               National Animal Disease Center, Ames, Iowa

    The President's budget proposes $58.8 million to complete the 
National Animal Disease Center in Ames, Iowa. Funding at this level 
will not compromise the original program requirements as outlined in 
the June, 2003 Program of Requirements (POR). A POR is an internal 
planning document that provides the costs of various options and 
alternatives which the Agricultural Research Service (ARS) uses to 
assist in defining research program needs and related technical 
requirements. Developing a POR is an iterative process; an Architect-
Engineer (AE) under contract to ARS conducts numerous interviews with a 
location's scientific and support staff. These inputs are gathered 
without regard to budget constraints, and the document serves as just 
one of several factors management considers in making final decisions 
on project scope, budget, and other project-related policy decisions.
    The June 2003 POR represents projections and estimates our 
professionals and support staff developed through discussions with the 
AE, who is under contract to ARS. It addresses only the Low Containment 
Large Animal Facility (LCLAF), which is one of five components that 
cover the overall plan to modernize the animal health facilities 
located at Ames, Iowa. Rather than serving as the final design plan, 
the POR functions as an interim step in developing the overall scope of 
the project. The June 2003 POR was one of several inputs used by agency 
management in making final decisions on the scope and sequencing of the 
project components within the total project budget. A copy of the POR 
was sent to the Subcommittee staff.
    The management decision made was to meet the LCLAF program 
requirements of the POR by a combination of new construction and 
renovation of buildings and infrastructure. The LCLAF offered the best 
opportunity to utilize existing facilities to insure the overall 
modernization budget is maintained. The modernization effort will 
construct new animal facilities to meet programmatic needs where the 
existing facilities are not functionally adequate (i.e. group housing 
of large animals) and will make use of the existing facilities that are 
functionally adequate for the remaining programs. Of the planned 
132,000 sq. ft., 42,000 sq. ft. will be built new. Existing LCLAF 
facilities (buildings 3 and 4) will be retained providing an additional 
88,500 sq. ft. of space. Together, the new and existing space will 
accommodate the program requirements originally envisioned. New 
infrastructure will be provided to ensure adequate and reliable utility 
space.
    The Department will keep the subcommittee informed if any bidding 
delays are required or if bids received exceed available funds. The 
Construction Manager (CM) at Risk is the project delivery system ARS is 
using for the Ames Modernization Project. This approach was selected at 
the outset because it accelerated the schedule by allowing construction 
to start before the total design of a particular project component is 
100 percent complete. To minimize the likelihood of excessive bids the 
construction contractor is involved early in the design process and 
provides verification of cost estimates during design. While the total 
design may be at the 30 percent stage, a discrete portion of the 
design, i.e. the site development or foundation, is 100 percent at the 
time of the award of that package. In essence the construction of a 
particular project component is being phased while design is underway.
    ARS expects to open bids on the first of several construction 
packages for the Laboratory/Office complex in the August-September, 
2005 time frame. The CM will let bids to subcontractors at that time. 
The package(s) will consist of site preparation, utilities, foundation, 
etc. or some combination of activities based on market prices. ARS will 
approve the final award. This process is similar to the design/
construction of the BSL3 Ag Containment facility now already underway.
    A copy of the full report of the International Review Team is 
provided for the record.

       Canadian Science Centre for Human and Animal Health,
                              Winnipeg, Manitoba, January 22, 2001.
Secretary Ann Veneman,
Secretary, Department of Agriculture,
Washington, DC.
    Dear Secretary Veneman: At the invitation of Dr. Floyd Horn, 
Administrator of the Agricultural Research Service of your department, 
we as an International Review Team, examined the Master Plan for the 
consolidation and modernization of facilities for the National Animal 
Disease Center (NADC), the National Veterinary Services Laboratory 
(NVSL), and the Center for Veterinary Biologics (CVB) at Ames, Iowa.
    During our visit to the site on January 9-10, 2001, we had 
important meetings with key personnel of the NADC, NVSL, CVB and the 
Iowa State University. As well, we were able to visit representative 
U.S. Department of Agriculture laboratory and animal facilities there.
    Enclosed, we provide you with our comments and observations for the 
future needs and scope of this project which we trust will prove useful 
to you in your deliberation.
    We would like to thank Dr. Horn for his invitation and all those 
who were involved in the visit. We would also like to note how 
impressed we were by the enthusiasm and collegiality of the Ames animal 
health community.
    You will see from this report that we were very supportive of this 
challenging and important project which clearly has national and 
international implications for the future security of your livestock 
industries.
            Sincerely,
                                      Dr. Norman G. Willis,
                                                Executive Director.
                                 ______
                                 

  ARS-APHIS Master Plan for Facility Consolidation and Modernization 
                    International Review Team Report

    Based on our review on January 9-10, 2001, we fully endorse the 
principle of consolidating the Agricultural Research Service (ARS) and 
Animal and Plant Health Inspection Service (APHIS) program elements and 
the modernization of the laboratory facilities at Ames, Iowa. We 
consider that the consolidation of the National Animal Disease Center, 
the National Veterinary Services Laboratories and the Center for 
Veterinary Biologics would bring many operational advantages and be 
entirely appropriate. This would establish a credible national 
reference laboratory status that we believe is essential for national 
and international recognition and acceptance.
    It is our opinion that this consolidation would further act as a 
catalyst to focus collaboration with the scientific expertise of 
academia and to tap into the huge national scientific resource. In 
addition the plan would emphasize the essential linkage among research, 
diagnosis and regulation required for the support of animal disease 
control programs, agricultural industry productivity and agricultural 
trade.
    Globally, new diseases are emerging which require new approaches 
and new technology. New and more demanding standards for international 
trade are being developed in international organizations. To address 
the changing and unpredictable animal disease and food safety needs of 
the future, a highly effective physical facility and a critical core of 
scientists are mandatory. Quality science needs quality facilities and 
quality staff, who are only attracted to quality facilities.
    With the globalization of trade heralded through the Sanitary and 
Phytosanitary Agreement of the World Trade Organization and its 
reference to a science base, agricultural program and animal disease 
needs have become more global. The nature and scope of the relevant 
science is now ``big science'' demanding state-of-the-art expensive 
facilities in which to undertake new biotechnology and veterinary 
biologics for disease detection, surveillance and control. Harmonized 
international standards dictate requirements. Modern, fully equipped 
facilities to accommodate and respond to these needs, are essential. To 
be flexible to changing yet unknown future demands, facilities must be 
designed to be adaptable.
    Current facilities at Ames were built at a time when science, 
standards and equipment requirements were more limited. They are now 
inadequate because they do not meet international standards for safety 
of staff and the environment, for animal welfare and for quality 
assurance. The need to replace them is urgent and of such a nature that 
we feel it should be considered a national emergency.

                                 SCOPE

General
    Consolidation of the three Centers is appropriate and will enhance 
synergy acid collaboration among these Federal responsibilities and, in 
the process, significantly improve their functions.
    Focusing in this one site will further facilitate collaboration 
with the scientific expertise existing in universities throughout the 
Nation. This will serve to expand and coordinate the inclusion of 
people in science for USDA's access, and to geographically focus the 
scientific knowledge and inquiry.
    It is appropriate and necessary to build modern laboratory 
facilities capable of supporting federally mandated scientific work. 
This includes developing new knowledge and technology, conducting 
trade-related diagnostics and reference testing, and licensing 
regulated biologics with the required laboratory support.

National Leadership
    There is a need for this facility to serve as a national reference, 
a premier laboratory that is recognized internationally as a Center of 
excellence. This recognition will be incorporated into the evaluation 
of veterinary services, a component in risk assessment which is used by 
all trading countries to make trade decisions. This recognition will 
unequivocally work to the U.S. advantage.
    The veterinary biologics consolidation will also display a 
leadership role in establishing biologics standards. Not only will this 
promote the availability of safe and effective vaccines, but it will 
also assure the industry that extraneous disease agents are not 
inadvertently introduced thus threatening the national livestock herds 
and flocks.

Location
    We support the development of this project in Ames, Iowa based on 
our observation that there already exists a strong and enthusiastic 
cooperation and synergy among the three Centers and with the Iowa State 
University. The Ames site would also provide the opportunity of mutual 
sharing, and hence not duplicating very expensive equipment and 
facilities in biotechnology Centers. This is an advantage for the USDA.
    The nature of the scientific activities conducted in the Centers 
can often be viewed with hostility by lay and business communities. It 
is, therefore, of great value that the Ames community already accepts, 
understands and values the functions of these Centers, a trust and 
support which would have to be re-established in a different location.
    The current human resource of ARS and APHIS personnel at Ames has 
been built up over many years. It is our opinion and experience that 
moving such facilities to a different location would result in a 
substantial loss or dispersion of scientific staff which would be 
extremely difficult to re-establish and, in the process, would set the 
program back, perhaps for years. A strong infrastructure exists upon 
which to further develop the physical facility. Development of such an 
infrastructure would be costly at another site.
    The best fulfillment of the benefits of this consolidation would be 
achieved in the present Ames location.

                                  NEED

Laboratories
    When viewing the presently occupied laboratory facilities, the poor 
standard and inadequacy of these facilities, particularly the off site 
facilities, was quite unexpected. With our perception of the importance 
of such programs as tuberculosis, brucellosis and prion diseases (such 
as bovine spongiform encephatopathy/mad cow disease, scrapie, chronic 
wasting disease), we found it ironic that the United States national 
reference laboratories are currently housed in a converted animal 
facility and other converted accommodation. It is our belief that this 
represents a severe threat to the United States ability to control 
animal disease. We question whether these facilities could be certified 
to internationally accepted standards.

Animal Facilities
    We consider that all animal facilities must meet established animal 
care standards: In the present facilities, we do not believe these are 
being met. For the future a failure to meet the standards presents a 
risk of having to restrict further research studies.
    We also observe that these facilities may place staff who work with 
large animals, especially wildlife, at a significant personal safety 
risk.
    There is evidence that the poor State of the facilities is 
seriously restricting progress in several key areas and that 
inordinately long periods are required to produce research results. We 
suggest that this will continue to have, a direct negative impact on 
agricultural productivity, allowing animal disease to have a greater 
than necessary impact.

Certification
    With the globalization of trade, reference is made by all trading 
countries to the international standards and guidelines for trade 
incorporated in the OIE International Animal Health Code. Included in 
the guidelines for risk assessment is the evaluation of an exporting 
country's veterinary services and facilities. We consider that there 
will soon be a requirement to achieve International Standards 
Organization (ISO) laboratory certification as a standard. Completion 
of the Master Plan would provide the Ames facility with the opportunity 
to be the national reference laboratory with international recognition 
and acceptance, and to meet these standards. We endorse this 
opportunity. The result would be a direct positive influence on the 
facilitation of agricultural trade.

Research
    The Master Plan in our view, provides the capability that would 
allow for investment in much needed longer team research. Such studies 
are unlikely to be achieved in other-areas due to a lack of appropriate 
facilities with the required biosecurity.
    The focusing of scientific expertise at this one site through 
collaboration provides the critical mass of scientists necessary to 
stimulate the creativity required to address and solve future, as yet 
unidentified problems.

                              CONSEQUENCES

    We would like to take this opportunity, if you forgive our 
directness, to stress risks and vulnerabilities which we believe are 
facing you.
    To our mind, status quo is not an acceptable option.
    Laboratories presently doing essential program testing, would not 
achieve ISO accreditation. This would threaten the acceptance of the 
results produced which could prove critical to the livestock industry 
and to the acceptance of the safety of food.
    The current animal facilities are placing staff at unacceptable 
personal risks and are causing significant delays in producing research 
results urgently needed by the livestock industry.

                        POINTS FOR CONSIDERATION

    We would like to bring to your attention that, in addition to the 
need to provide the capital investment to build the proposed new 
facilities, funding provisions should be considered to secure adequate 
operating and preventive maintenance as well as the need to equip the 
new facility. Such a comprehensive vision of this project would ensure 
that full advantage is taken of the capabilities of the facility and 
that it is available for the future.
    Since future demands cannot be accurately predicted, a key feature 
of facility design should be adaptability permitting flexible use in 
the future.

                               CONCLUSION

    As a result of our review, we fully endorse the scope of the 
project and the urgent need to address the deficiencies and limitations 
of the current facilities. We also consider the location of the project 
in Ames, Iowa to be appropriate and advantageous. We feel that the 
delivery of this project would address future agricultural industry and 
food safety needs, and would yield positive international recognition, 
contributing significantly to the success of USA trade.
    We strongly believe that addressing these concerns is urgent. Ten 
years is too long for correction and we suggest that this question be 
addressed on an emergency basis.

    Senator Harkin. I appreciate that.
    Secretary Johanns. Senator, I would be happy to sit down 
personally too once we assemble that and try to go through it 
so we can both get a good understanding where we are at.
    Senator Harkin. Okay. And I will get this to you in 
writing, but I wanted it on the record.

                 CONSERVATION SECURITY PROGRAM SIGN-UP

    Secondly, participation in the first CSP sign-up--somehow 
you probably knew I was going to ask this question about CSP--
was much lower than the NRCS expected, but they still spent $40 
million in 18 watersheds. This year, with expenditures capped 
at $202 million for contracts in 220 watersheds, there will be 
much less money per watershed for new contracts. The 
President's budget proposes capping CSP at $274 million next 
year. Again, all of these numbers are far less than the farm 
bill provides for this program.
    My questions are: how much of the $274 million for next 
year, for 2006, would be available for new contracts, and how 
much of it would go to making payments on contracts already 
signed in 2004 and 2005?
    Secretary Johanns. We can provide that, Senator.
    Senator Harkin. I appreciate that. I knew you would not 
know that, but if you could provide that, I would appreciate 
that.
    [The information follows:]

                             CSP Contracts

    NRCS estimates show that for fiscal year 2006, approximately $110 
million would be available for new contracts and $123.2 million would 
be used for prior year contracts. The balance of $41.4 million would be 
used for technical assistance by NRCS to deliver the program.

    Senator Harkin. Secondly, how many new contracts will be 
signed in 2005, this year, and how many fewer contracts will be 
signed in 2006 with only $274 million? In other words, what do 
you expect to sign this year, what would you expect to sign 
next year under the budget that we have been handed.
    Secretary Johanns. Okay.
    Senator Harkin. This is my own statement, that it seems to 
me that if this budget prevails then we will see a substantial 
decline in the number of new enrollments for CSP, but that is 
my supposition on that.
    Secretary Johanns. We will get that information to you.
    [The information follows:]

                             CSP Contracts

    NRCS is estimating that more than 13,000 contracts will be signed 
in fiscal year 2005, and approximately 9,400 contracts will be signed 
in fiscal year 2006.

                          PACKER CONCENTRATION

    Senator Harkin. I appreciate that. Last one, packers and 
stockyards. The Packers and Stockyards Act was written to give 
USDA the power to go after unfair and anticompetitive market 
practices that were not being reached by previously enacted 
laws such as Sherman and Clayton Act. It is a very powerful 
statute. Concentration in the livestock and poultry industry 
continues to increase at an alarming rate.
    Independent producers repeatedly tell me that they are 
being driven out of business because of unfair and 
anticompetitive bidding and contracting practices of packers, 
large packers and processors. They say they are just at the 
mercy of a few huge firms. Some of these independent producers 
have asked me why in the past 4 years, why in the past 4 years, 
USDA has not filed even one administrative complaint against 
any firm for anticompetitive activity. They ask why, despite 
tremendous changes in the industry, USDA has not in the past 4 
years proposed any new rules of modifications to rules to 
protect fair competition under the Packers and Stockyards Act.
    Whenever I or my staff have asked about this inactivity 
either in hearings like this or by written correspondence, the 
Department always says it is studying the matter and referring 
it to its meat marketing study. USDA got $4.5 million in the 
fiscal 2003 appropriations bill, but it took USDA over a year 
and a half just to decide who to contract with to conduct the 
study. That was $4.5 million for that study. It will be nearly 
2 more years before the study is finished, and even then you 
have no idea if its analysis and conclusions will be worth 
anything.
    I guess what I would ask is, are independent producers 
justified in believing that the Department will continue to do 
virtually nothing whatsoever to protect fairness in competition 
in the livestock and poultry markets? This is what I am 
hearing, and I ask that question in good faith, that 
independent producers are thinking that nothing is ever going 
to happen, and I am asking you if you have any--I know you have 
only been on the job a little while, but if you have looked at 
this and if you will at least work with this subcommittee and 
others to make sure that that $4.5 million which we 
appropriated is used expeditiously in getting this study done.
    Secretary Johanns. Yes, I will work with the Committee. 
Senator, I know you asked the question in good faith, and I 
would tell you that in my time as Governor, this would be an 
issue that people would raise as I am out there.
    I have at least had an opportunity to look at the number of 
investigations, and if you chart through the investigations, in 
2003, there were 1,744; and in 2004, there were 1,923. It is 
estimated that in 2005 there will be 1,975 investigations. So 
it appears there is a significant amount of investigative work 
going on.
    What I would offer at this point--I know this is an 
interest of yours and I would be happy to work with you. I 
remember reading just within the last few weeks, that you had 
asked for a look at this whole area of packer concentration. We 
will cooperate in that effort in any way we can, and I will try 
to do everything I can to provide you with the information to 
answer the questions being raised by your constituency.
    [The information follows:]

                            Livestock Study

    In the Consolidated Appropriations Resolution, 2003, Congress 
provided the Grain Inspection, Packers and Stockyards Administration 
(GIPSA) $4.5 million, to remain available until expended, for a packer 
concentration study. GIPSA is currently administering a study on 
alternative procurement and transfer methods for livestock in the farm 
to retail chain, including captive supplies.
    GIPSA awarded a $4,319,373 contract to Research Triangle Institute 
(RTI) on June 14, 2004, to conduct the study. RTI will complete two 
reports. The first, scheduled for release midsummer 2005, will be based 
on a limited survey of market participants that describes the types of 
marketing arrangements used, their terms and availability, and the 
reasons market participants give for their use. The second, scheduled 
for release in mid-summer 2006, will be a comprehensive report that 
provides an extensive economic analysis of the different marketing 
arrangements. Additional data for the second report will come from two 
types of sources: (1) a survey of industry participants, and (2) data 
on transactions (purchases and sales) of livestock and meat.

    Senator Harkin. I appreciate that very, very much. I thank 
you very much, Mr. Secretary. I will get this other stuff to 
you in writing on that Ames lab thing, and also on the CSP 
thing. I will get that to you in writing, sir.
    Secretary Johanns. Okay, great. Thank you, Senator.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Harkin. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman, for your indulgence. I appreciate 
it very much.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Robert F. Bennett

                         CANADIAN BEEF INDUSTRY

    Question. The Alberta provincial government and the Canadian 
federal government have pledged over $100 million (CDN) to expand its 
beef industry, taking advantage of the closed U.S. border.
    Is the U.S. Government contemplating any actions to counter the 
Canadians' efforts?
    Answer. Canadian federal, provincial, and territorial governments 
have funded $2.6 billion since 2003 for programs to support the 
Canadian cattle and ruminant industry. Approximately 50 percent of 
Canadian cattle and beef production is exported, and the United States 
is the largest destination of Canadian product. By contrast, 
approximately 8-10 percent of U.S. beef production is exported. Thus, 
the United States is not as dependent on export markets as Canada is, 
although we are working as hard as we can to reopen markets that are 
currently closed.
    Although this funding will be counted against Canada's WTO 
commitments, Canada's overall expenditures remain well below the 
CAN$4.3 billion annual ceiling for aggregate measures of support 
allowed under the WTO agreements. The Canadian actions do not appear to 
violate any trade commitments.
    Question. How do you plan on restoring U.S. market share of beef 
exports?
    Answer. USDA, through marketing programs such as the Market Access 
Program (MAP) and the Foreign Market Development (FMD) Program, works 
closely with the U.S. Meat Export Federation (USMEF) to develop 
strategies and action plans to develop, maintain, and restore U.S. beef 
exports worldwide. These programs are not only aimed at restoring U.S. 
market share, but are also used to create the atmosphere necessary to 
make it easier for countries to get consumers to accept their decision 
to reopen.
    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 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 U.S., BSE seminars, advertisements, 
and dissemination of technical materials.
    Most recently, Dr. Charles Lambert, Deputy Under Secretary for 
Marketing and Regulatory Programs has led teams of technical experts to 
meet with key Ministry officials in Korea and Japan to discuss the 
cumulative efforts the United States has made to address BSE. The 
teams, consisting of representatives from APHIS, FSIS, FAS, FDA, and 
the industry have included key members who can answer the specific 
concerns put forward by the Governments of Korea and Japan 
respectively. However, the team's primary purpose has been to conduct 
public diplomacy efforts, such as press briefings and seminars, to aid 
in paving the way to market reopening.
    With the recent opening of Taiwan's market to U.S. beef, USMEF and 
the American Institute in Taiwan (AIT) will host a weekend of re-launch 
events aimed at trade, media and consumers to celebrate ``U.S. beef is 
back on Taiwan's table'' starting May 6, 2005. The activities will 
include a press conference in the afternoon, followed by a reception 
jointly hosted by USMEF and AIT. I will be addressing the reception via 
a previously recorded video to acknowledge the science-based approach 
of the Taiwanese government, and send that same message to other 
markets in the region. Director Paal, AIT, will conduct the ceremonial 
``cutting of the steak.''
    Question. What funding is in the budget to resume and expand U.S. 
beef exports?
    Answer. For marketing year 2004/2005, FAS has allocated more than 
$15 million in MAP and FMD funds to the U.S. Meat Export Federation to 
conduct pre- and post-opening activities worldwide. A similar level of 
activities could be supported through funding provided in the 2006 
budget.
    In addition, the 2006 budget proposes a $5.7 million increase and 
27 additional staff years for the Trade Issues Resolution and 
Management activities of APHIS. These funds will be used to station 
staff at a number of overseas locations where they will be engaged in 
addressing and resolving technical trade barriers, such as those 
related to U.S. exports of beef.

                             CROP SUBSIDIES

    Question. What would the impact to the price of food be if crop 
subsidies were eliminated?
    Answer. Since the farm and commodity support programs do contribute 
to farm income and provide a financial safety net for producers, the 
removal of these programs could have an adverse impact on farm 
production, at least in the short term. The effect of that removal 
would likely be an increase in the price of farm products and, thus, 
some increase in food prices; however, the long-term effect on consumer 
food prices would be modest. Since our farm sector is efficient, 
productive, and already to a considerable degree market-oriented, one 
would expect production to remain strong over the long term. Having 
said that, I'd like to caution that an abrupt removal of the programs 
would be much more disruptive to producers and consumers than a gradual 
phase out. I will ask the Office of the Chief Economist provide 
additional information in this regard.
    [The information follows:]

    The impact over time may be modest. Economic studies generally 
suggest that the elimination of crop subsidies would lead to a modest 
increase in the price of program crops, with the magnitude of increase 
depending on market conditions when the subsidies are removed. Under 
current farm programs, direct and countercyclical payments are based on 
historical production and producers are permitted to plant all the 
acreage eligible for direct and counter-cyclical payments to any crop, 
except for some limitations on plantings of fruits, vegetables, and 
wild rice. Since these payments are ``decoupled'' from current 
production, the elimination of direct and countercyclical payments 
would lead to essentially no reduction in plantings of major crops. In 
contrast, marketing assistance loan benefits are tied to current 
production and likely encourage producers to maintain production, 
especially when prices for major crops fall and continue to remain 
below marketing assistance loan rates.
    Assuming conservation programs, such as the Conservation Reserve 
Program, continue as specified in the 2002 Farm Bill, elimination of 
crop subsidies would likely lead to lower plantings and higher prices 
for major crops, with the acreage and price effects caused by 
eliminating crop subsidies varying depending on baseline projections of 
marketing assistance loan benefits. Higher prices for grains and 
oilseeds following the elimination of crop subsidies would increase 
feed expenses, causing livestock producers to reduce production 
resulting in higher livestock prices. These higher farm prices for 
major crops and livestock would likely lead to only a modest increase 
in retail prices for food. Various economic studies suggest that the 
elimination of crop subsidies could lead to less than a 5-percent 
average increase in all farm prices. Since the farm value currently 
accounts for less than 20 percent of consumer expenditures for 
domestically grown food and less than 15 percent of total consumer 
expenditures for food, a 5-percent increase in all farm prices could 
raise the retail price of food by less than 1 percent.

    Question. What would the impact be to rural economies and the U.S. 
economy?
    Answer. I believe the overall effect could be modest over time, 
although certain rural economies could be more greatly affected. I will 
ask the Office of the Chief Economist to provide additional 
information.
    [The information follows:]

    Crop subsidies provide a stable source of income to producers of 
program crops and benefit other agriculture-related businesses. 
Increased farm income from crop subsidies results in additional goods 
and services purchased in the local economy, which contributes to 
economic expansion in the non-farm economy. Over time, government 
payments are capitalized into higher farmland values, stabilizing the 
property tax base for rural communities. Possible short run effects 
resulting from the elimination of crop subsidies include: lower farm 
income, lower planted acreage and production of program crops, higher 
prices, lower expenditures by producers in the local economy and lower 
land values and rents.
    That being said, eliminating crop subsidies would have very modest 
effects on the overall U.S. economy and on many rural economies. The 
importance of the farm sector to the U.S. economy has been declining in 
recent decades, reflecting improvements in agricultural productivity, 
macroeconomic growth and the expansion of the non-farm economy. Farming 
accounted for 0.7 percent of U.S. gross domestic product and 1.4 
percent of total employment in 2001. That same year, farm program 
payments amounted to only 1.3 percent of total personal income in all 
U.S. rural counties.
    However, some counties are much more dependent on farming and would 
be more affected by the elimination of crop subsidies than others. 
USDA's Economic Research Service (ERS) classifies counties as farm-
dependent when 15 percent or more of average annual labor and 
proprietors' earnings is derived farming or 15 percent or more of 
residents are employed in farm occupations. In 2000, ERS identified 440 
counties, or 14 percent of all counties in the United States, as farm-
dependent. Many of these counties are located in the same areas where 
crop subsidies are concentrated, such as the Western Corn Belt, 
Northern and Southern Plains and Delta. In many of these counties, farm 
program payments account for 3 percent or more of total personal 
income. In these counties, the elimination of crop subsidies could 
cause a more pronounced reduction of economic activity, employment and 
the property tax base than in other areas.

    Question. What would the impact be to U.S. food and fiber 
production?
    Answer. Once more, I believe we are talking about a modest impact 
in the long run. However, an abrupt removal of the programs rather than 
a longer term phase out would be more disruptive to many producers and 
commodity sectors and this could reduce production levels in the short 
term. I will ask the Office of the Chief Economist to provide 
additional information.
    [The information follows:]

    Economic studies generally suggest that the elimination of crop 
subsidies would not significantly reduce U.S. food production but could 
significantly lower fiber production. The elimination of crop subsidies 
is unlikely to significantly reduce overall food production, because a 
large portion of current crop subsidies are ``decoupled'' from 
production and large segments of agriculture do not receive crop 
subsidies, such as livestock, fruit and vegetable producers. In 
contrast, nearly all cotton producers receive crop subsidies and a 
significant portion of these subsidies are marketing assistance loans 
benefits which are more directly related to production levels.
    Under the 2002 Act, participating producers are permitted to plant 
all the acreage eligible for direct and counter-cyclical payments to 
any crop, except for some limitations on plantings of fruits, 
vegetables, and wild rice. As a result, producers' planting decisions 
are expected to be largely unaffected by direct and counter-cyclical 
payments, and producers select the mix of crops to plant based on 
relative market returns and agronomic considerations. In contrast, 
marketing loan benefits do depend on how much and which crops are 
planted and, thereby, alter producers' planting decisions.
    A study by USDA's Economic Research Service (ERS) analyzed the 
effects of eliminating marketing assistance loans on production of 
major crops over the period from 1998 through 2005. The ERS study 
projected that elimination of marketing loan benefits would have 
reduced plantings of major crops by 2 to 4 million acres (1-2 percent). 
For cotton, acreage was projected to decline by 1.5 million acres in 
2000 (10 percent) and by 2.5 to 3.0 million acres or 15-20 percent in 
2001. The larger decline in cotton acreage in 2001 reflects that year's 
sharply lower cotton prices and higher larger marketing loan benefits 
than for the 2000 crop. This suggests that the effects of eliminating 
crop subsidies on crop production depend on market conditions at the 
time subsidies are removed, the magnitude of these subsidies, and the 
speed with which subsidies were removed. Certainly, there would be some 
noticeable effects, especially in certain sectors.

                             FARM SPENDING

    Question. What actions has USDA specifically taken to implement the 
President's proposals to reduce farm program spending?
    Answer. The President's proposals to reduce farm program spending 
will require that the Congress pass legislation to modify the farm 
programs. Proposed legislation to implement the program changes is 
being drafted and will be submitted to the Congress soon. USDA stands 
ready to work with the Congress.
    Question. What actions will USDA take to make certain that the 
President's proposals are enacted?
    Answer. USDA is prepared to work with Congress when these or 
related proposals are taken up.

               LOW PATHOGENIC AVIAN INFLUENZA (BIRD FLU)

    Question. The funding level for the Low Pathogenic Avian Influenza 
(LPAI) program was increased from $994,000 in fiscal year 2004 to $23 
million for fiscal year 2005. The increase was provided to indemnify 
producers for losses and to increase surveillance activities.
     Can you provide an update on the status of the fiscal year 2005 
funding and when we should expect this program to be fully implemented?
    Answer. This program has two components: The commercial poultry 
industry and the live bird marketing system (LBMS). The program in 
commercial poultry will be administered through the National Poultry 
Improvement Plan (NPIP) and will provide for: an H5/H7 LPAI monitored 
status for poultry production facilities and States, thereby certifying 
disease freedom for international and interstate movement of poultry 
and poultry products; an active and passive LPAI surveillance program; 
and an initial state response and containment plan, with 
indemnification, for managing H5/H7 LPAI outbreaks, should they occur. 
The program in the live bird marketing system provides uniform 
standards (published October 2004) that are presently being implemented 
and enforced at the state level for prevention and control of H5/H7 
LPAI in markets, distributors and production facilities that 
participate in this marketing system.
    The breakout of the funding is as follows: $12,000,000 is for 
indemnities; $3,871,547 is for surveillance activities; $932,285 is for 
reagents and costs of administering tests; $4,326,693 is for salaries 
and benefits and staff support; $600,000 for the Center for Veterinary 
Biologics (CVB); $513,575 for Education and Outreach; and $555,900 for 
Information and Technology.
    The LPAI program will be fully operational when a regulation is 
finalized for the commercial component of the program. The proposed H5/
H7 LPAI program for commercial table-egg layers, meat-type chickens, 
and meat-type turkeys is currently going through the rule making 
process.
    As of April 12, 2005, no fiscal year 2005 funding for indemnities 
has been used. Any unused funding in fiscal year 2005 will be available 
in fiscal year 2006. In addition, there is about $6.5 million in 
funding for indemnities from fiscal year 2004 CCC funding that is 
currently available.

                     NATIONAL ANIMAL IDENTIFICATION

    Question. The fiscal year 2006 budget includes a request of $33.3 
million to continue the National Animal Identification program. This is 
in addition to $18.7 million that was transferred from the Commodity 
Credit Corporation (CCC) and another $33.1 million that was provided in 
the fiscal year 2005 appropriations bill.
     Can you provide the Subcommittee with a status report on this 
program? Also, will there be a role for private industry?
    Answer. In fiscal year 2005, the focus of the National Animal 
Identification System will be on premises registration. As of May 2, 
2005, 47 of 50 States have premises registration systems in place. 
Currently, 60,000 premises have been registered, which represents 3 
percent of all participating premises. APHIS also intends to begin the 
process of registering and distributing animal identification numbers 
in order to track animal movements. By the end of fiscal year 2005, 
APHIS expects a small amount of data collection infrastructure to be 
put in place with the implementation cost to be shared by the public 
and private sectors. Private industry will be involved with the 
distribution of animal identification numbers and producers will have 
the ability to purchase Animal ID devices at their choice of private 
sector providers.
    Question. The $18.7 million that was transferred from the CCC 
allowed for testing and fine tuning of technologies that could be used 
to identify and track animals. Can you provide information on what type 
of technology may be used for the Nation wide program?
    Answer. While the funds provided will support the data repository, 
the integration of animal identification technology standards 
(electronic identification, retinal scan, DNA, etc.) will be determined 
by industry to ensure the most practical options are implemented and 
that new ones can easily be incorporated into the National Animal 
Identification System (NAIS). NAIS allows producers to use technology 
in coordination with production management systems, marketing 
incentives, etc., allowing for the transition to a ``one number-one 
animal'' system for disease control programs and other industry-
administered programs. While animals must be identified prior to being 
moved from their current premises, producers can decide whether to 
identify their stock at birth or during other management practices.
    Question. What is the timeline for a fully implemented national 
identification program?
    Answer. We are working on a timeline and expect to release a 
timeline soon.
  special supplemental program for women, infants, and children (wic)
    Question. The Administration's fiscal year 2006 budget request 
includes an increase of $275 million for a total funding level of $5.5 
billion. The requested increase for this program follows a fiscal year 
2005 increase of $523 million. Therefore, the WIC program has received 
an increase of approximately $798 million over the past 2 years.
    Can you explain the fiscal year 2006 budget request for the WIC 
program and help us understand why the cost of this program has 
increased so rapidly?
    Answer. The WIC Program experienced a larger than anticipated 
increase in costs and participation during fiscal year 2004, for 
several reasons:
  --Participation grew substantially during fiscal year 2004, and is 
        currently at an all-time high. Our fiscal year 2004 budget 
        request projected an annual average participation of 7.8 
        million, but actual participation was over 7.9 million. The 
        fiscal year 2006 President's budget request projects 
        participation will increase to an average of 8.2 million in 
        fiscal year 2005 and 8.5 million in fiscal year 2006.
  --There was an unanticipated spike in the retail price of dairy 
        products in fiscal year 2004; while dairy prices have now 
        moderated, they are still higher than they were prior to the 
        spike.
  --Additionally, WIC has seen a decline in the amount of rebates some 
        States are able to receive from the Infant Formula Rebate 
        Program. Further, due to shifts in the infant formula market to 
        more expensive DHA/ARA enhanced formulas, formula began to cost 
        the program more than it did in the past.
    WIC participation and food cost are challenging to project into the 
future. Over time, the program has experienced periods, such as fiscal 
year 2004, where these factors are particularly volatile. We will 
continue to closely monitor program performance and will keep Congress 
apprised of changes to our estimates which might be needed.

                          TRADE STATUS--JAPAN

    Question. Mr. Secretary, we continue to monitor the current beef 
embargo with Japan. As you may know, the Congress is considering a 
number of actions that could be taken to address the current situation. 
One option would be to seek retaliatory actions against Japan.
    Can you update us on the current status of the negotiations? Also, 
do you believe it is the appropriate time for Congress to take action 
or do you expect Japan to allow the resumption of trade?
    Answer. Negotiations are moving forward, albeit at a slower than 
desired pace. However, for the first time since the October agreement 
to resume trade, we are finally beginning to see signs of progress in 
Japan's rulemaking.
    The first decision Japan had to make as a pre-condition to 
rulemaking on imports is the elimination of animals under 21 months of 
age from its mandatory BSE testing requirement. Japan is finally ready 
to make that change. In late March, Japan's Food Safety Commission 
concluded the modification in the testing regulations presents an 
acceptable level of risk. The decision to exempt animals under 21 
months of age from testing is expected to be final sometime during May.
    With the decision to exclude younger animals from mandatory testing 
behind us, this now clears the way for rulemaking on imports. 
Unfortunately, we do not have a timetable for a decision on imports, 
but the next steps are now in place. In the coming weeks, the Ministry 
of Agriculture, Forestry and Fisheries and the Ministry of Health, 
Labor, and Welfare will deliver the Beef Export Verification (BEV) 
program for Japan to the Food Safety Commission. The Commission will 
evaluate the program, and we expect there will be consultations and 
public meetings. Once they have finished that process, they will make a 
decision. Again, the timetable for completion of this work is still 
unclear, and we will continue to press Japan at every opportunity for a 
decision to resume trade.
    To help Japan prepare for decision-making on imports, Dr. Charles 
Lambert, Deputy Under Secretary for Marketing and Regulatory Programs, 
has led U.S. delegations of experts to Tokyo for technical discussions 
and outreach activities with Japanese press and consumer groups. The 
outreach activities have included press briefings and roundtable 
discussions with the media, industry, and consumers to educate them on 
the safety of U.S. beef.

                    BOLL WEEVIL ERADICATION PROGRAM

    Question. With the submission of each year's budget request, the 
Administration includes new priorities and drastically reduces a number 
of ongoing programs. The boll weevil eradication program was funded at 
$47 million for fiscal year 2005. The fiscal year 2006 budget request 
for this program reduces the level to $15.8 million--which is a $31.3 
million decrease.
    If the requested level for the boll weevil program (a decrease of 
$31.3 million) is provided, will the program be able to continue as 
designed?
    Answer. Together with funds from providers, and the FSA loan 
program, the budget provides adequate funding to continue the 
successful boll weevil eradication program.

                       USDA EMPLOYEE RETIREMENTS

    Question. What are the Department's losses due to retirement and 
what is it doing to recruit new people to carry out its very important 
missions?
    Answer. In fiscal year 2004, the Department lost 2,894 permanent 
employees to retirement.
    In December 2002, the Department established and implemented a 
Strategic Human Capital Plan which initiated policies and practices 
that ensure that USDA continue to have a workforce capable of meeting 
its mission needs. USDA annually assesses its workforce requirements 
and adjusts its recruitment and retention strategies in the Mission 
Areas and agencies. This process ensures that we proactively replace 
those who may choose retirement with people capable of filling those 
gaps in our skills inventory in a timely manner.

                           ETHANOL PRODUCTION

    Question. Dr. Collins, your written testimony mentions the rapid 
increase in ethanol production.
    Do you see any danger here in over production and producers' 
inability to repay loans, many of which are backed by Federal programs?
    Answer. Ethanol production has been rising rapidly. Current U.S. 
ethanol production capacity is 3.75 billion gallons per year. There are 
84 ethanol plants producing ethanol in 20 States. Daily ethanol 
production reached 245,000 barrels or 10.29 million gallons in February 
2005. There are 15 ethanol plants under construction and 2 ethanol 
plants are expanding their production capacities. Total capacity under 
construction and expansion is about 730 million gallons per year. 
Ethanol production could increase to as much as 4 billion gallons this 
year, up from 3.4 billion gallons last year, and late this year or 
early next year, ethanol production capacity is expected to reach 4.48 
billion gallons.
    Ethanol is mostly used in oxygenated and reformulated gasoline 
programs. About 20 percent of ethanol is used as an octane enhancer in 
conventional gasoline. The market for ethanol as a replacement for 
methyl tertiary butyl ether (MTBE) has largely been satisfied, and 
ethanol must now compete as a fuel extender at a lower price.
    The price of gasoline is rising due to the rising price of crude 
oil, and the price of ethanol is declining due to greater ethanol 
production. The price of ethanol net of the Federal excise tax 
exemption is significantly lower than the price of gasoline and the 
price of MTBE. However, refineries and blenders are reluctant to use 
ethanol, due to a lack of infrastructure, such as storage and blending 
facilities. This is especially true outside the Midwest. If the current 
lower price of ethanol and higher price of gasoline continues into the 
future, it is possible that refineries and blenders will start using 
more ethanol as a substitute for gasoline and MTBE. In the absence of 
any new demand for ethanol to replace MTBE, such as the Renewable Fuel 
Standard, a greater supply of ethanol could lower the price of ethanol 
in the future.
    On a positive note for ethanol producers, the price of corn is less 
than $2 per bushel and the price of distiller's dried grains (DDG) is 
above $60 per ton. The net corn cost for a new dry mill is about 50 
cents per gallon and processing cost is about 45 cents per gallon. 
Therefore, the cost of producing of ethanol, excluding capital costs is 
less than $1 per gallon. The current price of ethanol is about $1.30 
per gallon.
                                 ______
                                 

               Question Submitted by Senator Thad Cochran

                              SOYBEAN RUST

    Question. I know that several agencies within USDA have worked 
closely with the soybean industry on an ``Early Detection and 
Surveillance Plan'' for soybean rust. This program will be carried out 
in conjunction with land-grant universities, including Mississippi 
State University. As you know, Mississippi is one of the nine States 
where soybean rust was confirmed last fall. My soybean farmers are 
acutely aware that losses due to soybean rust totaled $1 billion the 
first year of the outbreak in Brazil, and $2 billion the following 
year. USDA's Economic Research Service has estimated net economic 
losses for the U.S. ranging from $640 million to $1.3 billion in the 
first year of the pathogen's establishment in this country, and 
estimated annual losses in the ensuing years of between $240 million 
and $2 billion.
    Given the importance of this early detection and surveillance plan, 
can you please tell the status of its funding?
    Answer. APHIS is using $1.19 million from its contingency fund to 
implement the SBR monitoring and surveillance network and continues 
supporting the comprehensive USDA SBR website. APHIS is providing 
$800,000 of the contingency funds to State cooperators for sentinel 
survey plots and $180,000 to USDA's Cooperative State Research, 
Education, and Extension Service for 5 mobile monitoring teams. The 
remaining funds will support the website, which provides real-time 
updates on the results of surveillance efforts.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                  RURAL COMMUNITY ADVANCEMENT PROGRAM

    Question. The Rural Community Advancement Program (RCAP) was 
established to provide planning assistance, grants, loan, loan 
guarantees, and other assistance to meet the development needs of rural 
communities. Though the fiscal year 2006 budget maintains the 
flexibility to transfer funding among programs within RCAP, funding for 
several programs, including Rural Community Development Grants, 
Economic Impact Initiative Grants, Rural Business Enterprise Grants, 
Rural Business Opportunity Grants, and High Cost Energy Grants is 
eliminated. This action troubles me because of the importance of these 
programs to my state, especially High Cost Energy Grants, which was 
funded at $28 million in fiscal year 2005. Alaska's rural communities 
experience some of the highest energy costs in the Nation, paying up to 
9 times higher than the national average. Rural areas rely on expensive 
diesel fuel which must either be barged or flown in.
     Given the devastating consequences on rural communities, 
particularly those in my state, why are these cuts being proposed?
    Answer. The Administration's proposal, which is referred to as the 
Strengthening America's Communities initiative, is expected to provide 
more efficient and effective assistance to the most needy communities 
and to provide some budgetary savings. Rural communities are expected 
to receive a fair share of the resources that will be consolidated 
under this initiative. In addition, RCAP would continue to be an 
important source of funding for rural communities and would retain the 
flexibility for transferring resources to meet local priorities. 
Funding is not being requested for the high energy cost grants because 
very few rural areas are eligible to receive these grants, and cuts in 
this program would provide additional funding for RCAP programs that 
serve more rural communities.

                              ALASKA DAIRY

    Question. As you know, the closure of the United States-Canada 
border due to the discovery of BSE infected cows in both Canada and 
Washington State has negatively impacted producers. This situation is 
particularly devastating to Alaska producers and dairy farmers who rely 
on the importation of live animals such as cattle to replenish their 
herds. This closure has eliminated transportation of these animals via 
the Alaska-Canada Highway, which is the only economically viable option 
for importing live animals into Alaska and our major transportation 
corridor from the Lower 48. During this time, my staff and I have been 
working with USDA to provide some measure of relief to our agriculture 
producers. Last fall, Governor Frank Murkowski declared an economic 
disaster for the State of Alaska caused by the closure and requested 
Federal assistance to minimize the impacts of this closure.
    Despite repeated requests to USDA from Governor Murkowski, the 
Alaska State Legislature, Senator Murkowski, and myself, no assistance 
has been offered or provided to assist agriculture workers in my State. 
The fiscal year 2005 Omnibus included $1 million for dairies in Alaska. 
USDA has still not released the funds--the stated reason is uncertainty 
as to how to allocate it. During this period of inactivity by USDA, the 
Alaska dairy industry continues to fail.
    What steps are being taken by your office and USDA to ensure the 
continued viability of the Alaska dairy industry?
    Answer. USDA has not received a request for a disaster designation. 
However, as you note, funds of $1 million were appropriated in Section 
786 of title VII of Division A of the Consolidated Appropriations Act, 
2005 (Public Law 108-447) to carry out Section 751 of Division A of 
Public Law 108-7, enacted on December 8, 2004. This legislation 
authorized the Secretary of Agriculture to make loans and grants to 
expand Alaska's dairy industry and related milk processing and 
packaging facilities. Further, I would note that an April 6, 2005, 
amendment to the Emergency Supplemental Appropriations Act for Defense, 
the Global War on Terror, and Tsunami Relief, 2005 (H.R. 1268), which 
is currently being considered by Congress, would modify that authority 
by giving the Secretary of Agriculture discretionary authority to apply 
the 2005 funding to the accounts of Alaska dairy farmers owed to the 
United States. If enacted, USDA will work expeditiously to implement 
that legislation and provide appropriate assistance to Alaska's dairy 
farmers.
    In addition, on January 4, 2005, USDA published a final rule 
amending existing regulations to provide for the importation of certain 
ruminants, ruminant products and byproducts from regions that pose a 
minimal risk of introducing BSE into the United States, and designates 
Canada as the first minimal risk region. The effective date of the 
final rule was to have been March 7, 2005. However, on March 2, 2005, 
the U.S. District Court for the District of Montana temporarily delayed 
the implementation of the minimal risk rule. As a result, opening up 
the border to trade in cattle is very much a legal process outside of 
the control of USDA. Nevertheless, we are very concerned about the 
economic impact of the closed border with Canada on U.S. cattle 
producers and processors, including Alaska's dairy producers. On June 
9, I will host a roundtable discussion on BSE in North America that 
will bring together experts from the USDA, producers, packers, academia 
and others to discuss the safety of North American beef and the effects 
of the border closings.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                           EXECUTIVE BONUSES

    Question. A recent OPM report on the performance level and bonuses 
of executives in the Federal Government noted that less than 40 percent 
of executives at USDA received the highest performance rating in fiscal 
year 2003. However, the same report stated that over 80 percent of 
these executives received bonuses, at an average of more than $12,000, 
that same fiscal year.
    What percentage of non-SES employees received bonuses in fiscal 
year 2003, and what percentage of those employees received the highest 
available performance rating?
    Answer. In 2003, 46 percent of non-SES level employees received 
cash awards. Fifty-nine percent of those employees who received cash 
awards received the highest available performance rating for their 
agency. Some of these employees received performance ratings under a 
five-level appraisal system, some under a three-level system, and 
others under a two-level system.
    Question. What was the average monetary amount of that bonus?
    Answer. The average cash award given to employees who received the 
highest available performance rating was $703 in 2003.
    Question. What is the total amount of funding USDA spent on 
employee bonuses in fiscal year 2003 and 2004 for SES and non-SES 
employees? How much does USDA plan to spend on bonuses in 2005?
    Answer. The amounts spent in fiscal year 2003 and fiscal year 2004 
are provided below. For fiscal year 2005, we estimate the amount for 
SES awards to be 9 percent of salary costs, or approximately $4 
million. The estimate for non-SES bonuses is not available as each 
individual agency in the Department develops its own plan for bonuses.
    [The information follows:]

------------------------------------------------------------------------
                                            SES awards     Non-SES award
------------------------------------------------------------------------
Fiscal year 2003........................      $1,927,845     $53,519,877
Fiscal year 2004........................       3,025,520      57,236,689
------------------------------------------------------------------------

    Question. Please provide a list of agencies that include funding in 
their fiscal year 2006 budget request for SES and non-SES employees, 
including the amount set aside for bonuses.
    Answer. The President's Budget for USDA does not include requests 
for bonuses. The amounts to be spent on SES and non-SES bonuses are 
expected to be similar to those in prior years and are funded as part 
of the agencies' salaries and expenses costs.

                      GAO HOMELAND SECURITY REPORT

    Question. A few weeks ago, GAO issued a report on the potential 
threat of agro-terrorism. GAO pointed out problems with:
  --USDA accreditation for veterinarians;
  --rapid diagnostic tools;
  --stockpiles of ready-to-use vaccines;
  --and the 8 percent decline in agricultural border inspections.
    You have stated that you believe in order to reverse the decline in 
agricultural border inspections it is very important to improve the 
communication between USDA and DHS.
    What specifically do you plan to do to improve your communication 
and relationship with DHS to improve this situation and avoid similar 
problems in the future?
    Answer. APHIS Administrator Ron DeHaven and DHS' Customs and Border 
Protection (CBP) Commissioner Bonner met in early April 2005 to discuss 
communication issues between the two Agencies and agricultural 
inspection operations at U.S. ports of entry. In addition to continuing 
to implement the newly established joint quality assurance program to 
evaluate operations at ports of entry, Dr. DeHaven and Commissioner 
Bonner have agreed to hold quarterly meetings to address any issues 
that cannot be resolved at the operational level. APHIS and CBP 
operations officials are meeting twice monthly to carry out the quality 
assurance program and address ongoing operational issues. The Agency's 
goal for the program is to ensure the quality of inspections and 
facilitate an appropriate level of communications between DHS and 
APHIS. Thus far, APHIS and CBP have conducted a pilot joint inspection 
blitz at the port of Detroit and joint reviews of operations at the 
ports of Philadelphia and Miami. A review of operations at the maritime 
port of Long Beach, California, is scheduled for June 2005.
    APHIS and CBP officials are also continuing to address the large 
number of vacancies at ports of entry. With the transfer of the port 
inspection portion of the agriculture quarantine inspection function to 
CBP in fiscal year 2003, APHIS transferred 363 fully-funded vacant AQI 
inspector positions. This number has increased significantly through 
attrition in the last 2 years. While progress has been made in filling 
many positions, APHIS encourages CBP to continue an aggressive 
recruitment and hiring program. APHIS assists CBP in recruiting by 
distributing vacancy announcements to a large pool of qualified 
candidates and expeditiously training those hired. Following the April 
2005 meeting between Dr. DeHaven and Commissioner Bonner, APHIS is 
enhancing its recruitment program for CBP vacancies through promoting 
the jobs to qualified candidates. APHIS' Professional Development 
Center has 14 classes scheduled for incoming agricultural specialists 
(with space for 36 new inspectors in each class).
    Progress has been made in other areas, such as access to CBP's data 
systems. In March 2005, APHIS and CBP reached an agreement to allow 
APHIS users to access CBP's Automated Targeting System (ATS), which 
will allow us to review incoming cargo manifests electronically and 
determine which to target for agricultural inspections. At this time, 
14 APHIS users are approved to access ATS, with 6 more in the approval 
process. APHIS is also placing two agricultural specialists in CBP's 
National Targeting Center to develop criteria for determining which 
incoming shipments to target for agricultural inspections.

                ACCREDITED VETERINARIANS IN RURAL AREAS

    Question. You have discussed the importance and variety of State 
programs that are working to increase the number of accredited 
veterinarians in rural areas where they could provide ample 
surveillance of animal disease and potential agro-terrorist threats. I 
agree that State programs are important, but I also believe they should 
be strongly supplemented by the Federal Government, especially as they 
are used to enhance national security.
    What Federal programs are available and being utilized to increase 
the number of accredited veterinarians in rural areas?
    Answer. APHIS is authorized to offer additional compensation to 
help recruit and retain veterinarians for difficult-to-fill positions. 
The National Veterinary Medical Service Act enables APHIS to repay 
veterinary medical school loans when a veterinarian serves in a 
``shortage'' area. APHIS is also authorized to provide retention 
bonuses to veterinarians, who are paid on the normal General Schedule. 
Any retention bonuses must be approved through the APHIS Deputy 
Administrator's Office on a case-by-case basis.
    APHIS has not used its authority under the National Veterinary 
Medical Services Act since the agency has not received appropriated 
funding supporting this legislation. In fiscal year 2004 APHIS 
Veterinary Services provided $36,755 in retention bonuses to two 
veterinarians. In addition, APHIS has a roster of about 1,200 private 
veterinarians in the National Animal Health Emergency Response Corps 
who are available for public service in the event of an emergency.
    FSIS routinely pays a range of recruitment incentives to attract 
new veterinary hires in shortage or difficult to fill locations 
nationwide. For example:
  --Recruitment bonuses were used when filling positions in various 
        locations in 21 States. In fiscal year 2004, FSIS paid $632,803 
        to provide recruitment bonuses to 59 new veterinary hires.
  --FSIS pays travel and transportation expenses to all veterinary new 
        hires. In fiscal year 2004, $290,000 was provided to pay these 
        expenses to 58 new hires.
  --Direct-Hire Authority was granted by OPM for VMO hires GS-9 through 
        13, which doubled the number of applications.
  --Training agreement authorizes accelerated promotion for GS-9 to GS-
        11 VMO within 6 months of hiring to attract talented veterinary 
        applicants. The low starting salary for our entry level 
        positions, compared to jobs in the private sector, has been a 
        major factor in our inability to recruit new veterinary 
        graduates.
  --Finally, use Superior Qualifications Appointment authority for 
        veterinarians new to Federal Service--allows for setting 
        starting salary above the normal level.
    To date, we have not used Retention allowances to retain FSIS 
veterinarians. FSIS has also not yet utilized the Repayment of Student 
Loans Program to attract or retain veterinarians; however, the agency 
is considering use of these authorities.

                FOOD AND AGRICULTURE DEFENSE INITIATIVE

    Question. The USDA budget proposes an increase of $78 million for 
the Food and Agriculture Defense Initiative (FADI) bringing total FADI 
spending to $376 million. The goals of this Initiative are laudable, 
but I do have questions regarding what, specifically, this money is 
buying.
     Can you tell us what USDA has achieved and what work remains? How 
are you measuring success in achieving these goals?
    Answer. The events of September 11, 2001, heightened the Nation's 
awareness and placed a renewed focus on ensuring the protection of the 
Nation's critical infrastructures. The Department plays a significant 
role in protecting America's agricultural industry and food supply from 
intentional and unintentional harms. A terrorist attack on the food 
supply could pose both severe public health and economic impacts, while 
damaging the public's confidence in the Nation's food supply. As a 
result of new potential threats to the food supply, USDA agencies have 
made fundamental changes in how they implement their missions and have 
focused efforts on food and agricultural production, USDA facilities, 
and USDA staff and emergency preparedness.
    Some activities the Department has begun include expanding the Food 
Emergency Response Network (FERN) and the Regional Diagnostic Network 
with links to the National Agricultural Pest Information System; 
upgrading laboratory security and enhancing their capabilities to 
quickly identify threats to the food supply; strengthening research on 
diagnostic methods for quickly identifying various plant and animal 
pathogens; enhancing the monitoring and surveillance of pests and 
diseases in plants and animals; and enhancing the Department's 
emergency preparedness and response capabilities by establishing a 
Homeland Security Staff. The Homeland Security Staff provides oversight 
of USDA nationwide policies and procedures related to homeland 
security, and coordination with the Department of Homeland Security and 
other Federal agencies, public and private organizations. I will have 
this office provide additional information for the record.
    [The information follows:]

    The FADI closely correlates to the food and agriculture security 
tasks set forth in Homeland Security Presidential Directive (HSPD)-9, 
Defense of U.S. Agriculture and Food. HSPD-9 establishes 6 main 
components to a defense strategy for agriculture and food security: (1) 
Awareness and Warning, 2) Vulnerability Assessments, (3) Mitigation 
Strategies, (4) Response Planning and Recovery, (5) Outreach and 
Professional Development, and (6) Research and Development. Highlights 
of current fiscal year activities for each component follow.
Awareness and Warning
    Enhancing Federal, State, local, and industry awareness of the 
threats to the agriculture and food sector is essential. First 
responders in this sector are often industry owners and operators or 
State or local regulatory officials. Additionally, early detection is 
also key to minimizing the spread of a contaminant. Therefore, USDA has 
focused upon educating individuals of the signs of an attack or 
outbreak. USDA has also focused upon enhancing scientific capabilities 
for early warning, such as establishing laboratory networks that can 
rapidly share information and diagnostics. Key programs within 
Awareness and Warning are highlighted below:
    Awareness Activities.--To ensure awareness, USDA has hosted Food 
and Agricultural Defense Field Training in a variety of settings. 
USDA's Food Safety and Inspection Service (FSIS) has provided 
biosecurity training to in-plant personnel. USDA's Animal and Plant 
Health Inspection Service (APHIS) has provided biosecurity training via 
CD-Rom to States. USDA's Cooperative State, Research, Education and 
Extension Service (CSREES) has trained plant diagnosticians in every 
State to recognize high consequence pathogens and is conducting plant 
disease outbreak scenario drills in 24 States. USDA has also provided 
information on its web page for owners and operators, so that they are 
aware of signs of contamination. The USDA page on Soybean Rust is an 
example of these activities. USDA also partnered with industry to 
ensure their awareness of agriculture and food security during 
transportation by providing a voluntary security guide with tips for 
keeping products secure during transport. FSIS has also provided model 
food security plans for industry to use in developing their own plans.
    Food Emergency Response Network (FERN).--FSIS, along with the Food 
and Drug Administration (FDA), co-chairs the Food Emergency Response 
Network. Screening, in FSIS laboratories, under a surveillance program 
coordinated by FERN, a national, integrated network of Federal & State 
laboratories, with the surveillance and surge capability of testing 
foods for threat agents in the event of a terrorist attack. Currently, 
FERN includes 93 laboratories representing 43 States and Puerto Rico 
(25 Federal, 60 State, 4 local and 4 other) and each laboratory has 
satisfactorily completed the FERN Laboratory Qualification Checklist. 
The FERN Laboratory Qualification Checklist provides the FERN National 
Program Office with vital information to determine if a laboratory 
meets the criteria for participation in FERN. Within the 93 
laboratories, 67 conduct chemical agent testing, 69 conduct 
microbiological testing, and 25 conduct radiological (some laboratories 
conduct more than one type of test). The goal for FERN in fiscal year 
2006 is to add 15 new State laboratories to partner with FSIS and FDA.
    Funding to date has been used to build on the expertise of the 
Federal, State and local laboratories that are now part of FERN. FERN 
has laid the foundation for a coordinated laboratory network that will 
ultimately be capable of meeting the testing demands resulting from an 
attack on our food supply. FERN laboratories are currently conducting 
method development for testing and performing proficiency testing. FERN 
has established Regional Coordination Centers that serve as the primary 
points of contact for laboratories across the country. Already 
established are the Southeast Center located in Athens, Georgia, and 
the Northeast Center temporarily headquartered in Rockville, Maryland. 
Other Regional Coordination Centers will soon be established in 
Alameda, California; Denver, Colorado; and St. Paul, Minnesota.
    The additional funding requested for FERN, will enable the agency 
to manage, maintain, and expand the capacity and capabilities of the 
existing FERN labs. These funds will improve the FERN's ability to 
handle the numerous samples that would be required to be tested in the 
event of a terrorist attack on the food supply, because State and local 
laboratories would be able to conduct a significant portion of the 
necessary testing.
    State and local laboratories continue to be identified and 
recruited into the FERN. The goal is to include an adequate number of 
Federal, State, and local food laboratories in the network to ensure 
the necessary laboratory support, coordination, and collaboration in 
the event of a terrorist attack on the food supply.
    National Animal Health Laboratory Network (NAHLN).--The NAHLN is a 
functional national network of existing animal diagnostic laboratories. 
Its purpose is to rapidly and accurately detect and report pathogens of 
national interest that have the potential for high consequence and/or 
to be introduced intentionally. It provides geographically distributed 
diagnostic support to APHIS by training diagnostic personnel to improve 
service capabilities, expanding standardized rapid/sensitive testing 
capabilities, improving the Nation's Bio-Safety Level (BSL)-3 
capability, assuring quality standards and proficiency testing, and 
improving communications to share data. The goal for NAHLN in fiscal 
year 2006 is to train and proficiency test 10 additional laboratories; 
assist in diagnostic fee-for-service guidance; and develop 
international linkages.
    The 12 founding laboratories, along with 32 other laboratories 
funded by APHIS, provide surveillance testing for Bovine Spongiform 
Encephalopathy (BSE), Exotic Newcastle Disease, Highly Pathogenic Avian 
Influenza, and Chronic Wasting Disease in 37 States. The current number 
of States with laboratories available to assist the National Veterinary 
Services Laboratory (NVSL) in providing necessary Federal animal 
diagnostic services has increased to 41.
    Outputs that must occur to achieve preparedness oriented outcomes 
include: laboratory biosafety upgrades, laboratory physical security 
improvements, laboratory equipment upgrades, deployment of quality 
management (QM) manuals and personnel, completed standard operating 
procedures, and diagnostic personnel trained for high consequence 
pathogens. These outputs are necessary to improve preparedness for and 
ability to respond to high consequence animal diseases. Currently, 11 
of the 12 laboratories are running Exotic Newcastle and Highly 
Pathogenic Avian Influenza tests post proficiency. All laboratories 
have passed proficiency tests for Classical Swine Fever. The Foot and 
Mouth Disease program is progressing according to schedule.
    The NAHLN has been an important part of the BSE testing program. 
Eight of the twelve founding NAHLN laboratories have participated in 
this high volume surveillance testing program, which tests volumes 
similar to the Colorado example below, representing three to four fold 
increases over 2001 levels. Beyond surveillance test performance, NAHLN 
host institutions helped to operationalize the current high volume BSE 
test, which makes wider surveillance possible with limited resources. 
The NAHLN founding laboratories, through assay development and training 
activities, have also increased the surveillance capacity of the 
veterinary diagnostic system for Foot and Mouth Disease, Classical 
Swine Fever, Exotic Newcastle Disease, and Highly Pathogenic Avian 
Influenza.
    As of January 31, 2005, Colorado State University Veterinary 
Diagnostic Laboratories (CSUVDL) has performed 50,000 BSE tests, 
processed over 15,000 chronic wasting disease samples, and 6,000 
Scrapie samples since the NAHLN program's inception. Their weekly 
testing volume has exceeded 3000 samples.
    In 2004, Texas experienced 2 outbreaks of Avian Influenza (AI). 
Because of the training and equipment afforded through this CSREES 
grant, the Texas Veterinary Medical Diagnostic Laboratory (TMVDL) was 
able to assume a major role in laboratory testing during and following 
these 2 outbreaks. They were able to reduce the testing burden on the 
National Veterinary Services Laboratory significantly by performing 
almost all PCR and serological tests following the diagnosis of the 
index case by NVSL. In total TVMDL ran 20,468 triage preliminary tests 
and 2,679 real time PCR tests for AI during the 2 outbreaks. This 
success story provides evidence of the increased foreign animal disease 
response capacity that is needed in order to gather near-real time 
information regarding potential threats to the Nation's animal 
resources.
    National Plant Diagnostic Network (NPDN).--The NPDN provides a 
functional national network of existing diagnostic laboratories in all 
States. Its purpose is to provide rapid and accurate detection and 
reporting of plant pests and diseases that have the potential for high 
consequence and/or to be introduced intentionally. The NPDN also 
provides geographically distributed diagnostic support to APHIS by 
decreasing the time between first observation of an anomaly by first 
detectors and response, increasing the Nation's plant diagnostic 
capabilities through improved equipment and training, providing 
diagnostic surge capacity in case of a concentrated or deliberately 
distributed agroterrorist incident, and training first detector 
trainers that will increase the Nation's ability to detect incidents 
before they become widely distributed.
    The network is currently being utilized by APHIS to manage the 
Phytophthora Ramorum (Sudden Oak Death) outbreak. NPDN is currently 
running several multi-State plant disease outbreak simulations in 
cooperation with APHIS/PPQ, State governments, the grower community. 
The network is also currently working with the USDA Forest Service to 
educate potential first detectors of sudden oak death disease.
    NPDN provides equipment funding, training, and educational 
resources to all land grant university diagnostic laboratories in an 
effort to raise diagnostic capabilities nationwide. Last year, Plant 
Diagnostic Laboratories in 41 States received funding to upgrade 
equipment and facilities and Plant Diagnostic Laboratories in all 
States and U.S. Territories received diagnostic training. In addition, 
laboratories provided triage diagnostics for over 130,000 samples that 
were potentially infected with P. ramorum, the pathogen that causes 
sudden oak death, preventing its nationwide distribution through 
marketing channels.
    The NPDN also hosted outbreak scenario training exercises in 23 
States. Outbreak scenarios will be completed for all States in the 
continental United States by May 2005. Technical training on plant 
biosecurity issues was provided through The National Pest Diagnostic 
Network's First Detector Training and Certification Course. This 
program trained over 10,000 individuals and trained over 1,500 
individuals as additional trainers. With 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.
    Integrated Consortium of Laboratory Networks.--Laboratory networks 
from a variety of Federal Departments have agreed to work cooperatively 
under a Memorandum of Understanding to communicate and cooperate by 
sharing capabilities, policies, procedures, and approaches for handling 
laboratory analysis during national emergencies. The consortium also 
seeks to reduce redundancies among laboratories, identify holes in 
laboratory capabilities, and to seek solutions to managing these 
identified issues in the future. The MOU will likely be signed in early 
May.
    Integrated Surveillance Capability.--USDA's APHIS, FSIS, and CSREES 
agencies are conducting a review and analysis of their information 
systems that are relevant to the National Biosurveillance Integration 
System (NBIS). In consultation with the Department of Homeland Security 
(DHS), the agencies are considering the current information available 
for submission to the NBIS, the costs of providing the information, and 
a process for prioritizing information systems that should link to the 
NBIS. The goal is to provide the highest priority information systems 
to the NBIS to improve surveillance of threat agents in plants, 
animals, and food.
    Surveillance and Monitoring.--Surveillance and monitoring programs 
are essential to an awareness and early warning capability. Within this 
realm, USDA has a number of key initiatives underway. FSIS has 
implemented the National Consumer Complaint Monitoring System (CCMS), a 
surveillance and sentinel system that monitors, records, and tracks 
food-related consumer complaints 24/7, and other reports of suspicious 
activity. It serves as a real-time, early warning system of a potential 
attack on the food supply. CCMS has evaluated approximately 3,500 
consumer complaints since January 2001.
    With regard to plant and animal health, USDA is completing the New 
Pest Response Guidelines for all the select agents and is completing 
integration of the Overseas Pest Information System (OPIS) database. 
Wildlife provides an early indicator for outbreaks that may impact food 
animals. Therefore, USDA is hiring 77 wildlife biologists nationwide. 
Due to the importance of food animals, USDA is developing a monitoring 
and database system for the National Animal Identification System 
(NAIS) to identify gaps in the surveillance and monitoring of animal 
health. Similarly, USDA is continuing its surveillance programs for 
Foreign Animal Diseases (Foot and Mouth Disease), Swine feeding 
surveillance, and Classical Swine Fever activities.

Vulnerability Assessments
    USDA is using the CARVER + Shock vulnerability assessment method 
across agencies so that we may compare findings across the farm-to-
table continuum. Our goal is to expand and continue these assessments 
both internally and by leveraging upon DHS projects to partner with 
industry to conduct assessments. To date, USDA has done a number of 
threat and vulnerability assessments. Highlights follow:
    USDA CARVER + Shock Assessments.--USDA agencies have conducted 
threat and vulnerability assessments for food, animal, and crop 
products and programs under our jurisdiction. USDA agencies will update 
these assessments every 2 years. These agencies are also working with 
Federal, State, and local partners to aid the private sector, as 
industry conducts its own assessments.
    Farm Service Contract Requirements.--Under USDA's Farm Service 
Agency (FSA) oversight, language has been incorporated into all 
Commodity Credit Corporation (CCC) Storage and U.S. Warehouse Act 
Licensing Agreements requiring agreement holders to conduct a facility 
vulnerability assessment and implement a security plan that includes 
measures to protect commodities handled and stored in their facility. 
FSA is also conducting training for agency staff that assess 
compliance. FSA is preparing to conduct a vulnerability assessment for 
commodity operations with specific emphasis on the vulnerability and 
risk of bulk grain, oilseeds, rice, and processed agricultural 
commodities to threats and attacks of deliberate contamination. This 
assessment will address the complexities of CCC-owned and farmer-owned 
marketing assistance loan collateral being commingled with bulk grain, 
oilseeds, and rice of other public owners during the storage, 
transportation, and distribution process. Additionally, USDA's Foreign 
Agricultural Service (FAS) has begun to work with the U.S. Agency for 
International Development and the State Department to develop and 
coordinate an international food aid plan. The focus of this 
cooperation is two fold: prevention by recognizing the most likely 
threats and vulnerabilities within the international food aid system 
(those that pose the biggest risk) and development of a Rapid Response 
Plan.

Mitigation Strategies
    Mitigation strategies depend upon vulnerability and threat 
assessment findings and research and development capabilities. To date, 
USDA has addressed concerns of vulnerabilities within imported meat, 
poultry and egg products by developing standardized screening and 
inspection procedures. USDA is also conducting research and development 
concerning intervention steps to prevent contamination. Specifically, 
USDA is developing intervention steps to prevent transport of agents of 
concern from farm-to-table.

Response Planning and Recovery
    In the event that preventive measures are unsuccessful, the 
Department must be prepared to respond to and recover from an incident. 
Therefore, USDA is focusing upon the national initiatives, the National 
Response Plan and the National Incident Management System, to ensure 
that the Department may respond appropriately to a catastrophic 
incident. Additionally, USDA is considering sector specific response 
and recovery initiatives. Highlights follow:
    National Response Plan (NRP).--Implementing the NRP at USDA is 
essential to ensuring that the food and agriculture continuum is 
prepared for an event. Therefore, USDA staff offices are identifying 
and preparing revisions to existing regulations, policies and guidance 
to assure compliance with the NRP. FSIS is working with FDA and DHS, to 
develop a food and agriculture annex for the NRP. They established a 
cooperative agreement with the National Association of State 
Departments of Agriculture (NASDA), to ``develop emergency 
preparedness/response best practices and guidelines for Federal-State 
response to incidents affecting the food supply.''
    National Incident Management System (NIMS).--Similarly, USDA is 
implementing NIMS. Agencies have completed the first phase of NIMS 
implementation plans, which include preparedness, prevention, response, 
and recovery aspects. USDA has compiled the plans into a department-
wide response to DHS. The next step is for USDA to work individually 
with agencies to finalize their plans.
    National Plant Disease Recovery System (NPDRS).--In the event of a 
large-scale disease outbreak, the food and agriculture sector must have 
plans in place for recovery. HSPD-9 specifically tasks USDA to develop 
such a plan for the plant production system. To date, USDA has led an 
interagency committee to develop a system to address the mechanisms and 
process for a recovery system for plants/crops. The system should be 
capable of responding to a high-consequence plant disease with pest 
control measures and the use of resistant seed varieties within a 
single growing season to sustain a reasonable level of production for 
economically important crops.
    To date, the committee has established a steering committee and 
working groups to focus on specific diseases. The working groups are 
examining the highest priority crops and most potentially harmful 
diseases first. They are determining the likely outcome of an outbreak 
and the existing mitigations and the need for research and development 
to enhance recovery.
    Decontamination and Disposal.--HSPD-9 also specifically tasks USDA 
to work with the Environmental Protection Agency (EPA) to consider 
decontamination and disposal roles and responsibilities. To date, EPA 
has led a collaborative effort with USDA, DHHS, and DHS to develop a 
plan that addresses how to handle decontamination and disposal issues 
post-event for inclusion in the Food and Agriculture Response Plan 
annex to the NRP.

Outreach and Professional Development
    Since security is a relatively new concept for the food and 
agriculture sector, educating stakeholders is important to successfully 
implementing programs. The new need for security within this sector 
also raises a need for educated professionals capable of addressing 
security related issues--veterinarians trained in research for 
biological weapons is an example of a new need. To address these 
issues, USDA is building new partnerships and working to transition 
traditional professional programs into the security realm.
    Outreach via Food and Agriculture Sector Coordination.--Forging 
strong relationships across Federal, State, local, and industry lines 
is key to addressing security within the food and agriculture sector, 
for most of it is privately held and or regulated at the State or local 
level. Both HSPD-7 and 9 require some form of enhanced relationship 
within the sector. Under the leadership of USDA, DHS, and FDA, Food and 
Agriculture Sector Coordinating Councils have been formed--one for the 
government, and one for industry. They meet in joint Council sessions 
quarterly and their leadership hosts conference calls twice monthly. 
The food and agriculture sector is the first to implement the NRP and 
the National Infrastructure Protection Plan and will serve as a model 
for others in organizing and implementing National programs.
    Higher Education Programs.--USDA is providing capacity building 
grants to universities that provide interdisciplinary degree programs 
to prepare food defense professionals. A success story from this effort 
is seen in the recently developed Soybean Rust webpage and related 
educational materials that were developed by land grant universities in 
partnership with CSREES.

Research and Development
    Current technologies do not provide USDA with the best possible 
tools for addressing our needs related to awareness, early warning, 
response or recovery. Therefore, USDA has a research and development 
program that focuses upon the highest priority needs. Key highlights 
follow:
    Food-related Research.--USDA is developing techniques to maximize 
the probability of detecting threat agents in food. Specifically, USDA 
is developing rapid tests for threat agents in food matrices. These 
matrices are based upon vulnerability assessment findings. USDA is also 
developing processing techniques to destroy (pasteurize) threat agents 
in food.
    Agricultural Research.--USDA is strengthening research on rapid 
response systems to bioterror agents, improving vaccines, and 
identifying genes affecting disease resistance. USDA is also supporting 
NPDRS by conducting research on protection of plants against 3 high 
priority threat agents (soybean rust, striped rust of wheat and downey 
mildew of corn). Additionally, USDA is hosting research to enhance the 
development of recombinant vaccine for Foot and Mouth Disease.
    BioSafety Level (BSL)-3 Facility.--A priority for USDA is to 
complete the consolidated state-of-the-art BSL-3 animal research and 
diagnostic laboratory and quarantine facility at Ames, Iowa.
    Leveraging DHS Programs an the University Centers for Excellence.--
USDA is working closely with both the pre and post-harvest DHS Centers 
for Excellence staff to ensure that they are aware of on-going research 
and development activities at USDA. The Department is also working with 
the Centers to ensure that they are aware of our priorities and needs 
as they develop their agendas.
    Question. We are providing significant funding for FADI, and large 
increases have been requested each year for the past several years. 
When will FADI be fully implemented? Should the Committee expect 
continued requests for increases in the years to come?
    Answer. The FADI is an on-going initiative to ensure coordinated 
efforts across the Federal agencies responsible for agriculture and 
food security. Initially, The Department requested funding to establish 
new programs because our focus and mandate was on preventing 
unintentional contamination or addressing small-scale intentional 
contamination such as an act by a disgruntled employee. Since 9/11, the 
Department has begun to address intentional contamination. Our reason 
for doing so is based upon intelligence demonstrating that our enemy 
has both the knowledge and the access to agents that would be harmful 
to the food and agriculture sector. Therefore, the Department will 
continue to build upon our current security initiatives within the FADI 
and as intelligence and world events dictate, we will modify and 
enhance our efforts.
    Question. How is USDA working with other agencies on FADI? Do you 
think the other agencies are paying a proportionate share of their cost 
for FADI, and how is that determined? Who makes that determination?
    Answer. HSPD-9 sets clear expectations for how agencies will work 
together to achieve a strategy to defend the Nation's food and 
agriculture sector. The Department is working with our Federal, State, 
local, and industry partners to meet this mandate. Although HSPD-9 sets 
clear expectations for how the agencies will work together there is no 
such directive for determining which agencies will pay for which 
activities. This is determined by meetings held between the White House 
Security Council, the Office of Management and Budget and the Federal 
agencies involved in a particular activity.

                               USER FEES

    Question. The budget request assumes more than $177 million in new 
user fees in fiscal year 2006. Several of these, such as Food Safety 
and Inspection Service (FSIS) user fees, have been proposed time after 
time, and they are always rejected. If our Committee fully complies 
with this request, and provides $710 million (a reduction of $106 
million from last year), the responsibility to achieve the fees then 
falls on you and the authorizing committees.
    Has legislative language been submitted to the authorizing 
committees? If not, when will USDA submit this language?
    Answer. Legislative language for the user fee proposals is being 
reviewed expeditiously and will be submitted to Congress as soon as the 
reviews are completed.
    Question. How will you avoid downsizing FSIS if you are not 
successful with the authorizing committees? How will you absorb $177 
million in lost resources? Do you support the Committee proceeding with 
the President's appropriations proposal if the authorization committee 
has taken no action by the date the Committee reports out the fiscal 
year 2006 bill?
    Answer. In 2006, the President's budget includes and requests the 
full amount of budget authority, $850 million, needed to operate FSIS' 
inspection services. We are requesting authority to charge user fees, 
deposit the fees into special receipt accounts, and use the fees 
subject to appropriations. We continue to support the fee proposals as 
presented in the budget, which will shift the responsibility for 
funding these programs to those who most directly benefit.

                              SOYBEAN RUST

    Question. This past year, soybean rust was detected in the southern 
United States and due to prevailing southerly winds, there is great 
concern this disease will spread to the other major soybean producing 
states. USDA actions to detect, halt, contain, and control soybean rust 
will require coordinated efforts of the research and regulatory mission 
areas, and perhaps others.
    Do you believe soybean rust can be stopped from spreading to 
additional States or do you believe there is little USDA can do in this 
regard?
    Answer. Soybean Rust (SBR) is a fungal disease that is spread 
primarily by wind-borne spores. Because it is wind-borne and easily 
travels long distances, there is no way to stop it from spreading. In 
fact, the pathogen is thought to have traveled from Asia to Africa in 
this way. Accordingly, USDA is focusing its efforts on assisting the 
States and soybean producers in preparing for the arrival of the 
disease in their areas.
    USDA has tested fungicides and is seeking resistant varieties of 
soybeans. Resistant varieties will take time to develop as there 
appears to be limited genetic resistance.
    Question. In what states, and regions of those states, has soybean 
rust been detected to date, and what are your projections for spread of 
this disease during the 2005 crop year?
    Answer. SBR was detected for the first time in the continental 
United States in November 2004 in Louisiana and subsequently in eight 
other southern States: Alabama, Arkansas, Florida, Georgia, 
Mississippi, Missouri, Tennessee, and South Carolina. The series of 
hurricanes in fall 2004 was the likely cause of the spread of SBR into 
the United States and may have spread it throughout the Gulf Coast 
region.
    In 2005, SBR has been detected in three counties in Florida on 
kudzu plants. Surveillance efforts are ongoing, and it is difficult to 
predict exactly where outbreaks will occur this year. However, USDA's 
SBR aerobiology modeling system indicates that SBR spores have already 
spread throughout the eastern half of the United States and likely into 
Canada by wind. APHIS and State departments of agriculture are 
implementing a monitoring and surveillance network utilizing sentinel 
survey plots and mobile monitoring teams to track outbreaks as they 
occur.
    Question. Do you think it is more effective to concentrate USDA 
activities on those areas of the country where soybean rust has been 
detected or is most likely to appear rather than spread assistance over 
a larger area where it is unlikely soybean rust will appear?
    Answer. Because the disease travels long distances by wind, APHIS 
officials believe that all major soybean-producing regions are at risk 
for the disease and need to be prepared for its arrival. The monitoring 
and surveillance network currently being implemented will allow APHIS 
and State cooperators to track SBR outbreaks as they occur in new areas 
and provide early warning to producers. SBR can be managed effectively 
with fungicides, but the fungicides are most effective when applied 
before the disease affects the plants.
    Question. Please describe any activities, funding levels, and 
funding sources the USDA plans to use in fiscal year 2005 and 2006 
relating to soybean rust.
    Answer. USDA will be spending $1.19 million on soybean rust 
surveillance and monitoring efforts and more than $3.8 million is 
research in fiscal year 2005. The President's budget requests $3.2 
million for research in fiscal year 2006. Details follow below and have 
been provided for the record.
    APHIS is using $1.19 million from its contingency fund to implement 
the SBR monitoring and surveillance network and continues supporting 
the comprehensive USDA SBR website. APHIS is providing $800,000 of the 
contingency funds to State cooperators for sentinel survey plots and 
$180,000 to USDA's Cooperative State Research, Education, and Extension 
Service for 5 mobile monitoring teams. The remaining funds will support 
the website, which provides timely updates on the results of 
surveillance efforts.
    ARS has initiated research programs that involve five research 
units in Illinois, Iowa, Maryland and Mississippi, plus cooperative 
agreements with several Land Grant universities. This research is 
designed to develop a better understanding of the way the disease 
attacks the plant, strains of soybeans resistant to the disease, a 
rapid detection test, and efficacy testing of various fungicide 
strategies to combat the disease.
    In fiscal year 2005, fungicide trials involving eight chemicals 
have been conducted by ARS in South America and Africa where the 
disease was known to occur prior to its entry into the United States. 
ARS is working with EPA, states, and registrants to develop and 
expedite Emergency Exemptions for fungicides in the chemical class of 
``triazoles'' which have been found effective against soybean rust in 
our studies in Africa and South America. These studies will continue in 
fiscal year 2006.
    In fiscal year 2005, ARS scientists working closely with the Joint 
Genome Institute, Department of Energy in California, have partially 
sequenced the genome of the more virulent species of the soybean rust 
(Phakopsora pachyrhizi) and are preparing genetic maps for further 
diagnostic development. Genome sequence data from the soybean rust 
pathogen will be indispensable in identifying polymorphic DNA sequences 
with high potential for strain identification, and will be essential to 
long-term genetic strategies for the identification of genes that 
regulate pathogenicity. These studies will continue in fiscal year 
2006.
    Fiscal year 2005 multi-year agreements are in place in Brazil, 
Paraguay, China, South Africa, Thailand and Vietnam to evaluate soybean 
varieties currently grown in the United States for tolerance to soybean 
rust and to screen exotic soybean germplasm for resistance to soybean 
rust under field conditions. Over 170 soybean lines are being tested at 
these 6 international locations. These field sites will greatly 
facilitate progress toward selection of superior breeding lines for 
development of resistant varieties. In addition, ARS has proposed 
research to exchange and evaluate Vietnamese and other soybean 
germplasm for resistance to soybean rust in Vietnam and in other 
locations.
    ARS funding for fiscal year 2005 is $3,881,900; and fiscal year 
2006 is $3,188,600.
                                 ______
                                 

             Questions Submitted by Senator Robert C. Byrd

                        HUMANE ACTIVITY TRACKING

    Question. Secretary Johanns, as you know, I am keenly interested in 
ensuring that food animals are treated in a humane manner prior to 
slaughter. I have included funding in the Food Safety and Inspection 
Service for the past several years to increase the number of food 
safety inspectors dedicated to making sure that humane animal handling 
is treated with the importance it deserves. I plan to continue focusing 
on this important subject, and I have several questions regarding how 
USDA is carrying out its mission in this regard.
    Last year, I included a $3 million increase for the Humane Animal 
Tracking (HAT) System, a component of the Field Automation and 
Information Management System (FAIM). It is my understanding that this 
funding was used to connect the HAT system into the FAIM architecture 
in 250 of the largest slaughter establishments. This allows one more 
component of information to be at the fingertips of Food Safety and 
Inspection Service personnel, which all taken together, is used to 
ensure that food animals are treated in a humane manner, and that the 
food they provide us remains safe.
    Please discuss any potential benefits this increased funding for 
the HAT System has to improve food safety and security, as well as 
humane animal handling.
    Answer. The increased funding has improved the enforcement of the 
Humane Methods of Slaughter Act (HMSA). The HAT system is being used to 
evaluate and verify important national and District trends to ensure 
appropriate actions are being implemented, and ensuring that 
enforcement of HMSA is consistent nationwide. The integration of HAT 
into the FAIM architecture also allows humane handling and slaughter 
verification data to be part of the same FSIS-wide communications 
infrastructure as food safety and food security activities, and will 
move us closer to the goal of real-time data sharing.
    Question. What will be the maintenance costs to ensure the HAT 
system remains connected to the FAIM architecture?
    Answer. With the $3.0 million in funds made available to FSIS for 
implementation of HAT, FSIS has established high-speed lines in 200 of 
the more than 900 federally inspected establishments subject to HMSA to 
date. The Agency will connect an additional 50 establishments with 
high-speed lines in the immediate future. These establishments 
slaughter approximately 95 percent of the animals slaughtered in the 
United States. After funding for this activity expires, FSIS will use 
available funds to maintain the high speed connections in these 
establishments.
    Question. What additional funding will be needed in order to 
connect the HAT System to the FAIM architecture in the remaining 
establishments?
    Answer. The 2006 budget does not request additional funding for 
FSIS to connect the HAT system to the FAIM architecture in the 
remaining establishments. Any expansion of the system to additional 
establishments will be done within available funds.
    Question. Under the current budget proposal for FAIM, what are the 
capabilities and shortfalls of this technology? In order to ensure that 
HAT information is received by FSIS in real time, as well as other food 
safety information, how would FAIM need to be changed or improved?
    Answer. FSIS' FAIM project serves as the communications 
infrastructure for the Agency's food safety, food security, and humane 
handling and slaughter verification activities. Real-time 
communications provide a continuous flow of data that gives FSIS the 
capability to more rapidly detect and respond to abnormalities in food 
safety systems. Dial-up technology is less reliable, less efficient, 
and is not capable of handling the same volume of information as high-
speed technology. Because a large number of livestock slaughter 
establishments are located in rural areas that may be isolated, there 
are significant hurdles to overcome in order to establish high-speed 
connections so that Agency personnel throughout the country can fully 
utilize data and share food safety, food security and humane handling 
and slaughter information in real-time. The existing FAIM 
infrastructure is being improved to allow HAT data to be integrated 
with inspection data stored in other Agency databases, including data 
such as non-compliance records and food safety verification 
information. The integration of HAT into the FAIM architecture also 
allows humane handling and slaughter verification data to be part of 
the same Agency-wide communications infrastructure as food safety and 
food security activities, and will move us closer to the goal of real-
time data sharing.
    Question. Do the DVMS or anyone else at FSIS prepare reports based 
on the HAT data analysis, and can you provide those reports to the 
committee?
    Answer. A variety of FSIS employees use HAT data and make reports 
on its contents. At this time, FSIS is in the process of developing a 
standard format for collecting and reporting data. Once these reports 
are developed and generated, I would be glad to provide a set to the 
Committee.
    Question. Of the total number of plants subject to HMSA, after the 
$3 million provided last year is spent, how many will remain to be 
hooked up to high speed connections? Of those not connected, what 
percentage of slaughter occurs there, and what has been the rate of 
HMSA compliance in those plants?
    Answer. There are currently more than 900 federally inspected 
slaughter establishments subject to HMSA. To date, FSIS has established 
high-speed connections in approximately 200 livestock slaughter plants. 
An additional 50 slaughter establishments will be connected with high-
speed lines in the immediate future. The establishments not connected 
with high-speed connections slaughter approximately 5 percent of the 
animals. The establishments with high-speed connections do not have a 
different rate of compliance with HMSA than other establishments.
    In the event of a food safety emergency, I believe it is imperative 
that information is available to all who need it in real time, as 
opposed to taking days, weeks, or event months to gather pertinent and 
necessary information. However, I do not believe that this is currently 
the case, and I am very concerned that improving the communication 
system to provide real time information does not appear to be a 
priority of USDA and FSIS.
    Question. What percentage of FSIS inspected plants still have dial 
up communications? What is the effect of having to use a dial up modem 
instead of a real time communication system in the event of a food 
safety, food security, or animal welfare emergency?
    Answer. FSIS is currently implementing high-speed communications in 
250 federally inspected establishments, which is approximately 11 
percent of the 2,200 ``base'' establishments. A ``base'' establishment 
is an establishment from which food safety inspectors, including patrol 
inspectors, use as a base of operations for providing inspection 
service to all establishments on a daily basis, and includes both 
slaughter and processing establishments. Though dial-up is not as fast 
and reliable as high speed, it still allows inspectors to be reached 
and provided food safety information. High-speed technology would 
provide greater assurances that inspectors can be reached and provided 
with food safety information more rapidly than dial-up technology.
    Question. In the event of an emergency, please describe how the 
situation would differ depending upon whether the problem occurred in a 
plant that still used slow, dial-up modems, as opposed to being able to 
provide information to FAIM in real time.
    Further, I included report language in the Senate report regarding 
the potential of allowing additional FSIS personnel to work with the 
current District Veterinary Medical Specialists (DVMS), in order to 
ensure that DVMS are spending adequate time focusing on humane 
slaughter activities. The language continued and discussed several 
objective scoring techniques for FSIS personnel to document animal 
slaughter improvements or failures. Specific suggestions were given, 
and a report, which has been received, was due on March 1 of this year 
regarding those suggestions. I appreciate that the report was submitted 
on time; however, I do not believe that specific responses to each of 
the suggestions given in the report language was provided. For example, 
does USDA plan to allow the use of location or technological 
opportunities to make unannounced observations at slaughter plants?
    Answer. In a food safety emergency, the primary difference between 
dial-up and high-speed technology would be the speed at which 
information, including the detection of a problem, instructions to 
inspectors, descriptions of product, test results, and other pertinent 
information would be collected and disseminated. High-speed connections 
would equip FSIS with a fully-integrated, real-time communications 
infrastructure, giving FSIS the ability to instantly detect and respond 
to abnormalities or weaknesses in the system to best ensure food 
safety, food security and humane handling and slaughter activities, 
particularly in the event of a food safety emergency.
    To enforce provisions of the HMSA, FSIS personnel utilize 
unobserved locations for verifying humane handling and slaughter 
activities. Furthermore, District Veterinary Medical Specialists 
(DVMSs) and other in-plant inspection personnel conduct unannounced--
including off-hour--visits to observe humane handling and slaughter 
activities by plant personnel. FSIS does not believe that video cameras 
are a substitute for the ongoing, intensive, and random verification of 
establishment humane handling and slaughter. The use of video 
surveillance from a remote location for HMSA enforcement would not be 
viable alternative for assessing the consciousness of animals.
    Question. Please respond to each of the suggestions provided in the 
fiscal year 2005 Senate report.
    Answer. I have asked FSIS to provide more detailed responses for 
the record.
    [The information follows:]

    First Suggestion.--The Committee strongly feels that a portion of 
that FTE increase should be used to allow additional FSIS personnel to 
work cooperatively with the existing District Veterinary Medical 
Specialists (DVMS), whose duties are specifically tied to HMSA 
enforcement, in order to increase the number of facility visits by FSIS 
personnel with special expertise in HMSA enforcement, and to allow each 
DVMS better opportunities to visit facilities in other FSIS districts 
to enhance communication and problem solving among all districts.
    Agency Response.--FSIS' District Veterinary Medical Specialists 
utilize the Agency's Public Health Veterinarians and in-plant 
inspection program personnel extensively to ensure HMSA enforcement and 
compliance. The DVMSs conduct in-plant verifications on humane handling 
and slaughter, and are in regular contact with FSIS in-plant inspection 
program personnel regarding humane enforcement issues. As part of their 
routine, ongoing and continuous inspection and enforcement duties, all 
FSIS inspection personnel are expected to take appropriate actions, 
including suspending operations, if appropriate, of a livestock 
slaughter establishment if they observe any violations of HMSA. 
Further, all FSIS inspection personnel are trained and held accountable 
for enforcing HMSA during the slaughter process.
    DVMSs, during their audits, work with FSIS in-plant personnel to 
identify observation locations from which FSIS officials can verify 
humane handling and slaughter activities of plant employees without 
knowledge of USDA's presence and observation. FSIS also continues to 
refine humane handling verification and tracking procedures for 
inspection program personnel. On February 18, 2005, the Agency issued 
FSIS Notice 12-05, to provide inspection personnel with additional 
information for humane handling and slaughter verification activities 
related to animal stunning and procedures for checking for conscious 
animals. The Notice also provides inspection personnel with 
clarification regarding the information they are to record in the HAT 
system, which are verified by DVMSs, and on noncompliance reports 
issued for humane handling violations. For veterinarians covering 
multiple plants as part of a patrol assignment, FSIS has assigned HAT 
activities to be conducted whenever these veterinarians have cause to 
visit these plants during their work day.
    Second Suggestion.--The Committee expects FSIS to consider a number 
of objective scoring techniques to measure more precisely the extent to 
and the occasions in which regulatory actions may be appropriate, and 
means by which FSIS personnel can actually document improvements or 
failures in animal handling and slaughter operations. Further, the 
Committee believes other scoring protocols will serve as useful tools 
to the agency in directing limited resources. Such protocols may 
include assigning overall facility ratings in regard to layout and 
adoption by facility management of a systematic approach to monitor and 
comply with HMSA requirements.
    Agency Response.--FSIS has considered scoring methods, but feels 
that scoring could jeopardize the Agency's zero-tolerance policy for 
violations of the HMSA. The Agency continues to encourage industry to 
implement good management practices for the humane handling of animals, 
and requires industry to abide by all of the requirements of USDA's 
regulations and HMSA. On September 9, 2004, FSIS published a Notice 
encouraging establishments to use a systematic approach to ensure that 
they meet the requirements of the law during handling and slaughter.
    With a systematic approach, establishments focus on treating 
livestock in such a manner as to minimize excitement, discomfort, and 
accidental injury the entire time they hold livestock in connection 
with handling and slaughter. Also, establishments have been encouraged 
to design facilities and implement practices that will minimize 
discomfort and injury in accordance with existing regulations. Plants 
should periodically evaluate their system for effectiveness and improve 
or adjust operations accordingly.
    Third Suggestion.--The Committee encourages FSIS to enhance 
capabilities to observe animal handling and slaughter operations 
through the use of location or technological opportunities to make 
unannounced observations that will allow the initiation, when 
appropriate, of regulatory actions.
    Agency Response.--The Agency supports use of unobserved locations 
for verifying humane handling and slaughter activities. DVMSs and other 
in-plant FSIS veterinary and inspection personnel conduct unannounced--
including off-hour--visits to observe humane handling and slaughter 
activities by plant personnel. In addition, FSIS officials use 
observation points in which plant employees conducting slaughter 
activities are unaware of USDA's presence and observation. The DVMSs, 
during their audits, work with FSIS in-plant personnel to identify 
observation locations from which FSIS officials can verify humane 
handling and slaughter activities of plant employees without knowledge 
of USDA's presence and observation. Ongoing inspection, beyond routine 
antemortem inspection, and enforcement responsibilities pursuant to 
HMSA are routinely unannounced. Moreover, all FSIS livestock inspection 
program personnel are trained in humane handling, and understand that 
they are required and obligated to take immediate enforcement action 
when a humane slaughter violation is observed.
    FSIS does not believe that video cameras are a substitute for the 
ongoing, intensive, and random verification of establishment humane 
handling and slaughter obligations as documented in this 3 month 
analysis. The use of video surveillance from a remote location for HMSA 
enforcement would not be viable alternative for assessing the 
consciousness of animals.

    Question. Out of the total inspections that FSIS carries out in 
regard to humane slaughter, what percentage of them occur unannounced 
or without notice to the establishments?
    Answer. The vast majority of humane handling and slaughter 
verifications conducted by FSIS inspection program personnel occur 
unannounced or without notice to the establishments. This is due to the 
fact that humane handling and slaughter verification activities are 
ongoing and continuous throughout the entire slaughter process, rather 
than at specific times or announced points in the process.
    Question. What has been the effect of the September 9th notice that 
encouraged establishments to use a systematic approach in ensuring 
humane slaughter? In what ways has it changed industry operations 
regarding humane handling and slaughter of animals?
    Answer. FSIS believes the Notice is having a positive effect in 
encouraging establishments to use a systematic approach to humane 
handling and slaughter activities. In addition, the Notice provides 
FSIS inspection personnel and industry with a common framework for 
discussion on how the Agency believes plants can be most successful in 
meeting their obligations under the HMSA.
    Question. Other than publishing the notice on September 9 regarding 
humane slaughter, what else is FSIS doing to encourage industry to 
change and improve their practices regarding humane handling of 
animals?
    Answer. FSIS conducts daily verification of humane handling through 
the HAT system and holds routine discussions with plant management 
during weekly meetings.
    Question. Does FSIS monitor facility design and improvements to 
measure how the industry is changing in plant designs regarding humane 
handling? Are the plants' ``periodic evaluations'' made available to 
FSIS, and what are the results?
    Answer. FSIS monitors facility design and improvements as part of 
the Agency's verification of facility regulatory requirements. The 
DVMSs also have access to an establishment's periodic evaluations 
during their audits. However, facility designs and establishment 
periodic evaluations are considered proprietary information and cannot 
be shared with the public.
    Question. How many FTEs will be dedicated to humane handling in the 
fiscal year 2006 budget?
    Answer. The Consolidated fiscal year 2005 Appropriations Act 
conference report requires that no fewer than 63 full time equivalent 
(FTE) positions above the fiscal year 2002 level be employed during 
fiscal year 2005 for purposes dedicated solely to inspection and 
enforcement related to HMSA. During fiscal year 2006, FSIS will more 
than meet this requirement for the number of FTEs.
                            hmsa enforcement
    Question. In a January, 2004 GAO report regarding humane slaughter, 
GAO stated that they could not determine the amount of resources 
necessary to ensure humane handling of animals in all establishments. 
Since then, significant attention and funding has been provided to 
ensure that humane handling of animals is a priority of FSIS, and FSIS 
has announced several ways in which it is working to improve HMSA 
enforcement.
    Taking into account all of the efforts, changes and increased 
funding for HMSA enforcement that have occurred since that GAO report, 
are you now able to provide a resource level you believe would be fully 
adequate to ensure HMSA enforcement throughout the country?
    Answer. We believe we have adequate funding for HMSA enforcement.
    Question. If you believe the current funding level is adequate, on 
what do you base that determination?
    Answer. We continually evaluate data on HMSA enforcement to assess 
our performance. The DVMSs assess trends for non-compliance reports and 
track any trends in humane handling slaughter violations that result in 
suspension actions.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin

                     CONSERVATION SECURITY PROGRAM

    Question. Participation in the first CSP sign-up was much lower 
than NRCS expected, but they still spent $40 million in 18 watersheds. 
This year with expenditures capped at $202 million for contracts in 220 
watersheds, there will be much less money per watershed for new 
contracts. The President's Budget proposes capping CSP at $274 million 
next year. All of these numbers are far less than the farm bill 
provides for this program. As discussed at the hearing, you would 
respond for the record to the following questions.
    How much of the $274 million for 2006 would be available for new 
contracts and how much of it would go to making payments on contracts 
signed in 2004 and 2005?
    Answer. NRCS estimates show that for fiscal year 2006, 
approximately $110 million would be available for new contracts and 
$123.2 million would be used for prior year contracts. The balance of 
$41.4 million would be used for technical assistance by NRCS to deliver 
the program.
    Question. How many new contracts will be signed in 2005, this year, 
and how many fewer contracts will be signed in 2006 with only $274 
million?
    Answer. NRCS is estimating that more than 13,000 contracts will be 
signed in fiscal year 2005, and approximately 9,400 contracts will be 
signed in fiscal year 2006.
    Question. It seems clear that if the President's Budget prevails, 
2006 will be a year of substantially diminished new enrollments and 
expectations for CSP, correct?
    Answer. The Administration's fiscal year 2006 Budget request 
reflects a strong future commitment to the CSP with a request of $273.9 
million, an increase of $71 million, or 36 percent, over the fiscal 
year 2005 funding level.

                      AMES ANIMAL DISEASE FACILITY

    Question. Modernizing USDA's National Animal Disease facilities is 
of critical importance for animal health, animal agriculture and for 
human health as well. This work is under way, with $404 million 
appropriated for the project thus far. The President's budget proposal 
calls for an additional $58.8 million, indicating this amount of funds 
will complete the project. This remaining amount of funds is dedicated 
to completing the so-called low containment large animal facilities.
    There are strong indications that this figure of $58.8 million 
proposed in the budget is not adequate to complete these animal holding 
facilities properly. I understand that because of the shortage of 
funds, the Department has developed several options for asking for bids 
to construct only a part of the major lab building in this fiscal year.
    I have had an extremely hard time getting to the bottom of this 
issue of what the correct figure is for the amount of funds needed to 
complete the modernization of these facilities properly. This 
renovation has to be done right, but my staff has been unable to get 
documents and information USDA has about what is really needed.
     As discussed at the hearing, please furnish to the Subcommittee 
and to me, without delay, (1) a copy of the June 2003 program of 
requirements that laid out the requirements for the Ames animal disease 
facilities and (2) a copy of the full report of the international 
review team in January 2001 that laid out their views of the adequacy 
of these facilities?
    Answer. The President's budget proposes $58.8 million to complete 
the National Animal Disease Center in Ames, Iowa. With the proposed 
level of funding, the facility will meet the original program 
requirements as outlined in the June, 2003 Program of Requirements 
(POR). A POR is an internal planning document that provides the costs 
of various options and alternatives which the Agricultural Research 
Service (ARS) uses to assist in defining research program needs and 
related technical requirements. The document serves as just one of 
several factors management considers in making final decisions on 
project scope, budget, and other project-related policy decisions. A 
copy of the POR was sent to the Subcommittee staff. A copy of the full 
report of the International Review Team has been provided for the 
record.
    Question. Exactly how will the current plans for the low bio-
containment holding facilities fall short of the June 2003 program of 
requirements?
    Answer. The original program requirements have not been 
compromised. The low bio-containment holding facility will be completed 
to meet all original programmatic requirements.
    Question. Also, as discussed at the hearing, please inform the 
Subcommittee promptly--that is prior to conference on this bill--(1) if 
the bids received for constructing the main laboratory building show 
that costs will exceed cost estimates used to this point and (2) if the 
Department is delaying any part of the bidding for constructing the 
main laboratory building because of cost concerns. What response to 
these questions can you provide at this time?
    Answer. We fully expect that the Ames modernization will be 
completed within the total funding requested in the fiscal year 2006 
budget. ARS expects to open bids on the first of several construction 
packages for the Laboratory/Office complex in the August-September, 
2005 time frame. The Department will keep the subcommittee informed on 
the bidding process.

                     BIOBASED PRODUCTS PROCUREMENT

    Question. I asked Chuck Conner at his confirmation hearing about 
the regulations that are long delayed for the Federal biobased 
purchasing preference program. He assured me that he would make it a 
top priority, which has not heretofore been the case.
     I would like to know what biobased products USDA is purchasing 
right now to meet its statutory and leadership obligations? I know that 
the Beltsville ARS facility, for example, has been a leader in its use 
of biobased products--everything from biodiesel to cleaning products--
but what is USDA doing right now, nearly 3 years after the passage of 
the farm bill, to actually buy products, and lead in this area as a 
model agency for all the others?
    Answer. The biobased product procurement program is a priority for 
USDA. In addition to the well-known biobased purchasing efforts of the 
Agricultural Research Service's Beltsville facility, USDA is currently 
procuring biobased products in many areas. We have also completed many 
leadership activities to support the program and currently plan many 
more to increase the purchase and use of biobased products. Additional 
details are provided for the record below.
    [The information follows:]

    Some of the biobased products that USDA is procuring include, but 
are not limited to, the following:
  --Soy-based inks in its printing plant;
  --Biobased oils, lubricants and hydraulic fluids for its people 
        movers (elevators, escalators, etc.) in the USDA headquarters 
        building complex (solicitation is currently out for bid);
  --Biobased signage to replace wooden signage made from traditionally 
        harvested forest materials in national forests;
  --Materials for the South Building modernization, such as polylactide 
        fabrics, a corn product, for systems furniture, and laminated 
        wheat board desktop workstations;
  --Carpet with soy-based backing;
  --Biobased ice melt; and,
  --Biobased cleaning solutions.
    Additionally, USDA has completed the following leadership 
activities to support the increased purchase and use of biobased 
products:
  --Issued Secretary's Memorandum 1042-003 and Departmental Regulation 
        5023-2, which establish the USDA Biobased Products Leadership 
        Council (BPLC) and basic USDA procurement policy on biobased 
        products. The Deputy Secretary of Agriculture chairs the BPLC;
  --Issued a final rule in the Federal Register on January 11, 2005 
        establishing the framework for biobased product designation;
  --Developed the Federal Acquisition Regulation (FAR) case for 
        biobased products. The Civilian Agency Acquisition Council 
        (CAAC) Law Team has assessed the case, and forwarded it to the 
        Civilian Agency Acquisition Council and the Defense Acquisition 
        Regulatory Council (DARC) for further review and initiation of 
        the rule making process.
    During the remainder of calendar year 2005, highlights of planned 
USDA activities include:
  --Publishing in the Federal Register the first proposed rule to 
        designate items for preferred procurement, and pursuing the 
        publication of a final rule;
  --Publishing two subsequent proposed rules to designate items for 
        preferred procurement for which we have developed the required 
        tests and analytical information (each with 10 items) and 
        clearing them through USDA and OMB;
  --Publishing in the Federal Register the proposed rule for the 
        voluntary labeling program;
  --Identifying existing biobased products available on General 
        Services Administration schedule contracts and make them 
        readily available for purchase by USDA purchase cardholders 
        using the USDA Advantage! virtual storefront;
  --Developing a tabletop biobased products display to increase USDA 
        employee awareness of these products, their benefits, and the 
        need for USDA to take a leadership position in their purchase 
        and use;
  --Developing and implementing an on-line biobased product awareness 
        training module thru USDA's AgLearn e-learning system; and,
  --Pursuing the acquisition of undesignated products consistent with 
        existing procurement law and regulation to show leadership as 
        the product designation effort continues.

                   LIVESTOCK AND MEAT MARKETING STUDY

    Question. On June 18, 2004, USDA announced that it had contracted 
with the Research Triangle Institute (RTI) to conduct its livestock and 
meat marketing study. This was roughly a year and a half after 
receiving funds to conduct the study from the fiscal year 2003 omnibus 
appropriations bill. It was my understanding that this study could not 
be started until the Office of Management and Budget (OMB) cleared the 
data collection packages to be used for the study. The comment period 
for the two data collection packages did not end until December 3, 
2004.
    At this time, has USDA received clearance from the Office of 
Management and Budget (OMB) for USDA and the Research Triangle 
Institute to begin data collection for the livestock and meat marketing 
study? If so, when was the start date?
    Answer. No, USDA will submit the data collection plans to OMB for 
clearance in the near future.
    Question. Please provide me a time frame and project completion 
date for the livestock and meat marketing study.
    Answer.
    [The information follows:]
      timeline for major steps for livestock and meat market study
2003
    Feb 20--$4.5 million appropriated for study
    Feb-May--Interagency working group (GIPSA, OCE, AMS, ERS, NASS, 
WAOB, DOJ, CFTC, FTC) defined scope of study necessary to meet 
Congressional objectives and comply with Information Quality 
Guidelines.
    May 30--Published purpose and scope of study in Federal Register 
with 30-day comment period. Received 23 comments.
    July--GIPSA reviewed and summarized comments. GIPSA worked with 
APHIS contracting office in Minneapolis to establish type of contract 
to award and to determine the contracting officer. Drafted AD-700 
required to initiate contracting procedures.
    July-Aug--Interagency working group reviewed comments and confirmed 
scope and objectives. GIPSA drafted Statement of Work (SOW).
    Sep-Oct--Working Group reviewed and commented on SOW, GIPSA 
finalized. GIPSA worked with APHIS contracting personnel in Minneapolis 
to incorporate SOW into formal request for proposals (RFP) in 
accordance with FAR.
    Nov 17--Pre-solicitation notice published in Federal Business 
Opportunities in accordance with FAR.
    Nov-Dec--Transitioned from APHIS Minneapolis contracting officer to 
Riverdale contracting officer to expedite contracting process. GIPSA 
worked with OGC to establish initial protocols for confidentiality 
provisions and non-disclosure agreements. GIPSA and APHIS contracting 
officer finalized RFP.
    Dec 3--APHIS published RFP in Federal Business Opportunities, GIPSA 
placed copy on agency Web page in accordance with FAR.
    Dec 16--Contracting officer and GIPSA held pre-proposal conference 
with potential contractors in accordance with FAR.
    Dec-Jan--GIPSA and contracting officer prepared responses to 
questions raised at pre-proposal conference and released responses as 
amendment to RFP. GIPSA and contracting officer prepared and published 
additional amendments to RFP to enhance confidentiality provisions with 
the Confidential Information Protection and Statistical Efficiency Act 
(CIPSEA).
2004
    Feb 9--Received proposals.
    Feb 9--
    Jun 14--Selection team from interagency working group reviewed 
initial proposals; offerors in competitive range submitted revised 
proposals; selection team evaluated revised proposals, negotiated with 
highest-ranked offerors on cost and deliverables to arrive at final 
proposal selection in accordance with FAR for competitive contracting 
procedures.
    Jun 14--Award of $4.3 million contract to RTI.
    July-Aug--GIPSA established a peer review panel to review technical 
performance of contractor. RTI prepared initial data collection plans.
    Sep 9--Published in Federal Register summary of data collection 
plans with 60-day public comment period in accordance with PRA 
requirements.
    Oct-Nov--RTI pre-tested data collection plans consistent with PRA 
requirements. Peer review panel reviewed collection plan and offered 
comments to meet Quality of Information guidelines.
    Nov 8--Extended comment period on Federal Register notice of data 
collection plans from Nov. 8 to Dec. 3 based on public requests.
    Dec 3--Received 19 comments on data collection plans. Comments 
addressed burden/scope, authority to collect data, MPR data use, and 
security of data.
    Dec-Mar--RTI revised data collection plans based on public and peer 
group comments.
2005
    March 21--Update Report sent to the House Appropriations Committee.
    Nov-Mar--RTI conducted informal interviews of 27 entities to 
address objectives 1 and 2.

Planned Activities
    May--Send final transactions and survey data collection plans to 
OCIO for submission to OMB, and publish notice in Federal Register.
    May--OMB reviews data collection plans for the final report and 
makes plans available to public in accordance with PRA requirements.
    Jun--RTI issues interim report on objectives 1 and 2.
    Jul--RTI begins collection of transaction data from 400 largest 
entities.
    Aug--RTI begins mail out survey of 6,800 entities.
2006
    Jun--RTI issues final report.

    Question. In addition, why has development of the framework of this 
study taken so exhaustively long when funds were appropriated for it in 
February 2003?
    Answer. Statutory and regulatory requirements including the 
Paperwork Reduction Act (PRA), the Information Quality Guidelines 
issued by the Office of Management and Budget (OMB), and Federal 
Acquisition Regulations (FAR) impose significant time-consuming 
requirements on implementing a study of this scope. The steps are 
outlined in the attached timeline, and are summarized below.
    In order to insure that the study meets Congressional objectives 
and complies with the OMB Information Quality Guidelines, Grain 
Inspection, Packers and Stockyards Administration (GIPSA) formed an 
interagency working group consisting of five USDA agencies with unique 
areas of expertise in economics, marketing, research, and data 
collection-processing and three other departments with expertise in 
market regulatory issues: Office of Chief Economist (OCE); Agricultural 
Marketing Service (AMS); Economic Research Service (ERS); National 
Agricultural Statistics Service (NASS); the World Agricultural Outlook 
Board (WAOB); Department of Justice (DOJ); Commodities Futures Trading 
Commission (CFTC); and Federal Trade Commission (FTC).
    Three months after the appropriation, GIPSA published a notice in 
the Federal Register that reflected the working group's interpretation 
of the scope of the study needed to effectively address the 
Congressional request. The public was given 30 days to comment on the 
scope of the study. GIPSA received comments from producers, packer 
trade associations, and universities. The working group considered the 
comments and refined the final scope into a request for proposals 
(RFP).
    GIPSA published the RFP on December 3, 2003. In consultation with 
the APHIS contracting officer and to conform to FAR requirements, GIPSA 
allowed approximately 2 months until February 9, 2004 for potential 
submitters to review the initial RFP and subsequent amendments and 
prepare proposals. GIPSA also published a pre-solicitation notice to 
comply with Section 508 of the Rehabilitation Act, 29 U.S.C.  794d. 
After GIPSA received the proposals, an evaluation committee composed of 
members of the working group reviewed and ranked the proposals. GIPSA 
gave the submitters of the highest-ranking proposals the opportunity to 
revise their proposals in accordance with FAR-established procedures. 
These proposals were then re-evaluated. The re-evaluation included 
negotiations between the evaluation committee and submitters of the 
highest-ranked proposals, during which the submitters responded to 
questions from the evaluation committee about the proposals.
    Once the contract was awarded, GIPSA and RTI implemented the 
procedures required by the PRA for review and approval of the data 
collection plan. First, RTI developed an initial data collection plan. 
In accordance with PRA requirements, RTI published its plans in the 
Federal Register, and the public was given 60 days to comment on the 
plans. GIPSA extended the comment period after several potential 
respondents requested additional time to file comments. GIPSA received 
ten comments from packers and six comments from packers' trade 
associations. To meet Information Quality Guidelines Requirements, RTI 
pre-tested the plans with potential respondents during the comment 
period, and GIPSA's independent peer reviewers reviewed and commented 
on the plans. RTI then revised its initial plans after considering the 
public comments, comments from the peer reviewers, and the results of 
the pre-tests. The revised plans must be reviewed by OMB and published 
in the Federal Register for an additional comment period by the public.
                                 ______
                                 

             Questions Submitted by Senator Byron L. Dorgan

                                 BUDGET

    Question. In an interview with the Des Moines Register on Sunday, 
you said this about the budget: ``Bad budget policy is not good for 
agriculture no matter what the short-term gain is. It's not good for 
interest rates. It's not good for stability in the international 
marketplace. There's nothing good in it for agriculture.''
    I agree with you completely; bad budget policy is bad for 
agriculture. That's why I can't understand the President's fiscal year 
2006 Budget request. The President's Budget would cut funding for food 
stamps and rural development programs. It would cut discretionary 
spending on conservation programs by $185 million, and cut funding for 
the Resource, Conservation and Development Program by 50 percent.
    The President's fiscal year 2006 Budget would impose a new, $40 
million-a-year tax on sugar processors, which would cost nearly $6,500 
each year to a farmer growing 500 acres of sugar beets, and it would 
cut $5.7 billion in farm programs over the next 10 years. I asked the 
Congressional Research Service to calculate the impact of the 
President's Budget request on average North Dakota farms; they told me 
an average North Dakota farm would have its farm payments cut by as 
much as 29 percent.
    Even though agriculture spending is less than 1 percent of the 
Federal budget, the Administration is trying to squeeze out 16 percent 
of its savings from agriculture programs.
    Mr. Secretary, when I travel back home to North Dakota, I meet with 
family farmers who ask me the same question over and over again:
     ``What is the President trying to do to us with this budget? 
Doesn't he understand how difficult it is to stay on the farm, even 
without these budget cuts? So I would ask you the same question.
    Answer. We both agree that good budget policy is good for 
agriculture and good for the Nation. And as I've noted before, 
agriculture is only one of several areas where the President has 
proposed reforms to reduce the budget deficit. I fully support the 
President's proposals. Certainly spending reductions can be painful in 
the short run, but the longer term benefits are worth some short term 
sacrifice. The President's proposals for agriculture are intended to 
spread the impact across the range of program participants in an 
equitable manner.
    The proposals do leave the farm safety net in place, albeit at 
modestly reduced levels. While the reduction in loan deficiency 
payments could be significant in some years, as you note, total 
payments would be reduced by far less since the Administration proposes 
direct and countercyclical payments be reduced by 5 percent. Since the 
latter payments make up the bulk of the total payments which producers 
receive in most situations, the total reduction is likely to be much 
closer to 5 percent. And for the farm sector as a whole, I note that 
aggregate farm income is at record levels and the financial health of 
the sector is robust.
    So I believe now is a good time to begin the task of reducing the 
deficit. I recognize that the proposals do involve sensitive issues as 
some suggest and I stand ready to work with the Congress to help 
contribute to ``good budget policy'' with some sensible and modest 
reforms which are consistent with ``good agricultural policy.''

                                 CAFTA

    Question. On Monday, you held a press conference with several 
agricultural organizations in support of the Central American Free 
Trade Agreement. But many in the agricultural community do not share 
your enthusiasm for this agreement. I have heard from cattle ranchers 
and wheat and corn and soybean producers in my State who think that the 
promises of a new market for our farm exports will never materialize. 
And I have heard from farm groups, like the National Farmers Union, the 
American Corn Growers Association, R-CALF USA, the National Family Farm 
Coalition, the American Sugar Beet Growers Association, the American 
Sugar Cane Alliance, and dozens more who think this agreement will hurt 
American agriculture. Additionally, the National Association of State 
Departments of Agriculture has taken a position against CAFTA.
    So my question is, are all of these groups simply wrong?
    Answer. The Department firmly believes that CAFTA-DR is a good 
agreement for American farmers and ranchers. This view is supported by 
numerous agricultural organizations, such as the American Farm Bureau 
Federation, National Association of Wheat Growers, National Cattlemen's 
Beef Association, American Soybean Association, and National Corn 
Growers' Association. All of these groups and scores more--56 leading 
food and agricultural organizations in all--wrote a letter to all 
Members of Congress on April 4, 2005, urging support for CAFTA-DR.
    Question. Two weeks ago, you held a press conference on CAFTA at 
which you said: ``There's one group that works hard on these trade 
agreements to defeat them. And that's the sugar industry. . . . Every 
which-way I look at this agreement I don't see that it has a negative 
impact on the sugar program.''
    As you know, the sugar program established in the 2002 Farm Bill 
only stays in effect as long as we import less than 1.53 million tons 
of sugar a year. If we ever import more than that, the sugar program is 
suspended, any excess sugar held by our producers gets dumped on the 
market, and the price of sugar plummets.
    The only reason we're less than 1.53 million tons now is because 
we've not been importing very much sugar from Mexico. But the Mexican 
government is negotiating with us to increase their exports and, as 
soon as those exports pick up again, we'll be right at the 1.53 million 
ton limit. You've said before that CAFTA won't hurt our sugar 
producers.
    But how do you reconcile that claim with the fact that CAFTA's 
sugar imports will put us over the limit and trigger the suspension of 
the sugar program once we resume full imports from Mexico?
    Answer. The Department is fully implementing the sugar program, 
including the non-recourse loans which are its backbone. The price-
supporting non-recourse loans will remain available regardless of the 
level of imports and regardless of whether or not domestic marketing 
allotments are in place. Furthermore, the CAFTA-DR agreement includes a 
mechanism for the United States to limit levels of sugar imports under 
the Agreement if needed to assist in managing the sugar program.
    Question. Our trade negotiators are currently working on Free Trade 
Agreements with more than 20 other sugar-exporting countries. Most of 
these countries already enjoy guaranteed, duty-free access to the U.S. 
market under WTO rules. If CAFTA passes, each of those more than 20 
sugar-exporting countries will expect to be treated just as generously 
as we've treated the CAFTA Nations.
    How can Congress begin work on a new farm bill in 2007 if we don't 
know whether our sugar program is going to be negotiated away by our 
trade negotiators looking for the next big Free Trade Agreement?
    Answer. The Administration consults with Congress on a continuing 
basis as we conduct all of our trade negotiations. In future trade 
agreements, we will continue to be mindful of all of our domestic 
agricultural programs, and continue to seek to reach agreements that 
promote the interests of U.S. farmers and ranchers.

                       COUNTRY-OF-ORIGIN LABELING

    Question. On Monday, April 4, County-of-Origin labeling for seafood 
went into effect across the country. For the last week, anyone who has 
bought fresh or frozen fish or shellfish has been able to tell its 
country-of-origin. This is a wonderful thing. I have long thought that 
it is crazy that we can tell where our shirts and our shoes were made, 
but not where the food that we eat comes from. COOL for seafood has 
been in effect for the last week, and I have not heard the industry 
complaining that the cost of compliance is too high; I have not heard 
of any consumers saying that the price of seafood has gone through the 
roof in the past week. In fact, USDA's own estimate says that the price 
for consumers will probably only increase by about two-tenths of a cent 
per-pound. I know that USDA has long been opposed to country-of-origin 
labeling.
     Will the success of this program for seafood finally convince USDA 
to embrace this program for meat and fruits and vegetables, too?
    Answer. Congress passed the Country of Origin Labeling legislation 
that will become mandatory for the meat and produce industry in 2006. 
Although the Administration has been clear that it prefers a voluntary 
program, if the current law requiring mandatory labeling is not 
changed, USDA will faithfully implement the law for the remaining 
commodities.

                              JAPAN TRADE

    Question. Taiwan recently announced that it was resuming imports of 
U.S. beef. This is good news. Before Taiwan closed its market to U.S. 
beef it was one of our largest export markets.
    What is the progress of your efforts to convince Japan and South 
Korea to reopen their markets to U.S. beef?
    Answer. We have been engaged with the Government of Japan at the 
technical and political level since it banned U.S. beef in December 
2003. For the first time since the October agreement to resume trade, 
we are finally beginning to see signs of progress in Japan's 
rulemaking.
    The first decision Japan had to make as a pre-condition to 
rulemaking on imports is eliminating animals under 21 months of age 
from its mandatory BSE testing requirement. Japan is finally ready to 
make that change. In late March, Japan's Food Safety Commission 
concluded the modification in Japan's testing regulations presents an 
acceptable level of risk. The decision to exempt animals under 21 
months of age from testing is expected to be final sometime during May.
    With the decision to exclude younger animals from mandatory testing 
behind us, this now clears the way for rulemaking on imports. 
Unfortunately, we do not have a timetable for a decision on imports but 
the next steps are now in place. In the coming weeks, the Ministry of 
Agriculture, Forestry, and Fisheries and the Ministry of Health, Labor, 
and Welfare will deliver the Beef Export Verification (BEV) program for 
Japan to the Food Safety Commission. The Commission will evaluate the 
program, and we expect there will be consultations and public meetings. 
Once they have finished that process, they will make a decision. Again, 
we do not know when Japan will complete this work and so we will 
continue to press Japan at every opportunity for a decision to resume 
trade.
    To help Japan prepare for a decision to lift its ban on imports, 
Dr. Charles Lambert, Deputy Under Secretary for Marketing and 
Regulatory Programs, has led U.S. delegations of experts to Tokyo for 
technical discussions and outreach activities with Japanese press and 
consumer groups. The outreach activities include press briefings and 
roundtable discussions with the media, industry, and consumers to 
educate them on the safety of U.S. beef.
    The delegation has also visited Korea for extensive technical 
discussions. The consultations have been led by experts from USDA and 
FDA who have reviewed U.S. BSE measures and U.S. beef safety with 
officials from the Korean Ministry of Agriculture.

                           BROADBAND FUNDING

    Question. Last year Senator Burns and I met with Secretary Veneman 
about the fact that Congress was providing the RUS with funding for 
loans yet RUS was slow in getting the loans out the door. Secretary 
Veneman did report some improvement, and I hope that you will remain 
committed to this program and to achieving the meaningful deployment of 
broadband services, particularly since broadband deployment has been a 
goal expressed by this Administration.
    Can you please walk me through your loan approval process? How long 
does it take the average borrower to make it through all the steps 
before getting final approval by USDA and provided with the actual 
money to build out the broadband service?
    Answer. I will ask USDA's Rural Development staff to provide a 
detailed explanation.
    [The information follows:]

    Once the application is received, it goes through an initial review 
process with one of the following decisions being reached: (1) the 
application is considered complete and goes to the final review stage; 
(2) the application is returned and cannot be processed; or (3) 
additional information is requested before the application can be 
considered complete. Once the application is considered complete, it 
goes through an in-depth financial and engineering review. The loan is 
then presented to the Assistant Administrator's Loan Committee for 
approval. If approved, the loan will be reviewed by the Senior Loan 
Committee. When the loan is approved the loan documents are sent to the 
applicant for signature. Once the documents are signed, funds are then 
made available for drawdown.
    In fiscal year 2003, 42 applications were received and returned 
with an average processing time of 7 months each; 31 applications were 
considered complete with an average processing time of 6 months each; 
and 26 applications were approved with an average processing time of 9 
months each. Once the loans were been approved, the average processing 
time of the loan was 6 months. Funds for 16 of these applications were 
made available to the borrower in an average of 14 months. Of the 16 
applications, 10 have not completed the approval process. Of these 10, 
8 are pending a borrower action and 2 are pending an RUS action.
    In fiscal year 2004, 25 applications were received and returned 
with an average processing time of 4 months each; 14 applications were 
considered complete with an average processing time of 3 months each; 
and 11 applications were approved with an average processing time of 3 
months each. Once the loans were approved, the average processing time 
of the loan was 7 months. Funds for 2 of these approved applications 
were made available to the borrower in an average of 11 months. Of the 
11 approved applications, 9 have not completed the approval process. Of 
these 9, 7 are pending a borrower action and 2 are pending an RUS 
action.
    So far during fiscal year 2005, three applications received have 
been returned with an average processing time of 1 month; 5 
applications have been considered complete with an average processing 
time of 2 months; and one has been approved with an average processing 
time of 5 months. This application is pending both an RUS and a 
borrower action.

                NATIONAL VETERINARY MEDICAL SERVICE ACT

    Question. Many rural areas of this country face a severe shortage 
of veterinarians. I understand that there are one-half as many 
veterinarians available to respond in the event of an animal disease 
outbreak as there were 20 years ago. The National Veterinary Medical 
Act would help solve this shortage by providing loan repayments to 
veterinarians who agree to practice in areas with a serious veterinary 
shortage. At this time, USDA has not included for the National 
Veterinary Medical Act in its budget. I understand that the program 
could be administered on a trial basis with approximately 15-20 
veterinarians for $1 million.
    Would you be willing to implement the National Veterinary Medical 
Act on a trial basis, in a limited number of states? Would you later 
consider expanding such a trial or pilot program if analysis proves the 
efficacy of the program in reducing veterinary shortage problem?
    Answer. The President's budget does not include funding to 
implement the National Veterinary Medical Act, which seeks to place 
practicing veterinarians in rural areas.

 RURAL DEVELOPMENT FUNDING FOR RURAL EMPOWERMENT ZONES AND OTHER GRANT 
                                PROGRAMS

    Question. For the fourth year in a row, the Administration proposes 
no funding to follow through on the commitment that USDA made to rural 
empowerment zones. This year, the approach is a bit different by 
proposing to consolidate the program in the Administration's 
Strengthening America's Communities Initiative at the Department of 
Commerce but I believe the result for the rural empowerment zones will 
be the same--no funding next year. I have one of these zones in my 
state, the Griggs-Steele Empowerment Zone, focused on out migration-a 
very serious problem in North Dakota.
    If the Administration's proposal was accepted, what guarantee-if 
any-would rural EZs have for funding in fiscal year 2006?
    Answer. The President's Strengthening America's Communities 
Initiative will include eligibility criteria that will ensure funds are 
directed to those communities most in need of development assistance. 
We feel confident that rural communities will fare well when these 
criteria are used. We will continue to work with the Department of 
Commerce on the technical details of program delivery, particularly as 
it affects rural areas. Under the new Initiative, rural community 
organizations would have access to a substantial portion of a total 
program level exceeding $3.5 billion.
    Question. You also propose consolidating several other rural 
development programs besides rural empowerment zones including rural 
business enterprise grants and rural business opportunity grants.
    What assurances can you give this Subcommittee that rural 
communities would be able to compete with urban ones for these grant 
dollars if we accepted the Administration's proposal to consolidate 
these programs into the Department of Commerce?
    Answer. USDA is working with the Department of Commerce on the 
development of this initiative, which will include criteria to ensure 
that funds are directed to the most needy communities. Moreover, USDA's 
Rural Development field staff will be available to help rural 
communities qualify for assistance. We are confident that rural 
communities will receive a fair share of the funding under the 
initiative.

             RESOURCE CONSERVATION AND DEVELOPMENT COUNCILS

    Question. You have proposed reducing funding for the Resource 
Conservation and Development Program within NRCS by about 50 percent. I 
have heard from many RC&D Councils in North Dakota concerned about 
their viability if such a large cut is enacted.
    Can you please tell me what the effect of this proposed budget 
would be on councils in my state?
    Answer. Under the budget proposal, the Federal role of providing 
seed money or serving as an incubator will cease after 20 years of 
support in the interest of reducing the deficit and redirecting funds 
to other higher priority conservation work. In North Dakota, six of the 
eight RC&D areas have received Federal funding for more than 20 years 
and will graduate from the program. They include: Dakota Prairies, Lake 
Agassiz, Dakota West, Northern Plains, South Central Dakota, and Red 
River. While these affected councils will no longer receive Federal 
financial support, they will retain their Internal Revenue Service 
(IRS) non-profit status and may continue to function as designed RC&D 
areas, participating in other Federal, State, and local programs and 
with non-Federal entities in rural communities across the country.

                      ARS RESEARCH IN NORTH DAKOTA

    Question. I see that virtually all of the congressional earmarked 
ARS research projects are eliminated again this year. This includes 
almost $4 million in earmarks for the Fargo ARS and other ARS 
facilities in Mandan and Grand Forks.
    What would you propose happen to the researchers who are working on 
projects such as sunflower research at the Fargo ARS proposed for 
termination?
    Answer. ARS has requested the termination of ongoing, unrequested 
earmarks in the fiscal year 2006 budget to finance new and expanded 
priority research initiatives that target national agricultural and 
food needs. ARS impacted researchers will be reassigned to the new 
initiatives where possible or offered positions funded from existing 
vacancies located throughout the country.
    Question. The Administration is requesting an increase of $6.8 
million for nutrition survey research and $1.5 million for research to 
address the Obesity Epidemic and to Promote Healthier Lifestyles.
    Can you please tell me what portion of these funds will be spent at 
the Grand Forks Human Nutrition Center, which is one of our Nation's 
most outstanding human nutrition research facilities?
    Answer. Of the $6.8 million increase requested for nutrition survey 
research, $6.4 million will be allocated to Beltsville as it is the ARS 
nutrition center that is responsible for conducting nutrition 
monitoring. In addition, ARS plans to provide $400,000 to the Grand 
Forks Human Nutrition Research Center to carry out research on obesity 
in Native Americans. The remaining $1.5 million increase is requested 
for research on obesity prevention and will be allocated to nutrition 
centers in Little Rock, Arkansas; Davis, California; Boston, 
Massachusetts; and Houston, Texas.

                         HATCH ACT FUNDING CUT

    Question. The Administration also proposes a 50 percent cut in 
formula funds under the Hatch Act for agricultural research at the 1862 
colleges ($89.4 million) stating that ``this is the first phase of a 
plan to shift funding from this program to competitively awarded 
grants.'' I am concerned that there are many policy flaws in this plan 
that haven't been considered by the Administration.
    In 1887, Congress passed the Hatch Act which authorizes Federal 
research funds for the State agricultural experiment stations, such as 
NDSU, on a formula basis. The money is intended to solve problems for 
farmers by developing new technology, plant varieties and ways to 
combat crop pests and disease. Those funds pay salaries of scientists, 
something not possible with competitive grants because the money cannot 
be counted on year to year.
    How does the Administration propose to deal with this problem if 
the President's proposal is accepted by this Committee?
    Answer. Recipients of formula funds have considerable flexibility 
to use these funds to support research projects, infrastructure, and 
personnel. The allocation of formula funds to support personnel varies 
widely from institution to institution depending not only on the size 
and needs of the institution but also on the institutional management 
of financial resources from Federal and non-Federal sources. While the 
amount of formula funds available to institutions in fiscal year 2006 
will be reduced and eliminated in fiscal year 2007, it will ultimately 
be up to each institution to determine how to allocate the resources 
available to support personnel. However, the fiscal year 2006 budget 
proposes full indirect cost recovery as part of competitive funding 
which will allow institutions to support faculty, staff, and other 
infrastructure needed to support agricultural science. 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.

                NORTHERN GREAT PLAINS REGIONAL AUTHORITY

    Question. Can you tell me how the Department is proceeding with the 
establishment of the Northern Great Plains Regional Authority and which 
agency within USDA will be charged with administering the Authority?
    Answer. The $1.479 million in the fiscal year 2005 Appropriations 
Act will be administered by USDA's Rural Development mission area 
pending the establishment of the Authority. These funds are for 
activity by the Northern Great Plains Regional Authority in fiscal year 
2005 and fiscal year 2006 and cannot be used until the Authority is 
established. Since the legislation authorizing this regional authority 
calls for the Federal members to be appointed by the President and 
confirmed by the Senate, the Presidential personnel staff is working to 
identify candidates for nomination.
    Question. Also, when can we expect the fiscal year 2005 funding to 
be released? The legislation also calls for the appointment of a 
Federal and a tribal co-chair.
    Answer. Funds cannot be released until the Authority is 
established, which cannot occur until the Federal and tribal co-chairs 
have been appointed. The authorizing legislation for the Authority 
calls for the Federal members to be in place before the Authority is 
officially established. The Presidential personnel staff is working on 
identifying candidates for nomination.
    Question. Can you tell me what the process will be to make these 
appointments and what the status of this process is?
    Answer. Since the legislation authorizing this regional authority 
calls for the Federal members to be appointed by the President and 
Senate-confirmed, the Presidential personnel staff is working to 
identify candidates for nomination.

                        APHIS BLACKBIRD CONTROL

    Question. What are WS methods for managing the blackbird problem 
for sunflowers? I understand one method, the Wildlife Conservation 
Sunflower Plots, are showing promise as a method of reducing damage and 
is supported by various ornithological groups. What resources would be 
needed to conduct a large-scale (100 20 acre plots) evaluation of this 
concept?
    Answer. APHIS WS manages blackbird damage to sunflowers using 
various methods such as aerial application of aquatic herbicide on 
cattail-choked wetlands, which serve as roost sites for blackbirds. 
Additionally, WS provides technical assistance through information 
sharing and the loan or distribution of damage abatement equipment as 
well as through monitoring annual bird populations and annual sunflower 
damage assessments. WS is also involved in various research projects to 
manage blackbirds, such as investigating blackbird migratory routes and 
evaluating blackbird repellants as well as the ability to divert 
blackbirds from commercial sunflower fields into 20-acre sunflower 
``lure plots.''
    Research projects provide an incentive for local farmers to 
participate in the projects. Financial incentives are $3,000 for each 
20 acre plot, and therefore, 100 20 acre plots would require $300,000.
    Question. Through this Subcommittee, I have been successful in 
adding funding to enhance blackbird control efforts in North Dakota. I 
have been told that APHIS doesn't see this action as enhancing their 
budget and funds have been directed away from blackbird control efforts 
in North Dakota such as the test plots to enhance APHIS' base budget. 
Can you tell me if these funds have all been applied for blackbird 
control in North Dakota and what overhead APHIS charges for this work?
    Answer. Each year since fiscal year 1989, APHIS appropriations 
included $335,000 to North Dakota and $33,000 to South Dakota for 
blackbird damage control activities. Since fiscal year 2002 an 
additional $240,000 in annual funding has been provided to strengthen 
our control efforts in North Dakota.
    In fiscal year 2005 North Dakota received $257,000 of the $335,000 
provided by congressional earmark in the fiscal year 1989 appropriation 
and $186,000 of the $240,000 provided by congressional earmark in the 
fiscal year 2002 appropriation for blackbird control efforts. The 
balance of the earmarks is being used to fund program management and 
operations, agency-wide support activity assessments, and department-
wide central charges. In addition, North Dakota received $77,612 for 
cattail management efforts.
                                 ______
                                 

            Questions Submitted by Senator Richard J. Durbin

                              BSE POLICIES

    Question. In your February 3 testimony to the Agriculture 
Committee, you testified that ``the single most important thing we can 
do to protect human health regarding BSE is the removal of SRMs 
(specified risk materials) from the food supply.''
    I agree that the removal of these materials--SRMs--is essential to 
our Nation's BSE prevention and control efforts. This is why I was 
concerned when I learned last December that the head of the food 
inspectors' union had raised some very important questions about USDA 
policies for SRM removal. I sent then-Secretary Ann Veneman a letter 
SRM removal but have not gotten answers to some of my specific 
questions. USDA has also refused to meet with my staff about this 
issue.
    Who is determining the age of cattle?
    Answer. Slaughter establishments are required to identify the age 
of animals. FSIS' scientifically trained Public Health Veterinarians 
and other similarly trained inspection personnel are responsible for 
verifying the development, implementation, and maintenance of 
establishment control procedures for determining the age of cattle. All 
FSIS inspection program personnel are fully authorized and expected to 
take immediate regulatory enforcement action in the event of 
noncompliance.
    Question. Specifically, SRM removal requirements depend on the age 
of the animal: more types of tissues need to be removed from animals 
over 30 months of age, for example, then from cows younger than 30 
months. Yet, it is not clear to me who is making this determination of 
cattle age, and what kind of training or qualification requirements 
this person must meet. Are slaughterhouse employees (rather than 
government inspectors) the ones who are determining the age of cattle 
at slaughter?
    Answer. The January 2004 BSE regulations and notices to FSIS 
employees provide clear and specific direction to plants regarding 
their responsibilities to have written plans and procedures in place to 
identify age and ensure the removal of specified risk materials (SRMs). 
Failure to comply with these requirements is a violation of the Federal 
Meat Inspection Act. FSIS' scientifically trained Public Health 
Veterinarians (PHVs) and other similarly trained inspection personnel 
are responsible for verifying the development, implementation, and 
maintenance of establishment control procedures for determining the age 
of cattle and ensuring the removal of SRMs.
    Question. What minimum training and qualifications does USDA 
require for the people who are making this determination?
    Answer. Establishments that slaughter cattle are responsible for 
having written plans and procedures for identifying the age of cattle 
at slaughter and ensuring the removal of specified risk materials 
(SRMs). Failure to comply with these requirements is a violation of the 
Federal Meat Inspection Act. FSIS' scientifically trained Public Health 
Veterinarians (PHVs) and other similarly trained inspection personnel 
are responsible for verifying the development, implementation, and 
maintenance of establishment control procedures for determining the age 
of cattle and ensuring the removal of SRMs.
    PHVs are highly educated public health professionals. FSIS' entry-
level PHV training includes 3 weeks of in-classroom training, followed 
by 3 weeks of on-the-job mentoring with a trained veterinarian, and 3 
weeks of Food Safety Regulatory Essentials training. In addition, we 
are beginning to train PHVs with 4-week Enforcement, Investigations and 
Analysis Officer training.
    PHVs also receive training that is specific to bovine spongiform 
encephalopathy (BSE). During February and March 2004, all PHVs assigned 
to beef slaughter plants were trained on Agency policies related to 
BSE. During the summer and fall of 2004, PHVs were trained for their 
role in the USDA BSE surveillance program. Finally, all entry-level PHV 
training now includes BSE training.
    Question. Have there been problems with non-compliance?
    Answer. FSIS has conducted an intensive review of its non-
compliance data related to the SRM requirements, and has not identified 
a systemic problem or problems with particular plants, beyond a low 
level of non-compliance for which regulatory action was taken. These 
regulatory actions, occurring at a low level, account for less than 1 
percent of overall compliance actions taken by FSIS.
    Question. I understand that FSIS keeps a database documenting 
instances of non-compliance with policies such as SRM removal. I also 
have heard that the Inspector General is investigating FSIS' 
implementation and enforcement of the SRM removal policy.
    How many instances of non-compliance have been reported since the 
policy was implemented (January 2004)?
    Answer. FSIS is in the process of reviewing records identified as 
potential noncompliance records.
    Question. Has FSIS located the non-compliance reports that show 
problems with SRM removal? Have all of these non-compliance reports 
been turned over to the Office of the Inspector General for its 
investigation into the issue?
    Answer. FSIS is in the process of reviewing records identified as 
potential noncompliance records. The agency is cooperating fully with 
the Office of Inspector General (OIG), and has provided them with the 
information requested.
    Question. Will you provide copies of these reports to my staff?
    Answer. Copies of these records will be made available after the 
agency completes its evaluation of records indicating potential non-
compliance.
    Question. When will the Inspector General's report be completed?
    Answer. According to OIG, the report is expected to be completed in 
early fiscal year 2006.
    Question. Is USDA's investigation of union president Stan Painter 
retaliatory?
    Answer. USDA's investigation into the validity of allegations that 
Specified Risk Material (SRM) regulations are not being effectively 
carried out or properly enforced was conducted solely to ensure the 
safety of our Nation's food supply.
    Question. Stan Painter, the president of the food inspectors union, 
set forth a series of concerns about SRM removal in a letter to the 
agency in early December. I understand that FSIS has responded to the 
letter by launching a personal investigation of Mr. Painter. In 
January, for example, FSIS flew Mr. Painter to Washington DC and 
questioned him for 3 hours, to try to get him to divulge the sources of 
his information. However, FSIS has a database of non-compliance 
reports, which should document instances in which inspectors have 
reported non-compliance with SRM removal.
    Why has FSIS chosen to investigate Mr. Painter personally instead 
of addressing the questions and concerns raised by his letter?
    Answer. In a December 8, 2004, letter, the chairman of the National 
Joint Council of Food Inspection Locals made unsubstantiated and non-
specific allegations that FSIS is not properly enforcing regulations 
requiring the removal of Specified Risk Materials (SRMs) from beef 
products. Because of the serious nature of the allegations contained in 
Mr. Painter's Letter, FSIS immediately initiated an inquiry into those 
allegations which included an informal interview of the union chairman. 
During that interview, Mr. Painter refused to provide specific 
information to support the letter's allegations. That inquiry 
subsequently resulted in a formal investigation by FSIS to determine 
the validity of the allegations. As part of that investigation, Mr. 
Painter was formally interviewed on two occasions in January. The FSIS 
investigation has been completed and the allegations concerning 
improper enforcement of SRM regulations were not substantiated. In 
addition, the OIG independently sent an investigator and an audit team 
to examine the allegations concerning SRM regulatory compliance. Their 
observations also concluded that the chairman's allegations were 
unsubstantiated.
    Question. Why did FSIS pressure Mr. Painter to name his sources, 
instead of reviewing its database of non-compliance reports for the 
information it needed?
    Answer. FSIS took these allegations seriously and sought specifics 
so the Agency could follow-up appropriately. To date, nothing 
communicated to FSIS through interviews or data analysis, supports the 
chairman's charge that BSE regulations are not being effectively 
carried out or enforced by FSIS inspection personnel.

                       SINGLE FOOD SAFETY AGENCY

    Question. Currently, Federal oversight for food safety is 
fragmented with at least 12 different Federal agencies and 35 different 
laws governing food safety. There are also dozens of House and Senate 
subcommittees with food safety oversight. With overlapping 
jurisdictions and scattered responsibilities, Federal agencies often 
lack accountability on food safety-related issues and resources are not 
properly allocated to ensure the public health is protected. The recent 
rise of concerns about antibiotic resistance transferred from food 
animals to humans and mad cow disease underscore the need for change. 
Our Federal food safety statutes need to be modernized to more 
effectively ensure that food safety hazards are minimized and research 
and education programs are bolstered. I introduced a bill last week--S. 
729--that would do just that.
    President Bush and former Homeland Security Secretary Ridge have 
both publicly discussed the concept of combining Federal food safety 
responsibilities into a single agency, and outgoing HHS Secretary Tommy 
Thompson noted in December that he had trouble sleeping at night, 
worrying about attacks on our food supply.
    Just last Thursday, the trade press reported that Gerald Masoudi, 
FDA's chief counsel, said the lack of coordination among the agencies 
with responsibility for beef safety as one of the greatest challenges 
to protecting the public against mad cow disease. Masoudi said: ``The 
responsibility of contaminated food products is spread out among three 
Federal agencies that do not regulate the problem in a consistent 
manner.''
     With all these high-ranking officials raising concerns about the 
safety of the food supply, has USDA changed its position and decided to 
embrace the concept of a single food safety agency?
    Answer. I believe that the Federal Government has a strong food 
safety system in place and that USDA has a critical role to play in 
protecting the U.S. food supply. I will work with my colleagues at the 
Department of Homeland Security, the Department of Health and Human 
Services, and other Federal and State agencies to maintain effective 
working relationships.
    Question. What do you see as the disadvantages of combining the 
Federal food safety agencies into a single agency? Are there any 
advantages?
    Answer. The ultimate goal for Federal food safety programs must be 
to improve food safety and public health. The food safety system could 
be redesigned in an endless array of forms, but if food safety and 
public health are not improved, it would be a failure.
    Question. Do you believe the creation of the Department of Homeland 
Security could serve as a model for the creation of a single food 
safety agency?
    Answer. There are many options that would need to be evaluated 
before concluding that food safety functions of the Federal Government 
need to be reorganized.

                         FOOD SAFETY USER FEES

    Question. USDA's Food Safety and Inspection Service (FSIS) conducts 
mandatory inspection of meat, poultry, and processed egg products to 
insure their safety and proper labeling. The fiscal year 2006 FSIS 
budget includes a request for $850 million in appropriations, some of 
which would be reduced by $139 million in new user fees for salaries 
and expenses. Acting Under Secretary for Food Safety, Dr. Merle 
Pierson, told the House Appropriations Committee last month that the 
agency would have to lay off 2,000 people if Congress does not enact 
this user fee proposal.
    Could you verify whether this is an accurate estimate of the number 
of layoffs that would occur without the new user fees and elaborate on 
which 2,000 jobs would be eliminated?
    Answer. In 2006, the President's budget includes and requests the 
full amount of budget authority, $850 million, needed to operate FSIS' 
inspection services. We are requesting authority to charge user fees, 
deposit the fees into special receipt accounts, and use the fees 
subject to appropriations.
    Question. Since Congress has been skeptical to such user fee 
proposals in the past, what makes this proposal different? Will you be 
sending up legislative language on this user fee proposal?
    Answer. We continue to support the fee proposals as presented in 
the budget, which will shift the responsibility for funding these 
programs to those who most directly benefit. The legislative proposal 
should be submitted to the Congress shortly.

                         FOOD SAFETY PERSONNEL

    Question. The important food safety positions in the agency have 
been vacant for some time now. Specifically, there has been no Under 
Secretary for Food Safety since Elsa Murano left in December and there 
has been an acting FSIS administrator in place since last March.
    What is your timeframe for permanently filling these important food 
safety positions?
    Answer. We are working to fill these important positions as quickly 
as possible.

                     NATIONAL SCHOOL LUNCH PROGRAM

    Question. The Child Nutrition and WIC Reauthorization Act was 
signed into law on June 30, 2004. It contained several provisions based 
on legislation I proposed in 2003, known as the Safe School Food Act. 
These provisions include doubling the number of school cafeteria 
inspections and requiring USDA to provide training to school officials 
on how to include food safety requirements in their food purchasing 
contracts. And yet, investigations by Dateline NBC and others continue 
to turn up problems with rodent infestations and unsafe food holding 
temperatures in our Nation's school cafeterias that threaten to sicken 
our children.
    What is USDA doing to help school cafeterias improve school lunch 
safety, particularly in the areas of this law?
    Answer. School food safety has always been a priority for the 
National School Lunch Program. The Child Nutrition and WIC 
Reauthorization Act of 2004 provides schools additional tools to 
improve the safety of school meals.
    The Department will shortly issue interim regulations to implement 
the statutory requirement of two school food safety inspections per 
year. In addition, the Department has taken steps to link schools with 
food safety regulators to put schools on the way to compliance. Earlier 
this year, USDA contacted the associations representing State and local 
food safety inspectors to inform them about the new requirement and 
stress their important role in helping schools comply with the law. In 
June, staff from the Food and Nutrition Service will attend the annual 
conference of the National Environmental Health Association to discuss 
the school food safety inspection requirement and to seek their 
cooperation.
    USDA is also working on the implementation of the provision that 
requires School Food Authorities (SFAs) to establish a food safety 
program based on Hazard Analysis and Critical Control Points (HACCP) 
principles. The Department has drafted guidance with input from the 
SFAs, State education agencies, State health agencies, the Food and 
Drug Administration, and other Federal and State collaborators to help 
SFAs develop food safety programs that meet the needs and capabilities 
of different types of school foodservice operations. This document will 
soon be under clearance and the Department plans to distribute it to 
SFAs this spring.
    Furthermore, USDA will continue to develop technical assistance 
materials and training for school foodservice operators through Team 
Nutrition and the National Food Service Management Institute (NFSMI) to 
promote food safety in the National School Lunch Program. An example of 
food safety material developed in collaboration with the NFSMI is 
``Serving It Safe''. This technical assistance publication explains why 
school food safety is important and gives practical guidance to 
foodservice personnel to prepare and serve safe meals.
    Question. In your February budget outline, you note School Lunch 
participation is estimated to reach a record 29.8 million children each 
day next year. Are there adequate resources in the budget for this?
    Answer. The fiscal year 2006 funding request is a 5.8 percent 
increase over the fiscal year 2005 funding level and will be sufficient 
to provide reimbursement for meal service currently projected for 
fiscal year 2006.

                          SAFE SCHOOL FOOD ACT

    Question. The Safe School Food Act also calls for increased testing 
for pathogens like E. coli, Salmonella, and Listeria in uncooked ground 
meats, USDA to develop a database of information on food producers who 
provide food to schools, and all USDA to institute mandatory recalls of 
unsafe food being provided to schools.
    Will you work with me to pursue these measures?
    Answer. Although USDA has multiple measures in place to ensure that 
safe food is provided to schools, I am always happy to work with 
Congress on issues of importance to the Nation, such as food safety.

                           CHILDHOOD OBESITY

    Question. Obesity rates have doubled for children in the last 25 
years. In adolescents, the rates have tripled. We have to do something 
to change the way children learn about nutrition and the way they make 
food choices. In Illinois, several schools are working together to test 
a few different strategies for improving the way students eat and we 
expect to know more about what's working based on what these schools 
are doing. But in the meantime, our kids are eating all the wrong kinds 
of foods. I visited a school near Chicago last week and saw students 
eating tabasco-spiced cheese puffs and soda for breakfast. School 
administrators feel they have little choice but to provide what 
students want.
    How do you think we can improve the food choices students make when 
they are at school?
    Answer. Getting children to eat healthy food is always a challenge 
for parents, caregivers and educators, especially during the school 
year, when schedules are the busiest. Federal school meals programs 
offer a critical tool to help parents and other caregivers encourage 
healthy eating. USDA has been working closely with schools to help them 
prepare meals that look good, taste good, and meet national nutrition 
standards.
    Yet the challenges of helping kids eat healthy reach beyond these 
USDA-supported meals. Children's preferences are shaped by innumerable 
influences in their environment as they learn and grow into adulthood. 
Many students, enticed by high calorie low nutrient foods, do not 
choose healthy meals. Improved school meals are undermined by competing 
food sales outside of the Federal program that feature high-calorie low 
nutrient foods and beverage items, and the intense advertising efforts 
for those items.
    Parents, schools, and many others in local communities have 
important roles to play:
  --Schools, parents and others in the community can use the new 
        MyPyramid as a tool to educate children in making wise food 
        choices. In April, 2005, USDA introduced MyPyramid, which 
        replaces the Food Guide Pyramid introduced in 1992. MyPyramid 
        is part of an overall food guidance system that emphasizes the 
        need for a more individualized approach to improving diet and 
        lifestyle. A child-friendly version of MyPyramid for teachers 
        and children is being developed. This version of MyPyramid is 
        intended to reach children 6 to 11 years old with targeted 
        messages about the importance of making smart eating and 
        physical activity choices. USDA hopes to have the children's 
        version available next school year.
  --Parents and caregivers can influence behavior at school by offering 
        healthful meals and snacks at home, and by leading by example, 
        since children learn from what parents do at least as much as 
        what parents say. Parents should eat with their children and 
        model good eating and activity practices.
  --School food service professionals can make healthful meals more 
        appealing to students using USDA resources such as our Fruits 
        and Vegetables Galore kit, which offers strategies to 
        incorporate more fruits and vegetables into school meals, and 
        promote them to students.
  --Teachers can use USDA educational materials to build nutrition 
        education into their curricula.
  --School administrators can encourage or require vending machine 
        operators, school canteens, and a la carte meal services to 
        improve their offerings. Our Making it Happen guide describes a 
        wide range of successful efforts to improve the nutritional 
        environments schools across the country.
  --Parents, school administrators, teachers and local communities can 
        promote children's health through new local wellness policies. 
        Recent legislation will encourage the development of wellness 
        committees to develop goals and plans for nutrition education, 
        physical activity, and other activities. USDA is working with 
        schools to get these policies in place over the next 2 years.
  --Schools and community leaders can take on the HealthierUS School 
        Challenge to make the school environment more supportive of 
        healthy eating and active lifestyle choices. Schools that 
        accept the challenge will be locally and nationally recognized 
        by USDA as being certified as a Silver or Gold Team Nutrition 
        School, based on school meal and other food and beverage sales 
        on the school campus, to showcase their success, and encourage 
        others to follow their lead.
    The challenge of promoting children's healthy eating and physical 
activity is one we must face together. The USDA offers leadership and 
support for parents, schools and communities in this important effort.

                         INTERNATIONAL FOOD AID

    Question. Your budget States we are going to provide an additional 
$300 million for emergency food aid funding with AID. It also states we 
are going to depend more on locally grown commodities in other 
countries rather than in our own. American-grown food assistance has 
long been a powerful weapon against world hunger.
    If we have surplus commodities and the world has urgent needs, why 
not continue to provide this U.S.-grown assistance?
    Answer. American farmers will continue to benefit from our 
international food aid programs. However, given the widely differing 
emergency conditions faced in the countries where we provide food aid, 
we need the flexibility to respond quickly and appropriately. In many 
emergency situations, time is a critical factor and cash for local 
purchases will save lives.
    The Administration appreciates the benefits our food aid activities 
provide to the agriculture industry, and the bulk of our programs will 
continue to benefit these groups as it has done in the past. We believe 
that the groups who have historically supported these programs will 
continue to see the value of promoting food security abroad. From a 
moral standpoint, the flexibility provided by this change will enable 
the United States to save more lives and respond more quickly to 
humanitarian crises which must continue to be the primary concern of 
this program.
    It is important to note that in situations where commodities are 
not available for local purchase under appropriate market conditions in 
developing countries, the funding could be used to purchase commodities 
in the United States as is now done.
    Our desire is not to entirely change the way that the United States 
approaches meeting food aid needs, but to enhance the variety of tools 
at our disposal so that we have multiple avenues to combat hunger in 
emergencies.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                NORTHERN GREAT PLAINS REGIONAL AUTHORITY

    Question. As a citizen of the Great Plains, you are well acquainted 
with the many economic challenges facing rural communities in States 
like South Dakota and Nebraska. In recognition of research 
demonstrating the benefits of regional strategies for promoting 
economic development, Congress established the Northern Great Plains 
Regional Authority in the 2002 Farm Bill. As you know, the Authority 
would help to coordinate policies affecting the region's economic 
performance. Unfortunately, our home States have still not seen more 
than a tiny fraction of the Authority's potential benefits.
    Would you please clarify the Administration's position regarding 
the merits of regional development organizations such as the Northern 
Great Plains Regional Authority?
    Answer. The President's 2006 budget shows that the Administration 
remains committed to providing the resources to meet the development 
needs of rural communities not only in South Dakota, Nebraska and the 
other Great Plains States, but in all parts of the country. 
Establishment of the Northern Great Plains Regional Authority that was 
authorized by the 2002 Farm Bill would not necessarily impact either 
the share of resources that the Great Plains States would receive or 
how effectively these resources would be used. Nevertheless, the 
Administration will continue to work toward establishing the Authority 
with funding provided in fiscal years 2004 and 2005.
    Question. Would you also please explain how, and in what timeframe, 
the Administration intends to resolve the issues that have impeded the 
Authority's operations to date?
    Answer. Since the legislation authorizing this regional authority 
calls for the Federal members to be appointed by the President and 
confirmed by the Senate before the Authority can be established, the 
Presidential personnel staff is working to identify candidates for 
nomination. The timeframe for announcing the nominations is not known.

                   RURAL BUSINESS INVESTMENT PROGRAM

    Question. As you know, inadequate access to financing, including 
venture capital, is one of many factors that constrains economic growth 
in our region. In order to address this issue, Congress established the 
Rural Business Investment Program, which is modeled on a successful 
program operated by the Small Business Administration. Though nearly 4 
years have elapsed since the President signed the Farm Bill, which 
created the Rural Business Investment Program, rural entrepreneurs 
starved for capital are still waiting for the Administration to 
implement the program.
     Could you please explain why it has taken so long to implement the 
program?
    Answer. It is my understanding that the Rural Business Investment 
Program was difficult to implement largely because it constituted an 
entirely new type of assistance for USDA to provide--the guaranteeing 
of debentures for investment companies to finance rural entrepreneurs. 
However, I have been told that the program is now underway.
    Question. Would you also please outline how, and in what timeframe, 
the Administration intends to resolve the factors that have delayed the 
program's implementation?
    Answer. I will ask USDA's Rural Development staff to provide the 
details of the key steps that were taken in implementing the program.
    [The information follows:]

    Publication of the Interim Final Rule and Notice of Funds 
Availability.--The RBIP Interim Final Rule was published on June 8, 
2004, in the Federal Register with a 30-day public comment period. On 
that same date, a Notice of Funds Availability (NOFA) applicable to the 
first competitive application round also was published in the Federal 
Register.
    Application Window Closed--September 17, 2004.--The Small Business 
Administration (SBA) received five applications by the deadline from a 
geographically diverse group of applicants. In fiscal year 2005, SBA's 
Investment Division has completed their Initial Review Process and 
notified applicants of the results. On or before June 1, 2005, USDA and 
SBA expect to designate selected applicants as conditionally approved 
Rural Business Investment Companies (RBIC's) and each will be given 1 
year to raise their private equity match requirement. After proof of 
the match and clearance of all requisite legal documentation, the 
conditionally approved RBIC's may be licensed and become eligible for 
program funds. We do not expect any investments to be made in rural 
enterprises until fiscal year 2006.

                          SUN GRANT INITIATIVE

    Question. I know that you are a proponent of the increased use of 
biobased fuels.
    Are you familiar with the ``Sun Grant Initiative,'' which provides 
an innovative approach for providing university-based bioproduct 
research and education programs at the State and local level?
    Answer. Yes, I am aware of the Sun Grant Initiative.
    Question. What is your opinion about possible collaborations 
between the Department and the Sun Grant Initiative to extend the 
Departments work in the area of bioproducts and the development of 
renewable fuels?
    Answer. Funding for the Sun Grant Initiative is not in the 
President's Budget Proposal for fiscal year 2006. CSREES supports 
research on biobased products and bioenergy through the National 
Research Initiative and researchers could submit a proposal for 
university-based bioproduct research and education to this 
competitively awarded program to be considered for funding.

                 RESOURCE CONSERVATION AND DEVELOPMENT

    Question. Resource Conservation and Development (RC&D) councils 
foster economic activity, using resources available to our rural 
communities. Constituents have voiced concern for the use of the 
Program Assessment Rating Tool (PART) in the evaluation of RC&Ds, 
questioning the applicability of the PART to RC&Ds given the 
quantitative nature of the assessment.
    Would you please clarify why PART is used for the evaluation of 
RC&D councils?
    Answer. The Performance Assessment Results Tool (PART) was 
developed to enable the Administration to assess the effectiveness of 
Federal programs and to help form management actions, budget requests, 
and legislative proposals directed at achieving results. The PART 
incorporates factors that affect and reflect program performance 
including program purpose and design; performance measurement, 
evaluations, and strategic planning; program management; and program 
results.
    Question. Are other rating tools available aside from PART that may 
be more appropriate for the evaluation of RC&Ds?
    Answer. USDA is in the final stages of completing a comprehensive 
program evaluation, as required by Section 2504 of the Farm Security 
and Rural Investment Act of 2002 for the RC&D program. The report 
findings are expected to be released by June 30, 2005, and may 
compliment the PART evaluation.

                         FEDERAL FORMULA FUNDS

    Question. One especially troubling proposal is the Administration's 
treatment of our Federal formula funds. South Dakota State University 
(SDSU), a land-grant university in Brookings, South Dakota, relies 
heavily on Hatch, McIntire-Stennis, and Animal Health Federal formula 
funds. The President's proposed budget would cut 45 faculty and staff 
at SDSU, with a 25 to 50 percent reduction in graduate students. These 
cuts will result in the closure of at least one SDSU research farm, and 
at least one SDSU public service laboratory. It is my understanding 
that other land-grant institutions across America are also concerned by 
the shift from Federal formula funds to competitive grants.
    Would you please clarify how land-grant universities are expected 
to adjust to this funding change?
    Answer. Recipients of formula funds have considerable flexibility 
to use these funds to support research projects, infrastructure, and 
personnel. The allocation of formula funds to support personnel varies 
widely from institution to institution depending not only on the size 
and needs of the institution but also on the institutional management 
of financial resources from Federal and non-Federal sources. While the 
amount of formula funds available to institutions in fiscal year 2006 
will be reduced and eliminated in fiscal year 2007, it will ultimately 
be up to each institution to determine how to allocate the resources 
available to support personnel. However, the fiscal year 2006 budget 
proposes full indirect cost recovery as part of competitive funding 
which will allow institutions to support faculty, staff, and other 
infrastructure needed to support agricultural science. 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.

                         ANIMAL IDENTIFICATION

    Question. I consistently hear from producers about the lack of 
transparency with USDA's proposed animal identification system, 
including cost, confidentiality, and incorporating practical methods of 
identification into a national system.
    Would you please indicate how producer costs will be minimized, how 
producer confidentiality will be maintained, and how much flexibility 
will be afforded producers with existing methods of identification 
(i.e. branding)?
    Answer. The National Animal Identification System (NAIS) will 
contain the minimum amount of information necessary for animal health 
officials to be able to track suspect animals and identify any other 
animals that may have been exposed to a disease. Animal identification 
and tracking systems maintained by the States or regional alliances 
will be an integral part of the overall NAIS information 
infrastructure. The State and regional systems will be able to collect 
and maintain more information than is required for the NAIS, yet only 
the required data need to be available for the national animal records 
repository.
    In order to secure full participation from livestock producers, the 
USDA is pursuing legislation to establish a system for protecting 
information obtained through the animal identification system 
established by the Secretary of the USDA.
    USDA understands that there is no ``one-size-fits-all'' 
identification technology. Rather than focus on a specific technology, 
the focus will be on the design of the identification data system; what 
information should be collected; and, when the data should be collected 
and reported. Once the identification system is designed, the market 
will determine which technologies will be the most appropriate to meet 
the needs of the system. As specific technologies are determined, the 
standards for those technologies will be established to ensure 
compatibility across all sectors of the industry.
    Producers will be able to use the NAIS in coordination with 
production management systems, marketing incentives, etc., allowing for 
the transition to a ``one number-one animal'' system for disease 
control programs and other industry-administered programs. While 
animals must be identified prior to being moved from their current 
premises, producers can decide whether to identify their stock at birth 
or during other management practices.
    The integration of existing branding procedures into the NAIS, 
while integrating animal identification technology standards 
(electronic identification, retinal scan, DNA, etc.) will be determined 
by industry to ensure the most practical options are implemented and 
that new ones can easily be incorporated into the NAIS.
    Because the NAIS is being developed as an industry-government 
partnership, we expect that industry and the government will share the 
cost of the necessary elements. At the present time, we do not envision 
any significant Federal funding for individual animal tags or other 
such devices. However, funding of select electronic readers could be 
accommodated under agreements with some cooperators. A variety of 
identification systems are currently used in the United States to 
identify various livestock species. USDA continues to seek technology 
solutions that have proven successful in the marketplace, and we 
continue to rely on stakeholders to determine which animal 
identification methods are the most practical and effective for each 
species in order to minimize the costs to the producer.

                          SUBCOMMITTEE RECESS

    Senator Bennett. Not at all.
    Thank you, Mr. Secretary. It has been a very informative 
morning, and we appreciate your responsiveness.
    The next hearing will be tomorrow afternoon, where we will 
hear from the Farm and Foreign Agricultural Services, the 
Natural Resources and Environment activity, Rural Development, 
and talk about Research, Education and Economics. Senator Craig 
made a comment to me as he left about research and the 
importance of that, and while I do not presume to speak for 
him, I do think we need to recognize that agricultural research 
in many ways is our seed corn, and we ought to take another 
look at some of the cuts that have been proposed there.
    With that, again, thank you for your participation, and the 
hearing is recessed.
    [Whereupon, at 11:18 a.m., Tuesday, April 12, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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