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



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

                              ----------                              


                        THURSDAY, MARCH 9, 2006

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

                       DEPARTMENT OF AGRICULTURE

                        Office of the Secretary

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


             opening statement of senator robert f. bennett


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


                          prepared statements


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

               Prepared Statement of Senator Thad Cochran

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

            Prepared Statement of Senator Richard J. Durbin

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

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

                  STATEMENT OF SECRETARY MIKE JOHANNS

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

                          PREPARED STATEMENTS

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

                   Prepared Statement of Mike Johanns

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

                              2007 BUDGET

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

                    PATHOGENIC AVIAN INFLUENZA (AI)

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

                FOOD AND AGRICULTURE DEFENSE INITIATIVE

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

                                 ENERGY

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

                    FARM COMMODITY PROGRAM SPENDING

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

                         FARM PROGRAM DELIVERY

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

                             CROP INSURANCE

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

                                 TRADE

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

                              FOOD SAFETY

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

                              CONSERVATION

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

                           RURAL DEVELOPMENT

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

                                RESEARCH

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

                          NUTRITION ASSISTANCE

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

                         DEPARTMENT MANAGEMENT

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

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

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

                      FISCAL YEAR 2007 OBJECTIVES

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

                     FISCAL YEAR 2007 KEY OUTCOMES

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

                    FISCAL YEAR 2007 BUDGET REQUEST

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

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

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

                  AGRICULTURE BUILDINGS AND FACILITIES

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

            DEPARTMENTAL ADMINISTRATION DIRECT APPROPRIATION

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

                           PHYSICAL SECURITY

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

                   CONTINUITY OF OPERATIONS PLANNING

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

                   PERSONNEL AND INFORMATION SECURITY

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

                        HUMAN CAPITAL MANAGEMENT

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

                   ENTERPRISE HUMAN RESOURCES SYSTEM

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

                       GOVERNMENT ETHICS PROGRAM

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

                           PROCUREMENT POLICY

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

                            USE OF BIOFUELS

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

        FEDERAL BIOBASED PRODUCTS PROCUREMENT PREFERENCE PROGRAM

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

                     REAL PROPERTY ASSET MANAGEMENT

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

                    EXCESS PERSONAL PROPERTY PROGRAM

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

               SMALL & DISADVANTAGED BUSINESS UTILIZATION

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

                     HAZARDOUS MATERIALS MANAGEMENT

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

                               CONCLUSION

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

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

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

               MISSION OF THE FARM CREDIT ADMINISTRATION

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

                    FISCAL YEAR 2005 ACCOMPLISHMENTS

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

          EXAMINATION PROGRAMS FOR FCS BANKS AND ASSOCIATIONS

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

                           REGULATORY ACTIVITY

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

                          CORPORATE ACTIVITIES

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

                STRATEGIC PLANNING AND PERFORMANCE PLANS

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

                  CONDITION OF THE FARM CREDIT SYSTEM

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

               FEDERAL AGRICULTURAL MORTGAGE CORPORATION

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

                    FISCAL YEAR 2007 BUDGET REQUEST

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

   Prepared Statement of Roger J. Klurfeld, National Appeals Division

                              INTRODUCTION

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

                                MISSION

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

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

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

                        FISCAL YEAR 2007 BUDGET

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

                         AGRICULTURAL ESTIMATES

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

                         CENSUS OF AGRICULTURE

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

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

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

                       RESULTS ACHIEVED RECENTLY

    In fiscal year 2005, OCFO continued to make substantial progress in 
improving financial management, financial information, and financial/
corporate systems throughout USDA. OCFO also actively worked on 
government-wide financial management issues affecting USDA to ensure we 
could achieve substantive and sustainable results. Some of the 
significant results USDA achieved in financial management, financial 
systems and related areas in fiscal year 2005 include:
  --Attained another clean financial audit opinion. Our ability to 
        sustain this critical performance benchmark is powerful 
        evidence of the Department's improved accountability, internal 
        control and data integrity.
  --This year Hurricane Katrina had a major impact on the NFC and OCFO 
        functions located in the New Orleans area. Thanks to the well-
        practiced continuity of operations plan (COOP), NFC and the 
        other OCFO operations in New Orleans were able to recover 
        operations quickly and to meet commitments to their customers 
        without interruption. Critical information technology services 
        were recovered within 24 hours; other essential operations were 
        recovered as planned over the next 10 days. We are most proud 
        that NFC was able to pay 565,000 employees accurately and on 
        time from their alternate locations. More noteworthy, NFC 
        converted two new customers, Transportation Safety 
        Administration and U.S. Coast Guard to its payroll system 
        during the 2 weeks following the storm and paid these new 
        payroll employees on time. The swiftness and accomplishment of 
        the recovery is a tribute to the employees of the NFC and OCFO 
        who deployed to remote locations, some leaving their families 
        behind, worked extended hours and assumed non-traditional jobs 
        to get the job done.
  --The NFC and OCFO are now reconstituting operations back to the New 
        Orleans location. Due to the personal impact on the employees' 
        homes and the New Orleans infrastructure, the reconstituting is 
        proving to be as difficult as the deployment. More than 96 
        percent of the 1,250 employees of the NFC and OCFO have 
        returned to New Orleans with some 400 of the employees located 
        in trailers in a trailer park or at their homes. The overall 
        productivity of the New Orleans-based operations have been 
        impacted by the loss of a large number of experienced employees 
        due to separations and retirements (13-percent of the workforce 
        has retired or separated after Katrina to work on their homes 
        or relocate from the area). OCFO operations have also been 
        impacted by (1) the Postal Service releasing mail from three 
        different Katrina storage facilities which contain potentially 
        thousands of undelivered invoices each; (the first warehouse 
        was released in February 2006) and (2) the loss of 
        knowledgeable employees from earlier reductions in force. The 
        payroll and human resources serviced by the NFC has been 
        impacted by a doubling in the volume of retirements and 
        separation transactions of its customer base and the loss of 
        knowledge through staff adjustments in repeated reduction-in-
        force actions in 2005. Although they have difficult personal 
        lives, the New Orleans staff is determined to eliminate the 
        workload backlog through extensive overtime. OCFO in Washington 
        D.C. continues to assist the operation and believes that the 
        backlog will be cured in the coming months.
  --Met OMB interim and year-end accelerated deadlines for preparing 
        the financial statements. Year-end statements were provided 45 
        days after the close of the fiscal year, that is, by November 
        15. USDA met these ambitious dates while sustaining data 
        quality and provided USDA executives and program managers with 
        financial results information more timely than ever before;
  --Reduced existing material internal control weaknesses from 32, 4 
        years ago, to 2 existing deficiencies at the end of fiscal year 
        2004. Although one new material weakness was reported in the 
        fiscal year 2005 Performance and Accountability Report, for a 
        total of three remaining for fiscal year 2006, we continue to 
        aggressively work to resolve the underlying internal control 
        and system issues. We will continue to work diligently to 
        eliminating material weaknesses;
  --Improved quality assurance of financial data by continuing to focus 
        on fixing ``root causes'' of data flow and accuracy problems. 
        Regularly monitored a set of metrics to ensure data is timely 
        and accurate and useful to USDA managers;
  --Closed 102 of 164 audits in fiscal year 2005 as compared to 96 in 
        fiscal year 2004, a 6 percent increase in audit closures;--
        Successfully consolidated and standardized departmental travel 
        procedures and policies;
  --Continued to monitor for travel card misuse, these efforts resulted 
        in lowering the Department-wide individually billed accounts 
        delinquency average of 4.68 percent in fiscal year 2004, to 
        4.06 percent in fiscal year 2005, representing a 13 percent 
        improvement;
  --During fiscal year 2005, the Forest Service submitted a competitive 
        sourcing plan to OMB for approval. In addition, USDA completed 
        2 competitive sourcing studies with results estimated to avoid 
        costs of $8.1 million over a 5-year period with annualized 
        amounts of over $1.62 million.
  --Implemented the real-time interface between the financial system 
        and procurement system, integrating the financial and 
        procurement systems for the first time and enhancing internal 
        funds control and streamlining operations; and
  --Enhanced through a technology modernization the data warehouse 
        reporting to provide more timely and useable financial and 
        performance information to USDA executives and managers to 
        manage daily operations.
    In addition to the above, during fiscal year 2005, USDA collected 
$1.1 billion of delinquent debt, $862 million through agencies using 
our internal tools and $238 million through the Department of Treasury 
Administrative Offset Program and other Debt Collection Improvement Act 
(DCIA) techniques. Since 1996, annual collections of delinquent USDA 
debt using DCIA tools have increased more than 276.6 percent from $63.2 
million in fiscal year 1996 to $238 million in fiscal year 2005. As of 
September 30, 2005, USDA had referred to the Treasury Offset Program 96 
percent of the $1.2 billion of eligible receivables and 97 percent of 
loans eligible for cross servicing compared to only 14 percent in 2001.
Results on which we are Currently Focused
    We continue to be focused on delivering valuable results in fiscal 
year 2006 as a context for consideration of our fiscal year 2007 budget 
request. Three areas of focus are: internal control and management 
information; support and develop shared services to the Departments of 
the Federal Government; and the President's Management Agenda.
    In the area of internal control and management information, we are 
committed to:
  --Continuing to enhance USDA's system of internal controls and data 
        integrity as reflected in sustaining in fiscal year 2006 USDA's 
        unqualified ``clean'' opinions on the consolidated financial 
        statements and component agency financial statements;
  --Meeting OMB's interim and year-end deadlines for financial 
        statement and the Performance and Accountability Report;
  --Eliminating material weaknesses in internal controls and systems 
        non-conformances with the requirements of the Federal Financial 
        Management Improvement Act (FFMIA);
  --Implementing an online USDA corporate financial and performance 
        reporting, system that the Secretary of Agriculture and his 
        senior executives will use to drive program results;
  --Continuing to develop financial management and accounting 
        operations leadership talent in-depth throughout all our 
        agencies so as to enhance further USDA's culture of sound 
        financial management and to sustain management results already 
        achieved; and
  --Expanding the use of data warehousing technology to improve data 
        integrity and timely availability of financial and performance 
        information to USDA's executives and managers for the 
        management of their daily operations.
    To support and develop shared services to the Departments of the 
Federal Government, we are focused on:
  --Completing the reconstitution and rebuilding the OCFO operations 
        and the NFC operations in New Orleans to support the functions 
        of the Federal Government and the USDA;
  --Structuring a Human Resources Line of Business (HR LoB) venture for 
        the NFC while continuing to implement new customers into 
        ePayroll. The HR LoB will provide a new business growth 
        opportunity for NFC in providing human resources systems and 
        services to all civilian Federal agencies;
  --Completing the transfer of the accounting and paralegal functions 
        of the Thrift Savings Plan to the Federal Retirement Thrift 
        Investment Plan;
  --Securing a location for the alternate worksite and computing 
        center, which reduces the operational risk through continuous 
        improvement of and practice in recovery operations for NFC and 
        accounting operations;
  --Working with Office of Personnel Management (OPM) on retaining 
        employees in critical positions with long-term learning curves 
        and cycles at the NFC; and
  --Reviewing additional USDA sponsored financial services that can 
        create savings in the Federal Government through a consolidated 
        service center. These services include a Financial Management 
        Line of Business.
    For President's Management Agenda (PMA) initiatives, we are:
  --Implementing the eTravel initiative throughout USDA to consolidate 
        travel processes at the Department level and centrally manage 
        them through a customer-centric, self-service, web-based 
        environment providing end-to-end travel services;
  --Adding the personal property components to the Corporate Property 
        Automated Information System (CPAIS). CPAIS was implemented in 
        fiscal year 2004 and currently tracks all USDA real property 
        whether owned or leased. Incorporating personal property into 
        CPAIS will allow USDA, in one place, to have a full view and 
        accounting of our property assets;
  --Taking aggressive action to implement the Improper Payments 
        Information Act (IPIA), Public Law 107-300 by establishing 
        measurements for programs that meet the required payment 
        criteria. We strengthened guidance to agencies requiring 
        detailed plans with key milestones and quality deliverables. We 
        are monitoring accomplishments through monthly workgroup 
        meetings, assessment of deliverables, evaluation of risk 
        assessments, and agency scorecards for executives and managers;
  --Conducting Independent Verification and Validation (IV&V) review 
        activities for the following: Feasibility studies conducted and 
        submitted by USDA Agencies and Offices in support of the USDA 
        Competitive Sourcing Green Plan; post-competition assessments 
        for completed performance reviews along with the cost 
        comparison; and independent validation verification of prior 
        year achieved savings;
  --Collaborating with Departmental Administration to use competitive 
        sourcing, where appropriate, to address core competency and 
        skills gaps;
  --Sponsoring training sessions for USDA Agencies and Offices on 
        various A-76 related topics including: FAIR Act Inventory; 
        Feasibility Studies; Performance Work Statements; and Most 
        Efficient Organizations; and
  --Facilitating departmental-wide collaboration efforts and working 
        group sessions to develop standards for FAIR Act Inventory 
        coding process: FAIR Act Inventory function code definitions 
        are being standardized and Reason Code Justifications and 
        Analyses are being evaluated to ensure compliance with OMB 
        regulations.

Fiscal Year 2007 Budget Request
    I would like to thank the Committee for your confidence in 
entrusting us with the basic resources required to provide stewardship 
over USDA financial processes. USDA's excellent results in sustaining 
and enhancing financial accountability in fiscal year 2005 were only 
possible because of your support. I would now like to focus on our 
fiscal year 2007 operating budget request, which is for $19,931,000, an 
increase of $14,116,000 or 242.8 percent more than the fiscal year 2006 
budget of $5,815,000. Approximately 90 percent of the Office of the 
Chief Financial Officer's current obligations are for the salaries and 
benefits of the OCFO employees. As part of this increase request, of 
$176,000 is to fund pay costs. The pay-related increases requested are 
necessary for us to accomplish key outcomes and to successfully meet 
our goals for fiscal year 2007. The remaining $13,940,000 of the 
request is for procurement of hardware and software to improve the 
financial management performance through implementation of a new core 
financial management system. OCFO is pursuing significant modernization 
of its technically outdated corporate financial, administrative 
payments and program general ledger systems. These outdated systems are 
no longer supported by the vendor and pose an unacceptable risk for 
USDA. Due to the current transaction services offered to other Federal 
Government entities, USDA has discussed with OMB the opportunity to 
offer a full financial solution to smaller agencies in the Federal 
Government.

USDA Working Capital Fund
    The Working Capital Fund (WCF) serves as the Department's principal 
investment engine to achieve progress in developing and implementing 
new corporate systems. Last year, we again made use of authority 
granted to us by the Committee in the appropriations language to use 
unobligated balances as part of this developmental effort. In 2005, our 
plan for use of these resources was reviewed by Congress--as required 
under appropriations language--and executed to continue our progress in 
implementing an enterprise human resources information system, an 
integrated acquisition system, and a management information tracking 
tool. For 2006, we have prepared a plan to Congress to obligate funds 
in pursuit of further efforts in development of an integrated 
procurement system and an enterprise human resources system. That plan 
will be delivered to the Committees on Appropriations shortly. We are 
grateful for the support and look forward to working with the Committee 
as our efforts to improve corporate systems proceed.
    In addition to the investments in corporate systems, the WCF 
supports services in the areas of financial management, information 
technology, communications, administration, as well as record keeping 
and item processing. It is our objective to use this financing 
mechanism to provide to agencies of the Department, the most effective 
cost-efficient centrally managed services available.
    The President's fiscal year 2007 budget estimates that total 
operating costs for the WCF in fiscal year 2007 will be $515.1 
million--net of intrafund transfers between WCF activities--a $13.0 
million increase, or 2.6 percent over the fiscal year 2006 estimate. 
Costs to USDA agencies will increase more slowly, about 2.4 percent 
from fiscal year 2006 to fiscal year 2007.
    The increases in cost estimates reflect the fact that the WCF 
recovers costs on the basis of user demand for services with the 
objective of lowering total costs through centrally-managed services. 
Historically, the largest of the USDA-wide services has been the 
National Finance Center. However, its menu of services has been 
changing to reflect the changing needs of customers both inside and 
outside USDA. Information Technology Services will be the largest WCF 
activity in terms of cost in fiscal year 2006. Examples of other 
services supported by the WCF include mainframe computing and 
information technology services at the National Information Technology 
Center in the Office of the Chief Information Officer, and video and 
teleconferencing production services provided by the Broadcast and 
Media Technology Center in the Office of Communications. Departmental 
Administration provides a wide variety of personal property, mail, and 
duplicating services to USDA and non-USDA customers. Among the 
corporate systems activities supported by the WCF include: Corporate 
Financial Management Systems and Integrated Procurement Systems. The 
source of funds for these investments in systems includes direct 
billings, purchase card rebates, and the use of unobligated balances.
    I would like to point out that the WCF financing mechanism, as a 
reimbursement for goods and services provided, gives us an opportunity 
to refine our estimates as newer and better information becomes 
available regarding customer demand and costs. Our office is currently 
engaged in reviewing fiscal year 2007 estimates with the goal of 
reducing estimates wherever possible in costs for core services to USDA 
agencies. It was with this objective in mind that we were able to 
submit an operating estimate for fiscal year 2007 that is consistent 
with expected inflation. I think it is important to note that costs for 
core services--those corporate services in which all agencies share--
will see cost increases of only 1.2 percent from fiscal year 2006 to 
fiscal year 2007. As we begin development of the fiscal year 2008 
budget this spring, we will be reexamining fiscal year 2007 estimates 
for more economies and savings. As we did last year, we will establish 
spending targets for WCF activities that take into account the 
Department's spending priorities among its agencies reflected in the 
President's budget.
    I would also like to express my appreciation to the Committee for 
all of the assistance and support provided to the Department in the 
wake of Hurricane Katrina. Specifically, the resources provided to us 
to address disaster recovery and resumption of business operations were 
essential to our success in bringing the National Finance Center and 
other activities in New Orleans back on line. The story of our recovery 
in New Orleans is primarily a story of people--dedicated workers who 
through their long hours of effort ensured that operations were resumed 
as quickly as possible. That we have been able to resume payrolling and 
financial operations activity to the extent we have is a reflection on 
their efforts and the support we have received from the Congress.
    Thank you, Mr. Chairman, for the opportunity to share the results 
we have achieved and our fiscal year 2007 budget request with the 
Committee. We especially look forward to working together with you and 
the Committee in fulfilling the vision for financial management we all 
have for the United States Department of Agriculture.
                                 ______
                                 

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

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

                    FISCAL YEAR 2007 BUDGET REQUEST

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

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

                              INTRODUCTION

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

     USDA'S FISCAL YEAR 2007 INFORMATION TECHNOLOGY BUDGET SUMMARY

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

            SERVICE CENTER MODERNIZATION INITIATIVE--(SCMI)

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

                          INFORMATION SECURITY

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

                         ELECTRONIC GOVERNMENT

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

                        ENTERPRISE ARCHITECTURE

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

                             IT MANAGEMENT

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

                               CONCLUSION

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

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

                              INTRODUCTION

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

                     CURRENT ACTIVITIES AND ISSUES
         INTERNATIONAL AFFAIRS AND COMMODITY PROGRAMS DIVISION

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

                      FOOD AND NUTRITION DIVISION

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

             MARKETING, REGULATORY AND FOOD SAFETY PROGRAMS

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

                           RURAL DEVELOPMENT

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

                           NATURAL RESOURCES

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

                          GENERAL LAW DIVISION

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

                          LITIGATION DIVISION

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

                          LEGISLATION DIVISION

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

                              CIVIL RIGHTS

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

                    FISCAL YEAR 2007 BUDGET REQUEST

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

                                CLOSING

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

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

                         BEEF EXPORTS TO JAPAN

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

                            RENEWABLE ENERGY

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

                              ENERGY COSTS

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

                              DAIRY POLICY

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

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

                      REDUCING THE FEDERAL DEFICIT

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

                  COMMODITY SUPPLEMENTAL FOOD PROGRAM

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

                       MILK INCOME LOSS CONTRACT

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

                            RENEWABLE ENERGY

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

                            AVIAN INFLUENZA

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

                Planned Use of Pandemic Influenza Funds

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

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

                     CENTRAL ADMINISTRATION FUNDING

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

                  WEATHER-RELATED DISASTER ASSISTANCE

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

                          FSA STAFFING LEVELS

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

                         BEEF EXPORTS TO JAPAN

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

            MISSISSIPPI RIVER TRANSPORTATION INFRASTRUCTURE

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

                       GRAIN EXPORTS FORECASTING

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

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Bennett. Thank you very much, Senator Bond.
    With the eye on the clock and the recognition that the full 
committee is meeting, we will submit additional questions to 
you, Mr. Secretary, in writing. And as I said in the opening 
statement, I hope that all Senators have those questions to the 
subcommittee staff by Friday, March 17.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Robert F. Bennett

                       USDA SHARE OF BUDGET CUTS

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

                  LEGISLATIVE PROPOSALS IN THE BUDGET

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

                        WIC LEGISLATIVE PROPOSAL

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

                         ANIMAL IDENTIFICATION

    Question. Mr. Secretary, the Congress has provided over $66 million 
for the implementation of an animal identification system. This level 
of funding does not include an additional $18.7 million that was 
transferred from the Commodity Credit Corporation. With that in mind, 
the budget request for fiscal year 2007 proposes another $33 million to 
continue this animal identification exercise.
    Please provide us with an update on the status of animal 
identification and when you expect a national program to be fully 
implemented.
    Answer. Premises registration has been implemented in all 50 States 
and 2 Territories. Several Tribes are also registering their premises. 
The animal identification phase, in which APHIS will begin allocating 
animal identification numbers, is being implemented in March 2006. We 
anticipate the remaining systems elements will be operational in early 
2007, but private entities will need to supply information to fill the 
private databases.
    Question. To be more specific, infrastructure items such as ear 
tags, scanners, and private databases must be available for such a 
program to operate. Who will fund this infrastructure, the private 
sector or USDA?
    Answer. USDA will continue to provide funding to the States to 
carry out their responsibilities at the local level. In addition, USDA 
will continue to support the premises registration and animal 
identification numbering systems, the data system necessary to support 
and integrate multiple data systems held by private industry and State 
sectors, and public outreach and education efforts. The private sector 
will be assuming costs associated with scanners, private databases, and 
animal identification devices.

  OFFICE OF THE UNDER SECRETARY FOR MARKETING AND REGULATORY PROGRAMS

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

          FARM SERVICE AGENCY (FSA)--COUNTY OFFICE REALIGNMENT

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

                        CLASSICAL CHINESE GARDEN

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

                    NATIONAL FINANCE CENTER--STATUS

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

            NATIONAL FINANCE CENTER--DATA CENTER OPERATIONS

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

                          515 HOUSING PROGRAM

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

                NATIONAL VETERINARY MEDICAL SERVICES ACT

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

                      MANDATORY COMMODITY PROGRAMS

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

                         FOREST SERVICE FUNDING

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

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

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

    The HMM funding the Forest Service receives in this process 
supplements the $10-15 million of annual Forest Service funding in 
support of USDA's Hazardous Materials Management Program. The Forest 
Service is not required to reimburse the account, except when cleanup 
costs are recovered from other responsible parties. It is estimated 
that HMM funding helped to leverage the estimated $22 million of 
environmental cleanup work responsible parties performed in lieu of 
cash payments in fiscal year 2005.

                      FINANCIAL MANAGEMENT SYSTEM

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

                     PROVINCIAL RECONSTRUCTION TEAM

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

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

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

                    FOREIGN SERVICE PERFORMANCE PAY

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

      CROSS CUTTING TRADE NEGOTIATIONS AND BIOTECHNOLOGY RESOURCES

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

                         OFFICE OF CIVIL RIGHTS

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

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

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

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

                 OFFICE OF CIVIL RIGHTS PROGRAM FUNDING

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

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

                                 ______
                                 

              Questions Submitted by Senator Arlen Specter

                            DAIRY ASSISTANCE

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

                  COMMODITY SUPPLEMENTAL FOOD PROGRAM

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

                      LIVESTOCK PROTECTION PROGRAM

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

           Questions Submitted by Senator Christopher S. Bond

                     NATIONAL AGRO-FORESTRY CENTER

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

              NATIONAL INSTITUTE FOR FOOD AND AGRICULTURE

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

                            EPA REGULATIONS

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

              Questions Submitted by Senator Conrad Burns

                     RESUMING BEEF EXPORTS TO JAPAN

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

                               PESTICIDES

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

                            RENEWABLE FUELS

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

                     BEGINNING FARMERS AND RANCHERS

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

                 NATIONAL ANIMAL IDENTIFICATION SYSTEM

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

              Questions Submitted by Senator Sam Brownback

                  NEW USES EXPO FOR BIOBASED PRODUCTS

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

                            HORSE SLAUGHTER

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

                     LAND GRANT UNIVERSITY FUNDING

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

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

Key Elements of the President's Fiscal Year 2006 Budget for CSREES
    The fiscal year 2006 budget expanded the NRI to $250 million; 
established a new, SAES Competitive Grants Program at $75 million; cut 
the Hatch and McIntire-Stennis research formulas by 50 percent in 2006, 
and 100 percent in 2007; cut the Animal Health (Section 1433) research 
formula by 100 percent, starting in 2006; and moved six competitive 
grants programs currently funded under Section 406, Integrated 
Competitive Grants programs, to the integrated programs area of the NRI 
initially provided through Congressional appropriations actions 
beginning in 2004. The proposal also called for full indirect cost 
recovery on all competitively award grants, up from the current level 
of 20 percent of direct costs, and an increase in integrated grants 
authority from 20 to 30 percent.

Congressional Response
    In questions to the Agency during the hearing, and more intensively 
in post hearing, written questions, the House sought accomplishment 
information for formula based programs and asked the agency about 
stakeholder input and the administration's analyses leading to the 
recommendations to redirect formula funded research programs to 
competitive grants.
    The Senate committee is very unlikely to adopt the administration's 
proposal to redirect formula funds to competitive programs, and may be 
reticent to consolidate the 406 programs with the NRI, particularly if 
this action limits the integrated programs in the NRI which began in 
2004.

University Response
    Agricultural Research and Extension Administrators, Land-Grant 
Universities (LGUs): The collective response of these administrators 
has been extraordinarily negative to the formula-competitive 
conversion. Initial analysis of the university director's response to 
the initial proposals in the President's fiscal year 2006 budget 
indicate that the primary concerns are: (1) lack of consultation with 
affected universities and stakeholders; (2) loss of matching funds; (3) 
program continuity and length of awards; (4) sustaining breadth of 
capacity in agricultural science and education nationwide; (5) 
providing responsiveness to State and local issues; and (6) leveraging 
and sustaining partnerships across institutions.
  --Directors particularly have cited consequences for employment 
        (estimating as many as 2000 scientists and equal numbers of 
        technicians and graduate students will lose their jobs; see 
        CRIS tables on employment by Hatch projects for actual 
        numbers.); concerns about program infrastructure; loss of 
        matching funds; and continuity of efforts. In addition, 
        agricultural research directors have expressed concern about a 
        net decline in total research effort, if funds are diverted 
        from direct scientific effort to covering indirect 
        administrative expenses. They also are concerned by the speed 
        with which these changes would be implemented especially given 
        that they argue there was no consultation on the proposal. In 
        2005, LGU agriculture deans and directors have declined the 
        offer of CSREES to participate in a joint planning team to 
        examine alternate strategies to implement fiscal year 2006 
        proposed, competitive research programs.
  --Central Administrators at LGU's: Chancellors, Presidents and Vice 
        President's for Research, particularly, though not exclusively, 
        those at larger institutions, have expressed support for the 
        proposals in the administration's fiscal year 2006 budget 
        proposal. Their support appears predicated not only on the need 
        for agricultural research grants to carry indirect cost 
        recovery to the degree consistent with other Federal grants, 
        but also to help bring agricultural science into the broader 
        fold--and stature--of peer reviewed research on campus.

Scientific Societies
    Individual organizations and consortia of scientific societies have 
supported growth in competitive research programs, and have been either 
fully supportive of the fiscal year 2006 administration budget, or 
supportive of the growth the NRI and other competitive programs while 
silent on the formula-related provisions. For example, the American 
Phytopathology Society has focused its lobbying efforts on seeking to 
expand competitive grants, as included in the fiscal year 2006 
proposal. Co-Farm, the Coalition for Funding Agricultural Research 
Missions, is seeking overall growth in funding for agricultural 
science, thus emphasizes programs with higher numbers than previous 
appropriations. Episodic reports from individual scientists have varied 
from concern about loss of start-up funds and preliminary studies 
needed to test approaches prior to developing proposals for grant 
funding provided by some institutions through formula programs to 
supporting increases in available funds for competitive grants 
especially to increase the average size and duration of awards.

Public Citizens and Associations of Producers, Processors, Consumers 
        and other Interests
    Few citizens or public stakeholder groups have expressed views to 
the Agency regarding funding mechanisms employed by CSREES. CARET, the 
Council for Agricultural Research, Extension and Teaching, collectively 
has called for the restoration of formula funds, although individual 
members have expressed an interest in developing alternative funding 
approaches. Major commodity groups have not expressed views on this 
issue.

                               HATCH ACT

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



                    MCINTIRE-STENNIS FORESTRY GRANTS

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



                   ANIMAL HEALTH AND DISEASE RESEARCH

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

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



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

                          FARM PROGRAM FUNDING

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

              NATIONAL ANIMAL IDENTIFICATION SYSTEM (NAIS)

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

                           SERICEA LESPEDEZA

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

                Questions Submitted by Senator Herb Kohl

                       HORSE SLAUGHTER/USER FEES

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

                       FOOD SAFETY BUDGET TRENDS

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

                  COMMODITY SUPPLEMENTAL FOOD PROGRAM

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

                            GIPSA OIG AUDIT

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

                      SMALL FARM/DIRECT MARKETING

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

                         BSE--JAPANESE EXPORTS

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

                     NON-AMBULATORY DISABLED CATTLE

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

                         BSE--JAPANESE EXPORTS

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

                           ALTERNATIVE FUELS

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

               Questions Submitted by Senator Tom Harkin

                          USDA SERVICE CENTERS

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

                      COMMON COMPUTING ENVIRONMENT

    Question. The objective of the Service Center Modernization 
Initiative is to create an environment of one-stop quality service for 
customers of the Farm Service Agency, the Natural Resources 
Conservation Service, and the Rural Development agencies. The Common 
Computing Environment (CCE) is intended to enable the 3 agencies to 
share information technology to improve customer service. Since fiscal 
year 1996, USDA has been planning and deploying an integrated 
information system to replace several old systems in Service Center 
Agencies that could not share data. In March 2000, the Office of Chief 
Information Officer was given direct management responsibility for the 
CCE.
     Given that this effort has been underway for 10 years, has USDA 
made sufficient progress in reaching the objective number of shared 
information technology and ability to share and transfer data?
     Answer. USDA has made significant progress in reaching the shared 
information technology objectives. The shared technology platform, the 
Common Computing Environment (CCE), is in place. The platform allows 
USDA to maintain one standardized environment for use by the Service 
Center Agencies (SCAs). The platform is the foundation for on-going 
efforts to modernize individual SCA systems and business processes. 
Despite the fact that full modernization has yet to be achieved, the 
platform has provided several administrative and technological 
benefits. Examples of the benefits have been provided.
    [The information follows:]

Common Administrative Functions
    Common computer technology on each of 50,000 agency and 
contributing partner desks, including shared software;
    Shared networks, making higher speed connectivity affordable for 
the SCAs; and
    Common IT security with the capability to manage from a single 
operation nationwide.

Centralized Computing Technology
    Shared Storage Area Network (SAN) technology (5 locations) for 
tabular and geospatial data and backup/disaster recovery (full 
redundancy);
    Common eAuthentication portal for user validation in the SCAs; and
    Web Farm Technology (consolidated IT locations) developed and 
deployed to support Web access for employees and customers.

Telecommunications Architecture and Operations
    Maintenance for phones and network routers and upgrades to data 
network and technology to meet future demands; and
    Transition to the Departments Universal Telecommunications Network 
(UTN)--component of the USDA Enterprise Architecture in fiscal year 
2006.

USDA Data Center
    Data acquisition for Geographic Information Systems (GIS)--
examples: Common Land Use (CLU) data for FSA, Soils data for NRCS; and
    Data acquisition for aerial/high altitude imagery for mapping and 
compliance review--example: NAIP photography.

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

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

                             CROP INSURANCE

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

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

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

                                 TRADE

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

                                FOOD AID

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

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

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

                            AVIAN INFLUENZA

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

                              FOOD SAFETY

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

            RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

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

             Questions Submitted by Senator Byron L. Dorgan

                            RESEARCH BUDGET

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

                          DISASTER ASSISTANCE

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

                      VALUE-ADDED PRODUCER GRANTS

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

                NATIONAL VETERINARY MEDICAL SERVICES ACT

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

                        APHIS BLACKBIRD CONTROL

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

                             2007 FARM BILL

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

                     STATE MEAT INSPECTION PROGRAM

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

                          BEEF IMPORTS AND BSE

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

                                 GIPSA

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

            Questions Submitted by Senator Richard J. Durbin

                          DISASTER ASSISTANCE

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

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

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

                          FSA OFFICE CLOSURES

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

               Questions Submitted by Senator Tim Johnson

                        IMPORTS OF JAPANESE BEEF

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

                          IMPORTS FROM CANADA

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

                       COUNTRY OF ORIGIN LABELING

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

            RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

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

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

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

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

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

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

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

                  COMMODITY SUPPLEMENTAL FOOD PROGRAM

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

                          SUBCOMMITTEE RECESS

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