    [Senate Hearing 109-149]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-149

                                                            Senate Hearings

                                     Before the Committee on Appropriations

    _______________________________________________________________________

                                                         Agriculture, Rural

                                                   Development, and Related

                                                    Agencies Appropriations

                                                                Fiscal Year
                                                                       2006

                                              109th CONGRESS, FIRST SESSION

                                                                  H.R. 2744

    DEPARTMENT OF AGRICULTURE

    NONDEPARTMENTAL WITNESSES

     Agriculture, Rural Development, and Related Agencies Appropriations,
                                      2006
                                  (H.R. 2744)

                                                            S. Hrg. 109-149

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

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                       on

                                   H.R. 2744

     AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
     AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
             YEAR ENDING SEPTEMBER 30, 2006, AND FOR OTHER PURPOSES

                                   __________

                           Department of Agriculture
                           Nondepartmental witnesses

                                   __________

             Printed for the use of the Committee on Appropriations

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

                                   __________

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                          COMMITTEE ON APPROPRIATIONS

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

      Subcommittee on Agriculture, Rural Development, and Related Agencies

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

                                John Ziolkowski
                                   Fitz Elder
                                Hunter Moorhead
                           Galen Fountain (Minority)
                       Jessica Arden Frederick (Minority)
                           William Simpson (Minority)
                            Tom Gonzales (Minority)

                             Administrative Support

                                 Dianne Preece

                                C O N T E N T S

                                  ----------

                            Tuesday, April 12, 2005

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

                           Wednesday, April 13, 2005

    Department of Agriculture........................................    81

                            Thursday, April 14, 2005

    Department of Agriculture........................................   217
    Material Submitted by Agencies...................................   339
    Nondepartmental Witnesses........................................   409

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

                                  ----------

                            TUESDAY, APRIL 12, 2005

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

                           DEPARTMENT OF AGRICULTURE

                            Office of the Secretary

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

                 opening statement of senator robert f. bennett

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

                         STATEMENT OF SENATOR HERB KOHL

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

                       STATEMENT OF SENATOR CONRAD BURNS

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

                               PREPARED STATEMENT

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

                   Prepared Statement of Senator Conrad Burns

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

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

                    STATEMENT OF SENATOR CHRISTOPHER S. BOND

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

                              PREPARED STATEMENTS

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

                   Prepared Statement of Senator Thad Cochran

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

                   Prepared Statement of Senator Larry Craig

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

                   Prepared Statement of Senator Tim Johnson

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

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

                           STATEMENT OF MIKE JOHANNS

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

                               PREPARED STATEMENT

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

                       Prepared Statement of Mike Johanns

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

                     BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

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

                    FOOD AND AGRICULTURE DEFENSE INITIATIVE

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

                                  FOOD SAFETY

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

                             FARM PROGRAM SPENDING

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

                                     TRADE

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

                                 CROP INSURANCE

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

                                  CONSERVATION

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

                               RURAL DEVELOPMENT

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

                                    RESEARCH

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

                                FOOD ASSISTANCE

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

                             DEPARTMENT MANAGEMENT

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

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

                               DEFICIT REDUCTION

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

                            CANADIAN BORDER CLOSURE

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

                            CSREES BUDGET PROPOSALS

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

                                   USER FEES

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

                                NONFAT DRY MILK

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

                                  FARM INCOME

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

                        AGRICULTURAL BORDER INSPECTIONS

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

                                AVIAN INFLUENZA

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

                             VETERINARIAN SHORTAGES

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

                              MADCOW DISEASE (BSE)

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

                             BEEF EXPORTS TO JAPAN

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

                             CROP DISASTER PAYMENTS

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

                               FARM PROGRAM CUTS

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

                           COUNTRY-OF-ORGIN LABELING

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

                          CONSERVATION RESERVE PROGRAM

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

                                 TRADE DEFICIT

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

                                CANADIAN CATTLE

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

                     CENTRAL AMERICAN FREE TRADE AGREEMENT

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

                            CROP PAYMENT LIMITATION

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

                             BEEF EXPORTS TO JAPAN

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

                              RAISING FARM INCOME

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

                            VALUE-ADDED AGRICULTURE

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

                              CARBON SEQUESTRATION

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

                               FOOD AID PROGRAMS

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

                          REDUCING THE FEDERAL DEFICIT

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

                         NATIONAL ANIMAL DISEASE CENTER

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

                   National Animal Disease Center, Ames, Iowa

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

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

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

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

                                     SCOPE

    General
        Consolidation of the three Centers is appropriate and will enhance
    synergy acid collaboration among these Federal responsibilities and, in
    the process, significantly improve their functions.
        Focusing in this one site will further facilitate collaboration
    with the scientific expertise existing in universities throughout the
    Nation. This will serve to expand and coordinate the inclusion of
    people in science for USDA's access, and to geographically focus the
    scientific knowledge and inquiry.
        It is appropriate and necessary to build modern laboratory
    facilities capable of supporting federally mandated scientific work.
    This includes developing new knowledge and technology, conducting
    trade-related diagnostics and reference testing, and licensing
    regulated biologics with the required laboratory support.
    National Leadership
        There is a need for this facility to serve as a national reference,
    a premier laboratory that is recognized internationally as a Center of
    excellence. This recognition will be incorporated into the evaluation
    of veterinary services, a component in risk assessment which is used by
    all trading countries to make trade decisions. This recognition will
    unequivocally work to the U.S. advantage.
        The veterinary biologics consolidation will also display a
    leadership role in establishing biologics standards. Not only will this
    promote the availability of safe and effective vaccines, but it will
    also assure the industry that extraneous disease agents are not
    inadvertently introduced thus threatening the national livestock herds
    and flocks.
    Location
        We support the development of this project in Ames, Iowa based on
    our observation that there already exists a strong and enthusiastic
    cooperation and synergy among the three Centers and with the Iowa State
    University. The Ames site would also provide the opportunity of mutual
    sharing, and hence not duplicating very expensive equipment and
    facilities in biotechnology Centers. This is an advantage for the USDA.
        The nature of the scientific activities conducted in the Centers
    can often be viewed with hostility by lay and business communities. It
    is, therefore, of great value that the Ames community already accepts,
    understands and values the functions of these Centers, a trust and
    support which would have to be re-established in a different location.
        The current human resource of ARS and APHIS personnel at Ames has
    been built up over many years. It is our opinion and experience that
    moving such facilities to a different location would result in a
    substantial loss or dispersion of scientific staff which would be
    extremely difficult to re-establish and, in the process, would set the
    program back, perhaps for years. A strong infrastructure exists upon
    which to further develop the physical facility. Development of such an
    infrastructure would be costly at another site.
        The best fulfillment of the benefits of this consolidation would be
    achieved in the present Ames location.

                                      NEED

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

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

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

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

                                  CONSEQUENCES

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

                            POINTS FOR CONSIDERATION

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

                                   CONCLUSION

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

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

                     CONSERVATION SECURITY PROGRAM SIGN-UP

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

                                 CSP Contracts

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

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

                                 CSP Contracts

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

                              PACKER CONCENTRATION

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

                                Livestock Study

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

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

                         ADDITIONAL COMMITTEE QUESTIONS

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

                Questions Submitted by Senator Robert F. Bennett

                             CANADIAN BEEF INDUSTRY

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

                                 CROP SUBSIDIES

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

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

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

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

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

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

                                 FARM SPENDING

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

                   LOW PATHOGENIC AVIAN INFLUENZA (BIRD FLU)

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

                         NATIONAL ANIMAL IDENTIFICATION

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

                              TRADE STATUS--JAPAN

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

                        BOLL WEEVIL ERADICATION PROGRAM

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

                           USDA EMPLOYEE RETIREMENTS

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

                               ETHANOL PRODUCTION

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

                   Question Submitted by Senator Thad Cochran

                                  SOYBEAN RUST

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

                   Questions Submitted by Senator Ted Stevens

                      RURAL COMMUNITY ADVANCEMENT PROGRAM

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

                                  ALASKA DAIRY

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

                    Questions Submitted by Senator Herb Kohl

                               EXECUTIVE BONUSES

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

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

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

                          GAO HOMELAND SECURITY REPORT

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

                    ACCREDITED VETERINARIANS IN RURAL AREAS

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

                    FOOD AND AGRICULTURE DEFENSE INITIATIVE

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

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

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

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

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

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

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

                                   USER FEES

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

                                  SOYBEAN RUST

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

                 Questions Submitted by Senator Robert C. Byrd

                            HUMANE ACTIVITY TRACKING

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

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

        Question. Out of the total inspections that FSIS carries out in
    regard to humane slaughter, what percentage of them occur unannounced
    or without notice to the establishments?
        Answer. The vast majority of humane handling and slaughter
    verifications conducted by FSIS inspection program personnel occur
    unannounced or without notice to the establishments. This is due to the
    fact that humane handling and slaughter verification activities are
    ongoing and continuous throughout the entire slaughter process, rather
    than at specific times or announced points in the process.
        Question. What has been the effect of the September 9th notice that
    encouraged establishments to use a systematic approach in ensuring
    humane slaughter? In what ways has it changed industry operations
    regarding humane handling and slaughter of animals?
        Answer. FSIS believes the Notice is having a positive effect in
    encouraging establishments to use a systematic approach to humane
    handling and slaughter activities. In addition, the Notice provides
    FSIS inspection personnel and industry with a common framework for
    discussion on how the Agency believes plants can be most successful in
    meeting their obligations under the HMSA.
        Question. Other than publishing the notice on September 9 regarding
    humane slaughter, what else is FSIS doing to encourage industry to
    change and improve their practices regarding humane handling of
    animals?
        Answer. FSIS conducts daily verification of humane handling through
    the HAT system and holds routine discussions with plant management
    during weekly meetings.
        Question. Does FSIS monitor facility design and improvements to
    measure how the industry is changing in plant designs regarding humane
    handling? Are the plants' ``periodic evaluations'' made available to
    FSIS, and what are the results?
        Answer. FSIS monitors facility design and improvements as part of
    the Agency's verification of facility regulatory requirements. The
    DVMSs also have access to an establishment's periodic evaluations
    during their audits. However, facility designs and establishment
    periodic evaluations are considered proprietary information and cannot
    be shared with the public.
        Question. How many FTEs will be dedicated to humane handling in the
    fiscal year 2006 budget?
        Answer. The Consolidated fiscal year 2005 Appropriations Act
    conference report requires that no fewer than 63 full time equivalent
    (FTE) positions above the fiscal year 2002 level be employed during
    fiscal year 2005 for purposes dedicated solely to inspection and
    enforcement related to HMSA. During fiscal year 2006, FSIS will more
    than meet this requirement for the number of FTEs.

                                HMSA ENFORCEMENT

        Question. In a January, 2004 GAO report regarding humane slaughter,
    GAO stated that they could not determine the amount of resources
    necessary to ensure humane handling of animals in all establishments.
    Since then, significant attention and funding has been provided to
    ensure that humane handling of animals is a priority of FSIS, and FSIS
    has announced several ways in which it is working to improve HMSA
    enforcement.
        Taking into account all of the efforts, changes and increased
    funding for HMSA enforcement that have occurred since that GAO report,
    are you now able to provide a resource level you believe would be fully
    adequate to ensure HMSA enforcement throughout the country?
        Answer. We believe we have adequate funding for HMSA enforcement.
        Question. If you believe the current funding level is adequate, on
    what do you base that determination?
        Answer. We continually evaluate data on HMSA enforcement to assess
    our performance. The DVMSs assess trends for non-compliance reports and
    track any trends in humane handling slaughter violations that result in
    suspension actions.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                         CONSERVATION SECURITY PROGRAM

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

                          AMES ANIMAL DISEASE FACILITY

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

                         BIOBASED PRODUCTS PROCUREMENT

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

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

                       LIVESTOCK AND MEAT MARKETING STUDY

        Question. On June 18, 2004, USDA announced that it had contracted
    with the Research Triangle Institute (RTI) to conduct its livestock and
    meat marketing study. This was roughly a year and a half after
    receiving funds to conduct the study from the fiscal year 2003 omnibus
    appropriations bill. It was my understanding that this study could not
    be started until the Office of Management and Budget (OMB) cleared the
    data collection packages to be used for the study. The comment period
    for the two data collection packages did not end until December 3,
    2004.
        At this time, has USDA received clearance from the Office of
    Management and Budget (OMB) for USDA and the Research Triangle
    Institute to begin data collection for the livestock and meat marketing
    study? If so, when was the start date?
        Answer. No, USDA will submit the data collection plans to OMB for
    clearance in the near future.
        Question. Please provide me a time frame and project completion
    date for the livestock and meat marketing study.
        Answer.
        [The information follows:]
          timeline for major steps for livestock and meat market study
    2003
        Feb 20--$4.5 million appropriated for study
        Feb-May--Interagency working group (GIPSA, OCE, AMS, ERS, NASS,
    WAOB, DOJ, CFTC, FTC) defined scope of study necessary to meet
    Congressional objectives and comply with Information Quality
    Guidelines.
        May 30--Published purpose and scope of study in Federal Register
    with 30-day comment period. Received 23 comments.
        July--GIPSA reviewed and summarized comments. GIPSA worked with
    APHIS contracting office in Minneapolis to establish type of contract
    to award and to determine the contracting officer. Drafted AD-700
    required to initiate contracting procedures.
        July-Aug--Interagency working group reviewed comments and confirmed
    scope and objectives. GIPSA drafted Statement of Work (SOW).
        Sep-Oct--Working Group reviewed and commented on SOW, GIPSA
    finalized. GIPSA worked with APHIS contracting personnel in Minneapolis
    to incorporate SOW into formal request for proposals (RFP) in
    accordance with FAR.
        Nov 17--Pre-solicitation notice published in Federal Business
    Opportunities in accordance with FAR.
        Nov-Dec--Transitioned from APHIS Minneapolis contracting officer to
    Riverdale contracting officer to expedite contracting process. GIPSA
    worked with OGC to establish initial protocols for confidentiality
    provisions and non-disclosure agreements. GIPSA and APHIS contracting
    officer finalized RFP.
        Dec 3--APHIS published RFP in Federal Business Opportunities, GIPSA
    placed copy on agency Web page in accordance with FAR.
        Dec 16--Contracting officer and GIPSA held pre-proposal conference
    with potential contractors in accordance with FAR.
        Dec-Jan--GIPSA and contracting officer prepared responses to
    questions raised at pre-proposal conference and released responses as
    amendment to RFP. GIPSA and contracting officer prepared and published
    additional amendments to RFP to enhance confidentiality provisions with
    the Confidential Information Protection and Statistical Efficiency Act
    (CIPSEA).
    2004
        Feb 9--Received proposals.
        Feb 9--
        Jun 14--Selection team from interagency working group reviewed
    initial proposals; offerors in competitive range submitted revised
    proposals; selection team evaluated revised proposals, negotiated with
    highest-ranked offerors on cost and deliverables to arrive at final
    proposal selection in accordance with FAR for competitive contracting
    procedures.
        Jun 14--Award of $4.3 million contract to RTI.
        July-Aug--GIPSA established a peer review panel to review technical
    performance of contractor. RTI prepared initial data collection plans.
        Sep 9--Published in Federal Register summary of data collection
    plans with 60-day public comment period in accordance with PRA
    requirements.
        Oct-Nov--RTI pre-tested data collection plans consistent with PRA
    requirements. Peer review panel reviewed collection plan and offered
    comments to meet Quality of Information guidelines.
        Nov 8--Extended comment period on Federal Register notice of data
    collection plans from Nov. 8 to Dec. 3 based on public requests.
        Dec 3--Received 19 comments on data collection plans. Comments
    addressed burden/scope, authority to collect data, MPR data use, and
    security of data.
        Dec-Mar--RTI revised data collection plans based on public and peer
    group comments.
    2005
        March 21--Update Report sent to the House Appropriations Committee.
        Nov-Mar--RTI conducted informal interviews of 27 entities to
    address objectives 1 and 2.
    Planned Activities
        May--Send final transactions and survey data collection plans to
    OCIO for submission to OMB, and publish notice in Federal Register.
        May--OMB reviews data collection plans for the final report and
    makes plans available to public in accordance with PRA requirements.
        Jun--RTI issues interim report on objectives 1 and 2.
        Jul--RTI begins collection of transaction data from 400 largest
    entities.
        Aug--RTI begins mail out survey of 6,800 entities.
    2006
        Jun--RTI issues final report.

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

                 Questions Submitted by Senator Byron L. Dorgan

                                     BUDGET

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

                                     CAFTA

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

                           COUNTRY-OF-ORIGIN LABELING

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

                                  JAPAN TRADE

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

                               BROADBAND FUNDING

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

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

                    NATIONAL VETERINARY MEDICAL SERVICE ACT

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

     RURAL DEVELOPMENT FUNDING FOR RURAL EMPOWERMENT ZONES AND OTHER GRANT
                                    PROGRAMS

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

                 RESOURCE CONSERVATION AND DEVELOPMENT COUNCILS

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

                          ARS RESEARCH IN NORTH DAKOTA

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

                             HATCH ACT FUNDING CUT

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

                    NORTHERN GREAT PLAINS REGIONAL AUTHORITY

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

                            APHIS BLACKBIRD CONTROL

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

                Questions Submitted by Senator Richard J. Durbin

                                  BSE POLICIES

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

                           SINGLE FOOD SAFETY AGENCY

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

                             FOOD SAFETY USER FEES

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

                             FOOD SAFETY PERSONNEL

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

                         NATIONAL SCHOOL LUNCH PROGRAM

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

                              SAFE SCHOOL FOOD ACT

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

                               CHILDHOOD OBESITY

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

                             INTERNATIONAL FOOD AID

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

                   Questions Submitted by Senator Tim Johnson

                    NORTHERN GREAT PLAINS REGIONAL AUTHORITY

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

                       RURAL BUSINESS INVESTMENT PROGRAM

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

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

                              SUN GRANT INITIATIVE

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

                     RESOURCE CONSERVATION AND DEVELOPMENT

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

                             FEDERAL FORMULA FUNDS

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

                             ANIMAL IDENTIFICATION

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

                              SUBCOMMITTEE RECESS

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

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

                                  ----------

                           WEDNESDAY, APRIL 13, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 12:30 p.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett and Kohl.

                           DEPARTMENT OF AGRICULTURE

    STATEMENTS OF:
            KEITH COLLINS, CHIEF ECONOMIST
            MARK REY, UNDER SECRETARY FOR NATURAL RESOURCES AND ENVIRONMENT
            GILBERT G. GONZALEZ, ACTING UNDER SECRETARY FOR RURAL
                DEVELOPMENT
            JOSEPH J. JEN, UNDER SECRETARY FOR RESEARCH, EDUCATION, AND
                ECONOMICS
            J.B. PENN, UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURAL
                SERVICES
            DENNIS KAPLAN, OFFICE OF BUDGET AND PROGRAM ANALYSIS

                 OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. The subcommittee will come to order.
        We want to thank you all for your accommodating us at this
    somewhat unusual hour. We were scheduled to go at 2:00 p.m.,
    and we have had to move that because of Senate activity. And I
    understand that there is now a vote scheduled for 1:45 p.m.. So
    we will try to move through this in expeditious fashion.
        I am glad to see the curtain is open. That means you are
    not important enough to be on television, but you brought your
    own crowd with you. So it is well attended here today, and we
    appreciate your being here.
        This is our second hearing on the budget request. We heard
    from the Secretary yesterday. And today's witnesses are Dr.
    Keith Collins, the USDA's chief economist; Dr. J.B. Penn, who
    is the Under Secretary for Farm and Foreign Agricultural
    Services; Mark Rey, Under Secretary for Natural Resources and
    Environment; Gilbert Gonzalez, Acting Under Secretary for Rural
    Development; and Dr. Joseph Jen, Under Secretary for Research,
    Education, and Economics, and accompanied by Mr. Dennis Kaplan
    of the Office of Budget and Program Analysis. We appreciate
    your service and appreciate your being here today.
        The witnesses today represent production agriculture,
    trade, conservation, rural development, and the research and
    education, all of which support USDA programs, and we
    appreciate your being here.
        As I said, we are going to have a supplemental on the floor
    today. So I would suggest that Dr. Collins perhaps make some
    opening comments from his perspective as the chief economist.
    And then if the rest of you are willing to hold yourself in
    readiness, we go to questions.
        And we will do our best to hear from all of you as we go
    through the question situation. If that would be acceptable, we
    will do that in the interest of time.
        Senator Kohl.
        Senator Kohl. I thank you very much, Senator Bennett.
        And gentlemen, it is great to have you with us today. I
    also will withhold an opening statement in the interest of
    brevity and getting to your testimony and questions, and we
    appreciate your coming here very much.
        Thank you, Senator Bennett.
        Senator Bennett. All right. Dr. Collins, you have the
    floor.

                           STATEMENT OF KEITH COLLINS

        Mr. Collins. Thank you very much, Chairman Bennett and Mr.
    Kohl. For all of us here today, let me say thank you for
    inviting the Department up here to discuss our 2006 budget
    proposals.
        I am going to start with a very brief overview of the
    general economic situation in agriculture, and I think that
    will help provide some context for the discussions that you
    will have with our under secretaries this afternoon.
        To begin with, I would say that strong domestic and foreign
    economic growth are providing a foundation for U.S. farm and
    rural economies to continue the improved performances that we
    have seen over the past year and the year before. Markets for
    livestock and livestock products, which account for about half
    of the farm economy, continue to remain very strong despite the
    closure of our beef in Asian markets.
        During the first quarter of 2005, in fact, fed cattle
    prices averaged $89 a hundredweight, which was the second-
    highest quarterly price for cattle ever. With meat protein
    demand still firm, with cattle slaughter down, and live animal
    supplies expected to continue tight, I think average cattle
    prices are likely to remain historically strong for some time
    to come.
        Likewise, hog, broiler, and milk returns all remain
    favorable as supply expansion thus far has been restrained,
    even in the face of growing demand.
        Turning to major crops, stocks are up, and farm prices are
    down following last year's record production levels. However,
    farm cash receipts are being supported by the fact that farmers
    have more volume to market this year based on last year's
    record crops.
        If you look at 2005, we believe U.S. crop production will
    decline. USDA's prospective plantings report, which was
    released a couple of weeks ago, suggests lower acreage for
    wheat and for soybeans, about the same acreage for rice and
    cotton, and a modest increase for corn. If we have trend yields
    in 2005, production levels would decline for all major crops,
    with declines ranging from 8 to 9 percent for soybeans to 20
    percent for cotton.
        But even with such reduced production, our crop supplies
    would still be ample, and I believe little price appreciation
    seems likely, except for cotton.
        Globally, export competition will remain intense this year.
    Wheat from the European Union and Black Sea region, corn from
    Argentina and China, soybeans from Brazil and Argentina, as
    well as oil and demand-driven increases in shipping costs will
    pressure U.S. prices despite the competitive benefits from the
    weaker dollar.
        For fiscal year 2005, U.S. agricultural exports are
    forecast at $59 billion, down from last year's record, but the
    second highest since 1996. And that is despite the continuing
    loss of beef export value.
        With lower prices for program crops, Government payments
    are forecast to be a record $24 billion in 2005, and that will
    offset the decline in cash receipts for major crops. Under
    Secretaries Penn and Rey can provide more information this
    afternoon on how our farm and conservation programs are
    assisting the farm economy.
        Higher prices for fuel, fertilizer, and chemicals will
    likely push up production expenses in 2005. But those will be
    offset by lower expenses for farm origin inputs, such as feed.
    That should keep overall production expenses about the same as
    last year. And with gross income about the same as last year,
    that means that net cash farm income should likewise be about
    the same as last year's record high level.
        The combination of the growing overall economy, strong
    rural job growth, and record net cash income is expected to
    boost average farm household income. And Under Secretary
    Gonzalez today can relate how our rural development programs
    are helping the performance of the rural economy.
        With another sound income year in prospect, farm credit
    conditions are expected to remain favorable. Farm input sales
    should be good, and farm land values will likely rise again.
    Thus, cash flow and balance sheet prospects indicate a pretty
    solid footing for the farm economy in 2005.
        While many farms will benefit from these income and balance
    sheet trends, high cost/lower margin farms or those adversely
    affected by weather may not see these benefits. And I think
    that is why it is so important, as Dr. Jen can explain, to have
    research programs that can help farms overcome barriers to
    profitability.

                              PREPARED STATEMENTS

        Finally, let me say consumers will continue to have
    abundant, affordable food. Much smaller retail price increases
    are expected in 2005 for meat and for vegetable oils and for
    dairy products. That suggests retail food prices may rise
    between 2.5 and 3 percent in 2005, compared with about 3.4
    percent in 2004.
        That completes my statement, Mr. Chairman. We would be
    delighted to have your questions.
        Senator Bennett. Thank you very much. And for the record,
    all the statements submitted by all of the witnesses will be
    included in the record.
        [The statements follow:]

                      Prepared Statement of Keith Collins

        Mr. Chairman and members of the Committee, I appreciate the
    opportunity to appear at this hearing to discuss the current situation
    and outlook for U.S. agriculture. The recovery in the agricultural
    economy that began in 2003 is expected to continue in 2005. Net cash
    farm income set back-to-back record highs in 2003 and 2004. This record
    performance has led to general improvement in farm balance sheets. An
    important factor supporting the strong financial performance of the
    farm economy is the growth in U.S. agricultural exports. From fiscal
    year 2000 to fiscal year 2004, the value of U.S. agricultural exports
    rose by nearly $12 billion.
        Livestock prices continue to remain strong even though Japan and
    several other countries have failed to open their markets to U.S. beef
    following the discovery of a cow with Bovine Spongiform Encephalopathy
    (BSE) in December 2003. For most major crops, farm prices are down
    following last year's record production, but record government payments
    are forecast to about offset the decline in crop cash receipts. Higher
    prices for energy-related inputs will likely push up production
    expenses for fuel and fertilizer in 2005. However, lower production
    expenses for farm-origin inputs should keep overall farm production
    expenses about unchanged from last year. With gross income and total
    production expenses close to last year's levels, net cash farm income
    in 2005 is expected to be near last year's record. Cash flow and
    balance prospects indicate that the farm economy will remain on a solid
    footing in 2005.

    Outlook for United States and World Economies and the Implications for
            Agriculture
        After several years of a weak and variable global economy that
    constrained the demand for U.S. agricultural products, the United
    States and world economies had back-to-back years of strong growth in
    2003 and 2004. Both the United States and world economies are poised
    for strong growth in the year ahead, which will bolster the demand for
    U.S. agricultural products here and abroad.
        In 2004, the U.S. economy grew 4.4 percent, up from 3 percent in
    2003. Expansionary fiscal policy resulting from the budget deficit and
    the Jobs and Growth Act of 2001; the low interest rates; rising
    consumer income and spending; and increasing business fixed investment
    all boosted growth. In 2005, rising interest rates and energy prices
    are expected to slow the rate of economic growth in the United States
    to a more sustainable 3.7 percent.
        The improving domestic demand base may be seen in the demand for
    food, which also drives demand for animal feed. Personal consumption
    expenditures on food rose a very strong 4.8 percent in 2004, in real
    terms. That compares with average growth of 3.8 percent in 2003 and
    less than 2 percent during the economic slowdown in 2001 and 2002.
        In addition to rising food demand, domestic industrial demand for
    farm products is also increasing. As an example, ethanol production is
    setting new record highs almost every month. In 2005, U.S. ethanol
    production from corn will approach 4 billion gallons and is expected to
    account for over 13 percent of corn use.
        Foreign economies had a very nice recovery in 2004, growing 3.7
    percent after a sustained period of substantially lower average growth.
    The fitful performance of foreign economic growth had been a factor in
    the slow growth in U.S. farm exports since the mid-1990s. For 2005,
    lagging performance in Europe and Japan and slower growth in former
    Soviet countries and a number of developing economies are expected to
    reduce foreign economic growth to 3 percent. China, a $6 billion market
    for U.S. farm products in fiscal year 2004, is pegged to grow at 8.7
    percent.
        By December 2004, the agricultural trade-weighted dollar had
    depreciated almost 18 percent from its peak in February 2002. Over the
    same period, the depreciation compared with competitor agricultural
    exports was over 36 percent. While the dollar has already depreciated
    considerably, it may depreciate further in 2005 due to the historically
    large current account deficit. The depreciation in the dollar and
    robust foreign economic growth helped push U.S. agricultural exports to
    a record $62.3 billion in fiscal year 2004.
        U.S. agricultural exports are forecast to decline to $59 billion in
    fiscal year 2005. The primary factors leading to the decline in exports
    include record global grain, soybean and cotton supplies, increased
    foreign competition and lower prices. This export forecast reflects, in
    part, the assumption that the markets that are now closed to U.S. beef
    and poultry exports because of BSE and Avian Influenza will remain
    closed in 2005. This is not a forecast of what foreign countries will
    do. It simply reflects our standard forecasting procedure to assume the
    current policies of foreign countries remain in place until they are
    changed.
        U.S. meat exports experienced explosive growth in the 1990s but
    have faced slower growth over the past few years due to animal diseases
    and policy-driven import limitations in some countries. The United
    States finding of BSE has resulted in the loss of over 80 percent of
    U.S. export markets for beef and related products in 2004. U.S. poultry
    exports were flat, as outbreaks of Avian Influenza in several States
    resulted in a number of countries placing restrictions on poultry
    imports from the United States. But, U.S. pork exports rose by 27
    percent last year, as trade restrictions on U.S. beef and poultry
    created additional export opportunities for pork. In 2005, poultry
    exports are forecast to increase by 5 percent and pork exports could be
    up 16 percent.. Beef exports are forecast to increase by 37 percent in
    2005, reflecting the resumption of trade with Mexico. Despite the
    projected increase, U.S. beef exports are projected to be only one-
    quarter of pre-BSE levels.

    Outlook for Major Crops
         For major crops, production is expected to outpace demand for the
    first time in several years leading to a modest rebound in global
    stocks and some decline in market prices for the 2004/2005 crops.
    However, global grain stocks as a percent of total use remain low by
    historical standards. In addition, foreign economic growth appears
    sound. With relatively low world stocks, the potential for reduced crop
    production in 2005 due to a return to trend yields and economic growth
    continuing to support the demand for agricultural products, crop prices
    could move higher over the coming months.
        In 2004/2005, total supplies are generally exceeding total use of
    major crops, leading to higher world and United States carryover. World
    wheat stocks at the end of the 2004/2005 marketing year are expected to
    increase 12 percent from a year earlier. World coarse grain stocks are
    forecast to be up 27 percent, world oilseed stocks are forecast to
    increase 40 percent, and world cotton stocks are forecast to increase
    34 percent. These increases would result in global carryover stocks at
    their highest level in 2 years for wheat and in 3 years for coarse
    grains and for cotton. Reflecting the strong expansion in soybean
    production in South America in recent years, the forecast global
    oilseed stocks would be a record high at the end of 2004/2005.
        For wheat, plantings in 2004 declined by 2.4 million acres to 59.7
    million acres. This decline and lower yields reduced U.S. wheat
    production from 2.35 billion bushels in 2003 to 2.16 billion in 2004.
    U.S. wheat carryover is forecast to decrease by only 5 million bushels,
    as total use is forecast to decline by 119 million. Larger foreign
    wheat production in several traditional importing and major competitor
    countries is forecast to lower U.S. wheat exports by 109 million
    bushels in 2004/2005. For the current marketing year, the farm price of
    wheat is forecast to average $3.35-$3.45 per bushel compared with last
    season's $3.40.
        For 2005/2006, wheat planted area is expected to be down about 2
    percent, based on 4 percent lower winter wheat plantings last fall and
    farmers' intentions to increase spring wheat planted area. With this
    acreage, the lowest since 1972, and trend yields, 2005 wheat production
    would be about 2.1 billion bushels, about 50 million bushels below
    2004. Large global supplies are expected to keep exports under
    pressure, thus 2005/2006 carryover stocks could rise and farm wheat
    prices decline slightly from 2004/2005.
        U.S. rice acreage was up 11 percent in 2004, as rice producers
    responded to a strong recovery in prices and returns in 2003. Stocks at
    the end of the current marketing year are forecast at 37 million cwt,
    up from 24 million cwt from a year earlier and the highest as a percent
    of total use since the 2001/2002 marketing year. Despite the sharp
    increase in carryover, the farm price of rice is forecast to average
    $7.30-$7.50 per cwt this marketing year, compared with $8.08 per cwt in
    2003/2004, as stronger world prices are helping to bolster the United
    States price.
        In 2005, farmers indicated plans to seed 3.36 million acres, about
    the same as in 2004. With trend yields, U.S. rice production would
    decline to about 226 million cwt, but still the second largest crop
    ever. A modest rise in exports and domestic consumption are expected in
    2005/2006, implying that rice carryover stocks and farm prices are
    likely to be very similar to the levels for 2004/2005.
         In 2004, the corn crop was a record 11.8 billion bushels as
    producers harvested a record 160.4 bushels per acre, exceeding the
    previous record set last year by over 18 bushels per acre. The sharp
    increase in total supply is forecast to lead to lower prices and
    increasing carryover. Higher feed and industrial use is forecast to
    increase total use by 328 million bushels, not enough to prevent a 1.3-
    billion-bushel increase in carryover stocks. In 2004/2005, the use of
    corn for ethanol production is forecast to increase 20 percent to a
    record 1.4 billion bushels. This marketing year, the farm price of corn
    is projected to average $2.00-$2.10 per bushel, compared with $2.42 per
    bushel last season.
        Farmers indicated plans to plant 81.4 million acres to corn in 2005
    during the USDA planting intentions survey, up less than 1 percent from
    2004. This level was lower than generally expected, as producers
    planned to switch fewer acres away from soybeans than expected and
    producers in the Dakotas preferred to increase area with other
    oilseeds, such as sunflowers and canola. High fertilizer and fuel
    prices may also be a factor in the limited increase in corn area. With
    intended acreage and trend yields, 2005 corn production would be 10.8
    billion bushels, 1 billion less than the 2004 crop. However, total use
    is expected to about match this production, leaving carryover stocks
    and farm prices for 2005/06 about the same as for this marketing year.
         Soybean production reached a record 3.1 billion bushels in 2004,
    contributing to higher domestic use, exports and carryover stocks.
    Soybean crush is forecast to increase by 120 million bushels to 1.65
    billion and soybean exports are forecast to increase by 195 million
    bushels to 1.08 billion. Both crush and exports are forecast to be the
    second highest on record. United State carryover stocks are forecast to
    increase to 375 million bushels, which would be the highest carryover
    as a percent of total use in 6 years. In February 2005, USDA forecast
    Brazil's soybean production at 63 million metric tons for 2004/2005, up
    from 53 million metric tons a year earlier. However, USDA is currently
    projecting Brazil's soybean crop at 54 million metric tons.
        The Brazilian crop potential has been reduced by drought, helping
    to bolster U.S. soybean prices. The farm price of soybeans is projected
    to decrease from last season's average of $7.34 per bushel to $5.25-
    $5.55 per bushel this marketing year.
        In 2005, farmers indicated in USDA's recent survey that they would
    plant 73.9 million acres to soybeans. Although down 2 percent from
    2004, this acreage level generally exceeded expectations. The declines
    are largest in the south, where Asian rust was a factor and in the
    northern plains, where shifting to other oilseeds is expected. USDA's
    survey indicated that 11 percent of soybean producers had adjusted
    their planting intentions due to the presence of Asian rust in the
    United States. This low figure combined with the modest decline in
    intended acreage nationally suggests Asian rust is not likely to be a
    major factor in determining this year's United States planted acreage.
    With this acreage and trend yields, 2005 soybean production would drop
    back to 2.9 billion bushels, about equal to projected use, and leave
    carryover stocks about unchanged. Prices in 2005/2006 are projected
    below 2004/2005 when drought reduced carryin stocks.
        In 2004, U.S. cotton production reached a record 23.1 million
    bales, up from 18.3 million in 2003. Larger supplies coupled with lower
    exports and domestic use have increased expected carryover and pushed
    prices lower this season. U.S. exports of cotton are forecast to drop
    from last year's record high 13.8 million bales to 13.2 million in
    2004/2005, as production in China, our largest export market, is up
    from a year ago. Carryover stocks at the end of this season are
    projected to increase to 7.1 million bales, the highest in 3 years.
    During the first 7 months of the current marketing year, cotton prices
    have averaged 43 cents per pound, compared with last season's average
    of 61.8 cents per pound.
        For 2005, producers indicate plans to plant 13.8 million acres to
    cotton, up slightly from 2004. In the Delta States, where Asian rust in
    soybeans is of increased concern, intentions are up 12 percent, led by
    Louisiana's 24 percent. With trend yields, this acreage would produce a
    2005 crop of 18.1 million bales, down 5 million from last year.
    Although domestic use is expected to continue its trend decline under
    pressure from imported textiles and apparel, good export prospects and
    lower production would reduce 2005/2006 carryover stocks substantially.
        A persistent concern in U.S. agriculture is whether we are losing
    our competitiveness in bulk commodities in world markets. The United
    States share of global exports has been declining for decades for
    wheat, coarse grains, rice and soybeans, and only turned up recently
    for cotton in recent years as increased imports of textiles and apparel
    shifted U.S. textile production overseas, creating higher foreign
    demand for our cotton. Brazil, Argentina, China, India and the former
    Soviet countries have increased agricultural exports by either
    expanding arable land, increasing productivity or altering internal
    policies. The share of global export markets of these countries rose
    from 2 percent of world grain and soybean exports in 1994 to a peak of
    30 percent in 2002. But their share of world trade in 2004/2005 is
    expected to be 20 percent, the same as last year.
        In the future, we continue to believe that China will be a steadily
    increasing importer, that India will consume its own grain, and that
    gains for the former Soviet countries, while expected to continue, will
    not come as easily as recent gains; an inhospitable climate may also
    make them an irregular competitor. Thus, while competition will be
    strong, there is every reason to think that the United States will be a
    strong competitor as well.
        China remains an especially important factor in bulk commodity
    trade. China's role as a United States competitor in grain markets
    continued to decline in 2004/2005. China's net imports of wheat are
    expected to reach 6.5 million metric tons, up from less than 1 million
    in 2003/2004. Their net exports of coarse grains are also expected to
    fall from 6.2 million tons in 2003/2004 to 3.2 million in 2004/2005. In
    addition, China's growing oilseed crushing and textile export
    industries have resulted in soaring soybean and cotton imports. China
    is likely to continue to be a positive factor for U.S. agriculture in
    2005/2006. USDA forecasts U.S. agricultural exports to China will fall
    from last year's record of $6.1 billion to $4.6 billion in fiscal year
    2005. The drop primarily reflects much lower United States prices for
    cotton and soybeans. China is expected to remain the fifth largest U.S.
    agricultural export market.
        Horticultural markets have become an important contributor to farm
    income for all size producers. For 2005, cash receipts from fruits,
    vegetables and greenhouse and nursery crops are forecast to be $45.3
    billion, down 2 percent from last year. With average weather, farm
    receipts for fruits and nuts are expected to decline as production
    rebounds, leading to generally lower prices. Exports for horticultural
    crops for fiscal year 2005 are forecast to reach $14.5 billion, up
    substantially from last year's $13.3 billion.
        In recent years, strong demand for imported products has increased
    the sector's trade deficit which is forecast at $11.1 billion in fiscal
    year 2005. During the last 10 years, domestic production growth has
    averaged only 0.5 percent, compared with import growth of 4.4 percent.
    And with commercial and government interest in increasing the role of
    fruits and vegetables in the American diet, the sector's trade deficit
    likely will continue to grow to meet expanding demand.

    Outlook for Livestock, Poultry and Dairy
        Reduced supplies of red meat and nearly stable milk production
    combined with increasing demand led to record-high fed cattle, broiler
    and milk prices in 2004. Hog prices were also up sharply, pushing
    livestock cash receipts to a record $122 billion, a 16-percent increase
    from the previous year. While several traditional beef importers have
    failed to open their markets to U.S. beef following the single BSE
    incident in late December 2003, market fundamentals generally remain
    quite strong. In addition, lower feed costs in 2005 are also helping to
    bolster the returns of livestock and dairy producers.
        Beef production dropped 6.4 percent in 2004. The drop in production
    reflected tight domestic cattle inventories, following several years of
    herd liquidation, and the continued closure of the border to Canadian
    cattle imports. In addition to the drop in production, strong consumer
    demand for meat protein, the improving restaurant and hotel business,
    and improved diversity and quality of retail beef products have also
    helped support beef prices. During 2004, the price of choice steers
    averaged a record $84.75 per cwt.
        Cattle herd liquidation ended in 2004 as the U.S. cattle inventory
    on January 1, 2005, was 1 percent higher than a year earlier. This was
    the first increase in herd size since January 1996. Herd rebuilding is
    expected to be slow as the calf crop in 2004 was almost 1 percent
    smaller than the previous year, leaving a small base from which to
    retain heifers in 2005. USDA's April cattle market forecast assumes
    that live cattle imports from Canada will resume during the second half
    of 2005 and that fed cattle prices will average $83-87 per cwt. Prices
    could be substantially stronger if Japan and other Asian countries open
    their markets to U.S. beef.
        In 2004, pork production increased 2.8 percent to a record 20.5
    billion pounds. Despite the increase in pork supplies, the price of
    slaughter hogs averaged $52.51 per cwt in 2004, up from $39.45 in 2003,
    as tight supplies of beef boosted the demand for pork. In addition,
    U.S. pork exports were record high in 2004 as demand has been strong in
    markets that banned beef imports because of BSE or banned broiler
    imports because of Avian Influenza. Other factors contributing to the
    growth in pork exports are the weaker United States dollar and improved
    global economic performance, especially in Mexico.
        Despite high hog prices last year, hog producers have been cautious
    about expanding, as indicated in farrowing intentions surveys. In 2005,
    pork production is forecast up 1.2 percent. Hog slaughter will increase
    as a result of the recent International Trade Commission finding that
    removes duties placed on Canadian hogs and encourages imports of
    Canadian feeder pigs and slaughter hogs. Hog prices are forecast to
    average $48-$50 per cwt in 2005. While down from a year ago, hog prices
    would still be about $10 per cwt higher than during 1998-2003.
        Broiler production increased 4.0 percent to a record 34.1 billion
    pounds in 2004. Higher prices for competing meat products and an
    improving domestic economy pushed whole-bird broiler prices to a record
    74.1 cents per pound in 2004, up from 62.0 cents in 2003. Broiler
    exports fell 3 percent in 2004 as several countries restricted imports
    of U.S. poultry following outbreaks of Avian Influenza in Delaware, New
    Jersey, Pennsylvania, Texas and Maryland.
        Broiler production is forecast to increase about 3 percent in 2005,
    as producers respond to the increase in broiler prices. Continued
    strong prices for competing meats and a rebound in U.S. broiler exports
    are expected to maintain broiler prices at near last year's level.
    Lower broiler part prices compared with mid-2004 should stimulate
    sales, and several countries have either fully lifted the trade ban on
    U.S. poultry following last year's outbreaks of Avian Influenza or
    allowed the importation of U.S. poultry from selected States.
        In 2004, milk production increased by just 0.2 percent, as cow
    numbers fell by 0.8 percent and milk production per cow increased by
    1.1 percent. Over the past 2 years, milk production has increased by
    less than 0.5 percent, marking the slowest growth in milk production
    over a 2-year period since the mid-1980s. Many factors have contributed
    to this sluggish growth, including tight supplies of good quality hay,
    the discovery of BSE in Canada and the subsequent suspension of imports
    of dairy cows and heifers from that country, limitations on the
    availability of bovine somatotropin (rBST), the National Milk Producers
    Federation's CWT program which pays producers to reduce milk
    production, and weak milk prices during 2002 and the first half of
    2003. Tightening milk supplies caused the all-milk price to average a
    record $16.03 per cwt in 2004, up from $12.55 per cwt in 2003.
        During most of 2004, the Commodity Credit Corporation (CCC)
    continued to purchase nonfat dry milk under the price support program
    despite a record-high milk price. In 2004, CCC purchased 278 million
    pounds of nonfat dry milk, down from the 635 million pounds purchased
    in 2003. The CCC did not purchase any butter or cheese under the milk
    price support program in 2004. Tightening domestic and international
    milk supplies are keeping nonfat dry milk prices above support. Since
    mid-November, the CCC has not purchased any nonfat dry milk.
        Higher milk prices in 2004 reduced payments under the Milk Income
    Loss Contract (MILC) program. In 2003, MILC payments were triggered
    during January through August and the MILC payment rate averaged $1.09
    per cwt over the entire year. The MILC payment rate averaged $0.22 per
    cwt in 2004 with payments being triggered during January through April.
    So far this year, no payments have been made under the MILC program.
        Milk production is forecast to increase by 1.6 percent in 2005, as
    production per cow recovers from 2 years of anemic growth. Monsanto has
    announced that it is increasing the supply of rBST, and lower feed
    costs should boost milk production per cow. The all-milk price is
    projected to average $15.00 per cwt in 2005, which would be the fourth
    highest on record.

    Outlook for Farm Income
        In 2004, farm cash receipts, net farm income and net cash farm
    income all registered historic high. Farm cash receipts reached a
    record $235 billion in 2004 as both livestock and crop receipts were
    record highs. Livestock receipts rose by $16.7 billion in 2004,
    reflecting strong prices for cattle, hogs, poultry and milk. Prices for
    major crops generally exceeded year-earlier levels through the first 9
    months of 2004, allowing producers to sell the remainder of the large
    harvests from the fall of 2003 at unusually favorable prices. These
    higher prices were largely responsible for a $7-billion increase in
    crop receipts in 2004. Net cash farm income reached a record $77.8
    billion in 2004, up from the previous record of $68.6 billion in 2003.
        In 2005, both crop and livestock receipts are forecast to decline
    from last year's record high. Despite the drop, farm cash receipts in
    2005 are projected to be the second highest on record, surpassing $222
    billion. Higher government payments are forecast to offset the drop in
    farm cash receipts in 2005. The record crops harvested in 2004 have
    lowered prices for major crops, triggering additional government
    payments under the 2002 Farm Bill. In addition, producers affected by
    adverse weather in either 2003 or 2004 will be eligible to receive
    disaster payments in 2005. In 2005, government payments are forecast to
    reach $24 billion, exceeding the record of $22 billion in 2000. With
    higher government payments offsetting lower cash receipts, net cash
    farm income is forecast to remain very near last year's record. While
    most producers will face these generally favorable conditions, some,
    such as high cost producers or those affected by adverse weather, will
    not see these income benefits.
        An indicator of the underlying fundamental strength of commodity
    markets is farm income excluding government payments. In 2000, net cash
    farm income excluding government payments hit a cyclical low of $34
    billion. As markets have strengthened, payments based on prices have
    declined, so that more of net cash income is now coming from market
    sales. In 2004, net cash income excluding government payments increased
    to $63.3 billion. In 2005, net cash farm income excluding government
    payments is projected to fall to $54 billion. While below this past
    year, net cash farm income excluding government payments remains well
    above the cyclical low in 2000.
        Farm production expenses are expected to be about unchanged in 2005
    following a $13-billion increase last year. Higher prices for feed,
    feeder livestock, labor, fuel, fertilizer and other inputs pushed up
    production expenses in 2004. In 2005, lower feed and feeder cattle
    prices are expected to about offset increases in energy-based input
    costs, such as fuel and fertilizer.
        The income earned by farm operator households in 2005 is expected
    to continue the increases of recent years. Average farm household
    income is forecast at $73,059, up nearly 3 percent from 2004. A 3.4
    percent increase is expected in off-farm income, a modest rise from
    2004, but more than enough to offset the also modest reduction in net
    farm income from 2004.
        With another sound income year in prospect, farmland values may
    rise 4-5 percent in 2005. This increase would maintain the improvement
    in the farm sector balance sheet that we saw in 2003 and 2004. After
    ranging between 14.8 percent and 15.2 percent during 1992-2002, the
    farm debt-to-asset ratio fell to 14.2 percent last year and expected to
    remain steady in 2005. Recent increases in debt have been offset by
    larger gains in farm asset values. As a result of farm real estate
    values rising faster than farm mortgage debt, the degree of farmland
    leverage declined slightly. This has provided farmland owners with an
    added equity cushion to lessen the impact of any short-term declines in
    income or asset values. While uncertainty remains over the
    sustainability of the global economic recovery, the value of the
    dollar, issues raised by the Federal budget deficit, trade
    negotiations, emerging competitors, animal diseases, and oil prices,
    U.S. agriculture appears poised for another sound financial year in
    2005.
        That completes my statement, and I will be happy to respond to any
    questions.

                                     ______

                         Prepared Statement of Mark Rey

        Mr. Chairman and members of the Subcommittee, I am pleased to
    appear before you today to present the fiscal year 2006 budget and
    program proposals for the Natural Resources Conservation Service (NRCS)
    of the Department of Agriculture (USDA). I am grateful to the Chairman
    and members of this body for the ongoing support of private lands
    conservation and the protection of soil, water, and other natural
    resources.
        Farmers, ranchers, and other private landowners across America play
    a vital role in conserving our Nation's soil, water, air, and wildlife
    resources while producing abundant food and fiber. This year, NRCS
    celebrates its 70th Anniversary. I am proud to say that even though the
    issues facing farmers and ranchers have grown more complex, NRCS has
    risen to the challenge to help agriculture become even more vibrant and
    productive while helping to protect our private land natural resource
    base.

    Fiscal Year 2006 President's Budget
        The President's fiscal year 2006 Budget request for NRCS provides
    resources for the ongoing mission of NRCS while ensuring that new
    challenges faced by landowners can be addressed.
        Because of the overriding need to reduce the deficit, NRCS, like
    every Federal agency, will share in the responsibility of controlling
    Federal spending. There are proposals in the budget that will produce
    savings in both the mandatory and discretionary accounts. These savings
    will enable the Administration to target funding based on need and
    reward performance. It also allows the Administration to commit limited
    resources to the highest priorities, such as accelerating technical
    assistance to help agricultural producers meet regulatory challenges,
    particularly in the area of helping to manage livestock and poultry
    waste.
        With that said, the President's fiscal year 2006 Budget request for
    NRCS recognizes the vital role that natural resource conservation plays
    in securing America's national security. Without productive soil, clean
    water and air, and farmers and ranchers who can make a living off the
    land, the United States would not be the strong Nation it is today.
        The budget includes key increases within the Conservation Technical
    Assistance (CTA) account--an additional $37.2 million to help producers
    comply with Animal Feeding Operations/Confined Animal Feeding
    Operations regulations, and $10 million to control invasive species.
    This year, total NRCS funding for both discretionary and mandatory
    programs is proposed at $2.7 billion.

    Building Strong Accountability Measures
        In the current budget environment, it is more important than ever
    to continue working diligently in accountability and results
    measurements for the funds provided by Congress. Mr. Chairman, I am
    proud of the great strides NRCS has made in the past year on
    performance and results, as well as making NRCS information more
    accessible to farmers, ranchers, and the general public. NRCS has taken
    bold steps to address all the challenges identified as a result of the
    Program Assessment Rating Tool (PART) score for the base agency program
    of CTA.
        Meeting the President's Management Agenda is very critical to all
    of us at USDA. Linking program requirements and program allocations to
    performance and accountability measures helps both the Administration
    and Congress make budget decisions. I am proud to report that this year
    was the first year that NRCS could track direct charge through an
    entire budget development cycle. Direct charge has improved the ability
    of NRCS to directly track how NRCS employees spend every day and how
    the technical assistance workload is distributed among programs. This
    is a critical management tool, and will allow the Agency to prioritize
    work and provide even greater accountability to the taxpayers and
    members of Congress.
        In addition, as a result of the accountability management
    processes, NRCS has established national CTA program priorities for
    fiscal year 2005. These priorities include development of Comprehensive
    Nutrient Management Plans (CNMPs) to assist landowners needing to
    comply with the Environmental Protection Agency's Concentrated Animal
    Feeding Operation Rule; reduction of non-point source pollution, such
    as nutrients, sediments, pesticides, or excess salinity in watersheds;
    reduction of emissions that contribute to air quality impairment;
    reduction in soil erosion and sedimentation from unacceptable levels on
    agriculture lands; and promotion of habitat conservation for at-risk
    species.
        I am encouraged to report this direct link between performance and
    priority setting and look forward to reporting further on the results
    of this effort.

    Cooperative Conservation
        At the heart of delivery of voluntary conservation programs is
    cooperative conservation. Cooperation in the delivery of programs at
    the Federal, State and local levels with landowners, tribes, government
    agencies and nongovernmental organizations is critical to providing
    accountable, quality land care assistance. In August 2004, the
    President issued an Executive Order on Facilitation of Cooperative
    Conservation. Through this directive, the President has sent a clear
    message that we can look forward to greater cooperation among Federal
    agencies on natural resource issues. The order instructs Federal
    departments and agencies to enter into conservation partnerships, and
    to empower local participation in programs and projects that protect
    and conserve natural resources and the environment. The Department of
    Agriculture has embraced this concept, and is working with other
    Federal agencies to highlight the successes of our joint efforts.

    Looking Ahead
        As the NRCS prepares to celebrate its 70th Anniversary this spring,
    we have much to be proud of in private lands conservation. It is
    rewarding to see the changes on the landscape that those early pioneers
    in soil conservation envisioned--conservation terraces that stop sheet
    and rill erosion, streamside vegetative buffers, acres of wetland
    habitat, and healthy grazing and forest lands. Even with all those
    changes, the next 3 years (fiscal year 2005 through fiscal year 2007)
    promise to be record years for conservation implementation and
    spending. This effort will continue to change the face of our Nation's
    private lands landscape. Now more than ever, the field staff of NRCS
    are focused on working with farmers, ranchers and other conservation
    partners to get the job done.
        Mr. Chairman, in summary, we all know that we are trying to plan
    for the future under an atmosphere of increasingly austere budgets and
    with a multitude of unknowns on the domestic and international fronts.
    I believe that the Administration's fiscal year 2006 Budget request
    reflects sound policy, and will provide stability to the vital mission
    of conservation on private lands. The budget request reflects sound
    business management practices and the best way to work for the future
    and utilize valuable conservation dollars.
        I thank members of the Subcommittee for the opportunity to appear,
    and would be happy to respond to any questions that Members might have.
                                     ______

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

        Thank you for the opportunity to appear before you today to discuss
    our fiscal year 2006 Budget request for the Natural Resources
    Conservation Service (NRCS).
        As we look ahead to fiscal year 2006, and the contents of the
    Administration's Budget request, I want to take a moment to reflect
    upon all of the changes that have taken place within NRCS over the past
    year. Since I last appeared before this Subcommittee, a great deal of
    organizational change, streamlining, and improvements have taken shape.
        To begin, we have a new Associate Chief of NRCS, Dana D. York. Dana
    began her new position in August, and is a wonderful addition to our
    management team. She has spent more than 28 years working for NRCS at
    every level, including experience as a District Conservationist in the
    field. She also has a breadth of experience on managing organizational
    change, which is a timely skill, given the major organizational changes
    that NRCS has embarked upon over the past 18 months.

                             AGENCY REORGANIZATION

        Mr. Chairman, since our last hearing with this Subcommittee, we
    also have three Regional Assistant Chiefs on board at NRCS National
    Headquarters. Richard Coombe is heading up operations for the East
    Region; Merlin Bartz for the Central Region, and Sara Braasch for the
    West Region. The Regional Assistant Chiefs are providing leadership
    excellence in management for their respective States. They are also
    providing a critical link directly between the functions of National
    Headquarters and our Agency field activities.
        Overall, the NRCS reorganization is strengthening our support to
    States, better aligning expertise with applied conservation, and making
    NRCS a more efficient and effective organization. In September, we
    launched our three new National Technology Support Centers in
    Greensboro, North Carolina; Fort Worth, Texas; and Portland, Oregon.
    The Centers are providing integrated technological support and
    expertise for field conservationists. We have also reorganized National
    Headquarters to ensure that comparable functions are appropriately
    assigned to staff with similar expertise. For example, we now have a
    single Easement Programs Division, and a single Financial Assistance
    Programs Division to ensure that we have the right people working
    together to meet common program objectives. In general, these changes
    are helping to ensure that hard work from our staff is translating to
    work on the ground.
        I am proud of how NRCS staff, at all levels, has responded to the
    major organizational changes made over the past year. More than 130
    employees impacted by the reorganization have moved into their new
    assignments. Although this process was not easy, and required many
    careful steps and planning, it has gone remarkably well. We are now in
    a position to realize the benefits of the new organizational structure.
        Like most Federal agencies, NRCS faces a retirement bulge with 35
    percent of our natural resource professionals eligible to retire in the
    next 5 years. To ensure we have capable professionals in the future, we
    piloted the Conservation Boot Camp. New employees spent six weeks
    learning conservation planning and application skills. We plan three
    additional pilots this year. The goal of the pilots is to enable the
    agency to maintain its cadre of professional employees well into the
    future.

                           PERFORMANCE UNDER PRESSURE

        Given the shifts that have taken place over the past year, I think
    the agency's accomplishments are all the more impressive. Last year,
    NRCS and our partners:
      --Provided technical assistance on over 27 million acres of working
            farm and ranch land to reduce erosion, sedimentation and
            nutrient runoff, enhance water quality, restore and create
            wetlands, and improve and establish wildlife habitat;
      --Developed 6,100 Comprehensive Nutrient Management Plans and applied
            3,400;
      --Served nearly 3.8 million customers around the country;
      --Completed or updated soil survey mapping on 28 million acres;
      --Executed over 47,000 Environmental Quality Incentives Program
            agreements;
      --Enrolled over 3,000 Wildlife Habitat Incentives Program agreements;
      --Helped land managers create, restore, or enhance wetlands through
            more than 1,000 contracts;
      --Implemented the new Conservation Security program under a tight
            deadline;
      --Facilitated over one million hours of Earth Team volunteer service;
            and
      --Brought the number of proposed, interim final, and final rules
            issued for implementation of the Farm Bill to 21.
        As we move forward in fiscal year 2005, there are numerous
    challenges and opportunities ahead, with NRCS playing a central role in
    meeting the Administration's conservation objectives. We look to you to
    build upon the fine accomplishments achieved this year to reach an even
    brighter future.

                  INCREASING THIRD-PARTY TECHNICAL ASSISTANCE

        With the historic increase in conservation funding made available
    by the 2002 Farm Bill, NRCS will continue to look to non-Federal
    partners and private technical service providers (TSPs) to supply the
    technical assistance needed to plan and oversee the installation of
    conservation practices. I am proud to report that as of the beginning
    of March 2005, there are 2,201 TSPs registered with NRCS. Last year, we
    set the goal to use $40 million in TSP assistance. NRCS surpassed this
    goal for fiscal year 2004 and obligated $49.2 million for TSPs. In
    fiscal year 2005, our goal is to reach $45 million for TSPs, or an
    equivalent of 428 staff years.

                                  TRANSPARENCY

        Transparency of agency operations is an area that I have
    highlighted in the past, and I want to be clear that it remains a key
    focus of NRCS. NRCS has made tremendous gains in providing complete
    access to program information, allocations, backlog, and contracting
    data to the public. Our goal has been to ensure operational processes
    are completely open to customers and stakeholders. On the NRCS website,
    the Agency provides the following information:
      --State rankings for funding in conservation programs;
      --State Field Office Technical Guides;
      --Program performance data; and
      --Public input sessions to gather feedback on Farm Bill program
            operation and priority setting.
        NRCS has also taken strides to improve access to information in
    foreign language formats, including many publications offered in
    Spanish.

                             DISCRETIONARY FUNDING

        The President's fiscal year 2006 Budget request for NRCS reflects
    our ever-changing environment by providing resources for the ongoing
    mission of NRCS and ensuring that new opportunities can be realized.

    Conservation Operations
        The President's fiscal year 2006 Budget request for Conservation
    Operations (CO) proposes a funding level of $767.8 million, which
    includes $625.6 million for Conservation Technical Assistance (CTA).
    The CTA budget will enable NRCS to maintain funding for ongoing high-
    priority work. In addition, the President's Budget request includes an
    increase of $37.2 million for technical assistance to agriculture
    producers facing significant regulatory challenges. This budget
    initiative would be targeted toward animal feeding operations in need
    of Comprehensive Nutrient Management Planning (CNMP) assistance. The
    Budget request does not fund continuation of fiscal year 2005
    congressional earmarks.
        Mr. Chairman, for years we have stated that CTA is a program that
    is at the heart of everything our Agency does. But as an Agency, we
    have had a great deal of difficulty, up to this point, describing the
    program's scope and effect and providing clear guidelines to our
    frontline conservationists on its implementation.
        I am pleased to report that NRCS was successful this year in
    issuing a formal program policy for CTA. For the first time in 70
    years, CTA has the same kind of official program guidance and specific
    implementation framework as our other programs. We are also working to
    revise the allocations process for CTA in order to ensure that we
    reflect the values in the CTA program policy by placing our dollars
    where the needs are. It is key that allocations reflect natural
    resource conditions and the drive to meet our strategic planning
    objectives and accountability. Our aim is to have the new allocation
    formula in place upon enactment of the fiscal year 2006 Appropriations
    Bill.
        We have made great strides in developing an effective
    accountability system with the support of Congress. This system has
    allowed us to accurately track our accomplishments and costs. As
    Undersecretary Rey outlined in his statement, this is the first budget
    that truly integrates an entire cycle in terms of utilization of our
    direct charge data. Based upon the current mechanisms in place for
    funding discretionary and mandatory program technical assistance, it is
    necessary to have sound data for workload in field offices. Our direct
    charge accounting, along with the workload assessment tools that we
    have in place, are providing the solid data to help us make program
    management decisions and to assist in the budget development process.
    For instance, with this data we can tell you that the cost of technical
    assistance per active participant in the Farm Bill Programs has
    decreased 13 percent from fiscal year 2002 to fiscal year 2005.

    Watershed Surveys and Planning
        The Watershed Surveys and Planning (WSP) account helps communities
    and local sponsors assess natural resource issues and develop
    coordinated watershed plans that will conserve and utilize their
    natural resources, solve local natural resource and related economic
    problems, avoid and mitigate hazards related to flooding, and provide
    for advanced planning for local resource development. This includes
    Floodplain Management Studies, Cooperative River Basin Studies, Flood
    Insurance Studies, Watershed Inventory and Analysis, and other types of
    studies, as well as Public Law 566 Watershed Plans.
        Over 65 percent of these plans are used to guide local planning
    efforts. The other 35 percent guide experts and sponsors in the
    implementation of watershed projects to solve natural resource
    problems.
        The President's fiscal year 2006 Budget proposes to focus funding
    on ongoing WSP efforts and includes $5.1 million to help approximately
    40 communities complete their watershed planning efforts.

    Watershed and Flood Prevention Operations
        The Administration proposes to terminate funding for Watershed and
    Flood Prevention Operations (WFPO) in fiscal year 2006 for several
    reasons.
        The Administration compared the benefits and costs of three Federal
    flood damage reduction programs operated by NRCS, the Corps of
    Engineers, and the Federal Emergency Management Agency.
        The analysis found that the WFPO program provided the least net
    flood damage reduction benefits.
        This decrease in funding in WFPO account will enable the
    Administration to divert limited resources to other priorities such as
    accelerating technical assistance to help agricultural producers meet
    regulatory challenges, particularly in the area of helping them to
    manage livestock and poultry waste.
        Mr. Chairman, I would note that the projects that were earmarked
    for this program had funding requests that exceeded the amount
    appropriated, which has removed the Department's ability to effectively
    manage the program. The intense level of Congressional directives does
    not permit the Agency to prioritize projects based upon merit and local
    need. The fact that the program is entirely earmarked also makes it
    impossible for the Department to attempt to coordinate program efforts
    and implement work that will meet overall strategic natural resource
    goals.

    Watershed Rehabilitation
        The President's Budget funding request for fiscal year 2006
    includes funding for Watershed Rehabilitation activities involving
    aging dams. These projects involve dams with a high risk for loss of
    life and property. To date, 134 watershed rehabilitation projects have
    been funded and 37 have been completed. Sixty-six dams have
    rehabilitation plans authorized and implementation of the plans is
    underway.
        The Administration requests $15.1 million to address critical dams
    with the greatest potential for damage.

    Resource Conservation and Development
        The purpose of the Resource Conservation and Development (RC&D)
    program is to encourage and improve the capability of State, local
    units of government, and local nonprofit organizations in rural areas
    to plan, develop, and carry out programs for resource conservation.
    NRCS also helps coordinate available Federal, State, and local programs
    that blend natural resource use with local economic and social values.
    Over half of the 375 RC&D areas have received Federal support for at
    least 20 years. At this point, most of these communities should have
    the experience and capacity to identify, plan for, and address their
    local priorities. The President's fiscal year 2006 Budget, therefore,
    proposes to phase out Federal support for local planning councils after
    20 years of funding assistance after which the local councils should
    have the capability to carry out much of the program's purpose
    themselves. The overall proposed budget for RC&D in fiscal year 2006 is
    $25.6 million.

                         FARM BILL AUTHORIZED PROGRAMS

    Environmental Quality Incentives Program
        The purpose of Environmental Quality Incentives Program (EQIP) is
    to provide flexible technical and financial assistance to landowners
    that face serious natural resources challenges that impact soil, water,
    and related natural resources, including grazing lands, wetlands, and
    wildlife habitat management. The budget proposes a level of $1 billion
    for EQIP.
        Over the past year, NRCS fully implemented a new agency developed
    system, ProTracts, to speed up the processing of conservation contracts
    with farmers and ranchers. ProTracts, which came about as part of the
    West Texas Telecommunication Pilot, has allowed the Agency to
    streamline the contracts process and, for the first time, see the
    ongoing status of contracts, not just the payments. ProTracts allows
    program managers to manage payments and obligations for a portfolio of
    different contracts. We estimate savings of $5 to $10 million annually
    in administrative costs that can be used to get financial assistance to
    farmers to implement conservation programs. Because the contract
    process is now electronic instead of paper, it speeds up the time
    between contract application and approval. While reducing errors and
    omissions, NRCS worked with the Office of the Chief Financial Officer
    to link ProTracts to prior-year EQIP payments. The Agency is currently
    migrating and reconciling EQIP contracts.

    Wetlands Reserve Program
        Wetlands Reserve Program (WRP) is a voluntary program in which
    landowners are paid to retire cropland from agricultural production if
    those lands are restored to wetlands and protected, in most cases, with
    a long-term or permanent easement. Landowners receive fair market value
    for the land and are provided with cost-share assistance to cover the
    restoration expenses. The 2002 Farm Bill increased the program
    enrollment cap to 2,275,000 acres. The fiscal year 2006 Budget request
    estimates that about 200,000 additional acres will be enrolled in
    fiscal year 2006, an appropriate level to keep NRCS on schedule to meet
    the total acreage authorization provided in the Farm Bill.
        I would note, Mr. Chairman, that on Earth Day last year, President
    Bush announced a new policy: ``Instead of just limiting our losses (of
    wetlands), we will expand the wetlands of America.'' ``No-net loss of
    wetlands'' on the part of agriculture is a landmark achievement, and a
    testament to the kinds of investments made in wetlands conservation on
    private lands. I am proud that NRCS' wetland conservation efforts are
    at the core of this initiative, and I look forward to working with the
    Subcommittee toward achieving the goals.

    Grassland Reserve Program
        The 2002 Farm Bill authorized the Grassland Reserve Program (GRP)
    to assist landowners in restoring and protecting grassland by enrolling
    up to 2 million acres under easement or long term rental agreements.
    The program participant would also enroll in a restoration agreement to
    restore the functions and values of the grassland. The 2002 Farm Bill
    authorized $254 million for implementation of this program during the
    period fiscal year 2003-fiscal year 2007. Because we estimate that GRP
    will reach the statutory funding cap by the end of fiscal year 2005,
    the fiscal year 2006 Budget assumes that the program will have
    exhausted its funding and not be able to enroll new contracts next
    year.

    Conservation Security Program
        Conservation Security Program (CSP), as authorized by the 2002 Farm
    Bill, is a voluntary program that provides financial and technical
    assistance for the conservation, protection, and improvement of natural
    resources on Tribal and private working lands. The program provides
    payments for producers who practice good stewardship on their
    agricultural lands, and incentives for those who want to do more.
        Last year, we conducted a successful program signup in 18
    watersheds across 22 States. Nearly 2,200 farmers and ranchers entered
    contracts that covered 1.9 million acres of privately-owned land. We
    are now offering the program in 220 new watersheds across the country
    in addition to the 18 that were eligible in 2004. Each State has at
    least one participating watershed. The President's fiscal year 2006
    Budget requests $273.9 million in program funding to continue to expand
    the program and enroll excellent conservation stewards.

    Wildlife Habitat Incentives Program
        Wildlife Habitat Incentives Program (WHIP) is a voluntary program
    that provides cost-sharing for landowners to apply an array of wildlife
    practices to develop habitats that will support upland wildlife,
    wetland wildlife, threatened and endangered species, fisheries, and
    other types of wildlife. The budget proposes a funding level for WHIP
    of $60 million.

                    FARM AND RANCH LANDS PROTECTION PROGRAM

        Through the Farm and Ranch Lands Protection Program (FRPP), the
    Federal Government establishes partnerships with State, Local, or
    Tribal government entities or nonprofit organizations to share the
    costs of acquiring conservation easements or other interests to limit
    conversion of agricultural lands to non-agricultural uses. FRPP
    acquires perpetual conservation easements on a voluntary basis on lands
    with prime, unique, or other productive soil that presents the most
    social, economic, and environmental benefits. FRPP provides matching
    funds of no more than 50 percent of the purchase price for the acquired
    easements. The budget proposes a level of $83.5 million for FRPP in
    fiscal year 2006.

    Measuring Outcomes not Outputs
        One of the most common questions that I have answered during my
    tenure as Chief is about measuring the natural resource outcomes of
    NRCS efforts. Rightfully so, policy-makers, such as Members of this
    Subcommittee, as well as conservation and farm organizations, have
    voiced a need for better information about the kinds of changes in
    water and soil quality that are as a result of the investments we have
    made.
        Six months ago, we launched an exciting endeavor to better quantify
    the on-the-ground effects of our conservation work. The Conservation
    Effects Assessment Project (CEAP) is a 5-year effort to better quantify
    the outcomes of our programs. Through CEAP, NRCS is partnering with the
    Agricultural Research Service (ARS), the National Agricultural
    Statistics Service (NASS), Farm Service Agency (FSA), and other
    agencies to study the benefits of most conservation practices
    implemented through the Environmental Quality Incentives Program,
    Wetlands Reserve Program, Wildlife Habitat Incentives Program,
    Conservation Reserve Program, and the Conservation Technical Assistance
    program. This project will evaluate conservation practices and
    management systems related to nutrient, manure, and pest management,
    buffer systems, tillage, irrigation, and drainage practices, as well as
    wildlife habitat establishment, and wetland protection and restoration.
        CEAP will provide the farming community, general public,
    legislators, and others with a scientifically based estimate of
    environmental benefits achieved through conservation programs.

    Conclusion
        As we look ahead, it is clear that the challenges before us will
    require the dedication of all available resources--the skills and
    expertise of the NRCS staff, the contributions of volunteers, and
    continued collaboration with partners and Technical Service Providers.
        I am proud of the dedicated work ethic our people exhibit day in
    and day out as they go about the work of getting conservation on the
    ground. We have achieved a great deal of success. We need to focus our
    efforts and work together, because available resources will ultimately
    determine whether our people have the tools to get the job done. I look
    forward to working with you as we move ahead in this endeavor.
        This concludes my statement. I will be glad to answer any questions
    that members of the Subcommittee might have.
                                     ______

                   Prepared Statement of Gilbert G. Gonzalez

        Mr. Chairman, Members of the Committee, it is a pleasure to present
    to you the fiscal year 2006 President's Budget request for USDA Rural
    Development.
        I am honored to serve as Acting Under Secretary of Agriculture for
    Rural Development, and to have the opportunity to work with you to
    carry out Rural Development's fundamental mission to increase economic
    opportunity and improve the quality of life in rural America.
        Everyday, we bring people and resources together. I believe that
    given the opportunity, Americans will create strength through
    investments in their own economic futures. And I believe it is our role
    at Rural Development to stimulate these efforts in ways that will
    maximize the benefits of local economies.
        With the assistance of this subcommittee, the Bush Administration
    has established a proud legacy of accomplishments in rural areas, and
    will work to continue to enhance that legacy.
        Overall, 800,000 jobs have been created or saved through combined
    business, housing, utility, and community development investments by
    USDA Rural Development over the last 4 years. Leveraging of these
    investments with private sector investments are helping to spur
    economic growth throughout rural America.
        The Bush Administration has committed over $50 billion in rural
    development investments in the last 4 years to support rural Americans'
    pursuit of economic opportunities and an improved quality of life.
        Rural Development delivers over 40 different programs enhancing
    business development, housing, community facilities, water supply,
    waste disposal, electric power, and telecommunications. Rural
    Development also provides technical assistance to rural families, and
    business and community leaders to ensure success of those projects. In
    addition to loan-making responsibilities, Rural Development is
    responsible for the servicing and collection of a loan portfolio that
    exceeds $87 billion.
        Rural Development is the only Federal organization that can
    essentially build a town from the ground up through investments in
    infrastructure, homeownership and job creation through business
    development programs. We help rural Americans achieve their part of the
    American Dream, particularly the 60 million rural residents who are not
    involved in production agriculture.
        Rural Development is a catalyst. We focus on our grassroots
    delivery mechanism, building partnerships that will act to
    strategically place Federal resources to serve as catalysts for
    spurring private investment. Partners in this effort include: the
    Department of Housing and Urban Development, the Department of Energy,
    the Environmental Protection Agency, the Minority Business Development
    Agency, the Small Business Administration, the Economic Development
    Administration, and the National Credit Union Association. In addition,
    we are working to increase the ability of faith-based organizations to
    partner with Rural Development to also support local community and
    economic development.
        Successful economic development in rural areas is driven by local
    strategies, where communities take ownership and focus on developing
    leadership, technology, entrepreneurship, and higher education
    opportunities.

                                RESPONSIBILITIES

        Rural Development provides rural individuals, communities,
    businesses, associations, and others with financial and technical
    assistance needed to increase economic opportunity and improve the
    quality of life in rural America. This financial and technical
    assistance may be provided solely by Rural Development or in
    collaboration with other public and private organizations promoting
    development of rural areas.

                                     VISION

        To realize our vision of creating greater economic opportunities
    and improved quality of life for rural citizens, we need to structure
    the delivery of Rural Development programs in a way that can ensure
    those who are most qualified become aware of our programs and receive
    needed investment assistance. Rural Development has to do a better job
    of outreach and education on what programs are available. To accomplish
    this goal, we have embarked upon an aggressive outreach and marketing
    effort that focuses on the programs appropriated, rather than on the
    names of individual agencies. This is a key priority that we believe
    will reduce confusion about who to contact for assistance and help
    ensure more efficient utilization of program investment dollars by
    those who are most qualified. We are also working to better communicate
    with minority sectors, analyze program delivery, and improve the
    overall knowledge of what USDA Rural Development can provide to rural
    citizens and communities.

                        RURAL DEVELOPMENT BUDGET REQUEST

        The President's commitment to rural America is strong, and this
    request will support a total program level of loans and grants of $13.5
    billion. Mr. Chairman, this Rural Development request is one component
    of the President's overarching budget. The budget reflects the
    difficult choices that had to be made among funding opportunities for a
    variety of meritorious programs.
        Over the last 4 years (fiscal year 2001-fiscal year 2004) with your
    assistance, Rural Development has delivered over $50 billion in loans
    and grants to rural Americans. Through this infusion of infrastructure
    investment and local area income stimulus, many rural areas are
    attracting an increase in private sector investment. These Federal
    investments are being returned many times over in the form of increased
    local tax base and new private ventures, with their associated
    multiplier effects on household incomes and local quality of life.
        I will now discuss the requests for specific Rural Development
    programs.

                             RURAL HOUSING PROGRAMS

        The budget request for USDA Rural Development's housing programs
    totals just under $6.5 billion. This commitment will improve housing
    conditions, continue to promote homeownership opportunities for
    minority populations, and initiate our multi-family housing program
    revitalization initiative. Initially, this will put in place a program
    of tenant protection for our multi-family housing residents.
        Rural Development's multi-family housing program includes about
    17,000 properties and 470,000 units, with a loan portfolio value
    approaching $12 billion. Many of the properties exceed 20 years in age
    and face substantial rehabilitation needs. A substantial number of
    owners wish to prepay their loans and remove properties from the
    program. Rental assistance, a vital component of the program, has
    steadily risen. Faced with this reality, this Administration
    acknowledged the need to evaluate tenant protections, the portfolio,
    and program, and identify alternatives to ensure the program's long-
    term viability and continued supply of affordable rental housing in
    rural areas.
        Last year, Rural Development engaged private industry experts to:
      --Review and define potential approaches to protect tenants;
      --Review issues and develop solutions directly pertaining to the
            market demand for such housing;
      --Analyze and develop solutions for the increasing rehabilitation and
            recapitalization requirements of the aging existing properties;
            and
      --Perform a comprehensive property assessment.
        A statistically representative sample of the portfolio was selected
    and reviewed. Based on that review and analysis by outside experts and
    Rural Development staff, a comprehensive tenant protection and
    revitalization initiative is being developed. This budget reflects the
    first component of that initiative, which provides protection for the
    very low-income tenants residing in the projects. We are requesting
    $214 million to fund a rural housing voucher program, which will ensure
    that very low-income and elderly tenants are protected in the event of
    project prepayment.
        A comprehensive legislative proposal is under development to
    protect tenants and address the issues of rehabilitation needs and
    prepayment. This proposal will embody the Administration's multi-year
    initiative to ensure adequate rental housing options remain available
    for very low-income rural residents and return the multi-family housing
    program to sound footing.
        Pending the outcome of the comprehensive multi-family property
    assessment, Rural Development did not request funding for section 515
    new construction. As a result of the study, we again are not requesting
    new construction; we are seeking $27 million in the section 515 program
    loan level for repair and rehabilitation only. New construction needs
    will be met through the section 538 guaranteed program, which we are
    requesting to double to a $200 million loan level.
        We are also requesting rental assistance of $650 million to support
    needed renewals, preservation, and a farm labor housing program level
    comprised of $42 million in loans and $14 million in grants. Rental
    assistance contracts should be maintained at the current 4 year term to
    underscore our commitment to our private partners that future rental
    assistance income streams will be supported.
        The request for single-family direct and guaranteed homeownership
    loans approaches $5 billion, which will assist about 40,400 rural
    households who are unable to obtain credit elsewhere. In addition, $36
    million is requested for housing repair loans and $30 million for
    housing repair grants, which will be used to improve existing single
    family houses mostly occupied by low-income elderly residents.
        The community facilities request totals $527 million, including
    $300 million for direct loans, $210 million for guaranteed loans, and
    $17 million for grants. It is expected that a portion of the direct
    loan program will continue to support homeland security and health and
    safety issues in rural areas. Community facilities programs finance
    rural health facilities, childcare facilities, fire and safety
    facilities, jails, education facilities, and almost any other type of
    essential community facility needed in rural America. Rural Utility
    Programs
        USDA Rural Development provides financing for electric,
    telecommunications, and water and waste disposal services that are
    essential for economic development in rural areas. The utilities
    program request exceeds $5 billion, which is comprised of $2.5 billion
    for electric loan programs, $669 million for rural telecommunication
    loans, $25 million for distance learning and telemedicine grants, $359
    million in loans for broadband transmission, over $1 billion for direct
    and guaranteed water and waste disposal loans, $377 million for water
    and waste disposal grants, and $3.5 million for solid waste management
    grants.
        The Rural Telephone Bank (RTB) was established in 1971 to provide a
    supplemental source of credit to help establish rural telephone
    companies. Efforts have been underway to privatize the bank. In fiscal
    year 1996, the RTB began repurchasing Class ``A'' stock from the
    Federal government, thereby beginning the process of transformation
    from a federally funded organization to a fully privatized banking
    institution. However, recent analysis has shown that there are private
    lenders available to fulfill rural telecommunications lending needs. In
    addition, funding for this program has exceeded demand.
        In fact, there is about $300 million in unadvanced loan balances
    for loans available for 5 years or more. This indicates that there is
    little demand for a privatized RTB. The fiscal year 2006 budget
    reflects the Administration's proposal to establish the process and
    terms to implement dissolution of the RTB. Dissolution will result in
    the government being repaid for all outstanding government stock and
    the borrower receiving a cash payout for their outstanding stock.
    Additional funds are requested for the regular telecommunications
    program to maintain and enhance the level of Federal support available
    to rural telecommunications. The fiscal year 2006 budget proposes $359
    million in new discretionary program funding. This, coupled with $1.6
    billion in carryover funds, will provide for almost a $2 billion
    program level.

                      RURAL BUSINESS-COOPERATIVE PROGRAMS

        Since fiscal year 2001, USDA Rural Development has provided about
    $4 billion for rural business development in the form of loans, grants
    and technical assistance. Funds assisted with the start up, expansion
    or modernization of businesses and cooperatives in rural areas that
    have helped create or save over 56,400 jobs.
        The Rural Development business and cooperative program budget
    request for fiscal year 2006 totals about $1.3 billion, the bulk of
    which is comprised of $900 million for the business & industry (B&I)
    loan guarantee program.
        The rural business enterprise grant, rural business opportunity
    grant, economic impact initiative, and the empowerment zone and
    enterprise community programs have been included in the President's new
    initiative to help strengthen American's transitioning communities,
    while making better use of taxpayer dollars.
        These grant programs will be consolidated and transformed into a
    new, two-part program: (1) The Strengthening America's Communities
    Grant Program, a unified economic and community development grant
    program; and (2) The Economic Development Challenge Fund, an incentive
    program for communities, modeled after the Millennium Challenge
    Account.
        We are requesting $34 million for the intermediary relending
    program, $25 million for rural economic development loans, $5.5 million
    for rural cooperative development grants, and $15.5 million of
    discretionary funding for the value-added producer grant program.
        The $10 million of discretionary budget authority for renewable
    energy will support $286 million in guaranteed loans and $5 million in
    grants. This program will assist in fulfilling the President's Energy
    Policy that encourages a clean and diverse portfolio of domestic energy
    supplies to meet future energy demands. In addition to helping
    diversify our energy portfolio, the development of renewable energy
    supplies will be environmentally friendly and assist in stimulating the
    national rural economy through the jobs created and additional incomes
    to farmers, ranchers, and rural small businesses. This is important for
    rural communities and our country's ability to rely less on imported
    energy. The President is committed to this program and the benefits it
    holds for America.
        During this Administration Rural Development has invested over $190
    million in Bioenergy/Biomass ventures including $80 million in value-
    added and business ventures and $114 million in renewable energy
    utility upgrades and expansions. Under the Farm Bill section 9006,
    $44.9 million in grant funds have been provided for 281 applicants for
    wind power, anaerobic digestion, solar, ethanol plants, direct
    combustion and fuel pellet suppliers, and other bioenergy related
    systems.

                            ADMINISTRATIVE EXPENSES

        Delivering these programs to the remote, isolated, and low-income
    areas of rural America requires administrative expenses sufficient to
    the task. From fiscal year 1996 through fiscal year 2004, Rural
    Development's annual delivered program level increased by 111 percent.
    Over that same period, Rural Development's Salaries and Expenses (S&E)
    appropriation increased only 17 percent. In fiscal year 2001, Rural
    Development was able to deliver $19 program dollars (loans and grants,
    plus servicing the ever-growing portfolio) with one dollar of S&E. By
    fiscal year 2004, Rural Development delivered $23 program dollars with
    every S&E dollar. Over 4 years we were able to increase efficiencies,
    to deliver 21 percent more program dollars with each S&E dollar. Rural
    Development has the staff and the local distribution mechanism to meet
    the ambitious program targets outlined earlier, but adequate
    administrative support must be made available. To maintain our high
    level of efficiency requires continued improvements which must be based
    on continuous effort and investment of administrative resources.
        With an outstanding loan portfolio exceeding $87 billion, fiduciary
    responsibilities mandate that Rural Development maintain adequately
    trained staff, employ state of the art automated financial systems, and
    monitor borrowers' activities and loan security to ensure protection of
    the public's financial interests. New, more sophisticated and
    complicated programs provided through the fiscal year 2002 Farm Bill
    (broadband, renewable energy, value-added, etc.), demand increasing
    technical expertise of our aging workforce.
        Limited S&E funding could jeopardize our ability to provide
    adequate underwriting and loan servicing to safeguard the public's
    interests.
        For fiscal year 2006, the budget proposes a total of $682.8 million
    for Rural Development S&E or an increase of $58.4 million over fiscal
    year 2004. Of this increase, $13.3 million will fund salary costs and
    related expenses; $20 million supports Information Technology (IT)
    needs, including the web farm and data warehousing, continued expansion
    and upgrading of systems supporting the evolving multi-family housing
    program, e-Gov, IT security, and essential licensing and maintenance
    agreements; $4 million for human capital investments, principally
    training; and $7.6 million to continue relocation of facilities and
    operations from downtown St. Louis, Missouri.
        Mr. Chairman, Members of the Committee, this concludes my formal
    statement. We would be glad to answer any questions you may have. Thank
    you for the opportunity to appear before you to discuss the Rural
    Development fiscal year 2006 budget request.
                                     ______

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

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to present the fiscal year 2006 President's budget for the
    USDA Rural Development rural housing programs.
        As an integral part of Rural Development, the rural housing program
    assists rural communities in many fundamental ways. We provide a
    variety of both single and multi-family housing options to residents of
    rural communities. We also help to fund medical facilities, local
    government buildings, childcare centers, and other essential community
    facilities. Rural Development programs are delivered through a network
    of 47 State offices and approximately 800 local offices.
        The proposed budget for the rural housing program in fiscal year
    2006 supports a program level of approximately $6.49 billion in loans,
    loan guarantees, grants, and technical assistance. It also maintains
    the Administration's strong commitment to economic growth, opportunity,
    and homeownership for rural Americans. We believe that our efforts,
    combined with the best of both the non-profit and private sectors, will
    ensure that this budget makes a tremendous difference in rural
    communities. The fiscal year 2006 budget also includes a major
    initiative to revitalize the rural rental housing programs.
        Let me share with you how we plan to continue improving the lives
    of rural residents under the President's fiscal year 2006 budget
    proposal for our rural housing programs.

                         MULTI-FAMILY HOUSING PROGRAMS

        The Multi-Family Housing (MFH) budget preserves Rural Development's
    commitment to maintaining the availability of affordable housing for
    the many rural Americans who rent their homes. Our existing portfolio
    provides decent, safe, sanitary, and affordable residences for about
    470,000 tenant households.
        The total program level request is $1.16 billion. This represents
    an increase of 30 percent from last year's request. Six hundred and
    fifty million dollars will be used for rental assistance (RA) for
    contract renewals, farm labor housing, and preservation. These funds
    will renew more than 46,000 4-year RA contracts. We estimate using $27
    million for MFH direct loans to meet our preservation responsibilities
    including prepayment prevention incentives.

    Revitalization Initiative
        In November 2004, we released a report titled the ``Multi-Family
    Housing Comprehensive Property Assessment and Portfolio Analysis.''
    This report analyzed the issues associated with the preservation of the
    portfolio and provided recommendations for changes to the MFH program.
    The fiscal year 2006 budget addresses the immediate need to provide
    assistance for tenants of projects that prepay and leave the program.
    Included is $214 million for the initial stage of the multi-family
    housing Revitalization Initiative that establishes a tenant protection
    program. Later this year, the Administration will propose legislation
    to ensure that projects remain in the program and that they are
    properly maintained. The authority to make rural housing vouchers is
    contained in the Housing Act of 1949. Regulations will need to be
    developed in order to use this authority.
        The report recommended three primary strategies to revitalize our
    aging portfolio, which continue to play a critical role in delivering
    affordable rental housing to rural communities across the nation:

    Allowing Prepayment While Protecting Tenants
        While a significant segment of the portfolio has the legal right to
    prepay, the report concluded that prepayment is economically viable for
    only about 10 percent of owners. Recent court decisions require that
    owners of projects that are eligible to prepay under the terms of their
    loans, be allowed to do so. This would leave the tenants of these
    projects at risk of significant rent increase and potential loss of
    their housing. Therefore, we are proposing that all tenants of these
    projects be adequately protected through the use of housing vouchers.

    Creating an Equitable New Agreement With Project Owners Electing to
            Stay With the Program
        The report recommended that new agreements be reached with project
    owners to keep their projects in the program and, thus, be used for
    housing low income families. This new agreement would allow owners and
    project managers to exercise their entrepreneurial planning and
    management skills. Performance expectations and performance-based
    incentives would be provided so that high-performing owners and project
    managers are rewarded. Conversely, owners and property managers
    performing poorly would be subject to sanctions.

    Using Debt Relief as the Primary Tool to Stabilize Projects at Risk of
            Physical Deterioration
        The report also recommended that a majority of the existing MFH
    portfolio is in need of additional financial assistance to achieve
    long-term viability. The report recommended our using debt
    restructuring as the primary tool. Additional financial assistance
    would be provided in exchange for the owner's commitment to providing
    long-term affordable housing.
        The Administration continues to evaluate the costs and benefits of
    various options to address items (2) and (3). We expect to complete
    this evaluation and to propose legislation later this year. However,
    the fiscal year 2006 budget includes $27 million for direct loans that
    are to be used to meet immediate revitalization needs.
        We anticipate our revitalization efforts will span the next several
    years and have initiated a demonstration program to test the viability
    of the revitalization concepts. In addition, we will be initiating a
    demonstration program for making loans through the use of revolving
    funds for preservation purposes, as provided for in the fiscal year
    2005 Appropriations Act.

    Section 538 Guaranteed Rural Rental Housing Program
        The fiscal year 2006 budget request will fund $200 million in
    section 538 guaranteed loans, funds that may be used for new
    construction. The section 538 guaranteed program continues to
    experience ever-increasing demand, brisk growth, and is rapidly
    becoming recognized within the multi-family housing finance,
    development, and construction industry, as a viable conduit to
    facilitate the financing of housing projects. In fact, Rural
    Development received an overwhelming response to the latest Notice of
    Funding Availability with over 150 applications received.
        In fiscal year 2004, we distributed more than $99 million in
    guarantees to fund housing projects with over $243 million in total
    development costs. The risk exposure to the government continues to be
    very low, as loan guarantees to total development costs are well under
    50 percent. We also have a delinquency rate of zero. A ``notice to
    proceed'' was given to 44 applicants with an average loan guarantee
    request of $2.2 million and an average total development cost of $5.5
    million. Thirty-five out of the 44 applications given the approval to
    proceed included the use of Low-Income Housing Tax Credits from the
    various State governments where the projects will be located.
        Since inception of the program, the section 538 guaranteed program
    has closed 71 guarantees totaling over $171 million. The program also
    has an additional 89 loans in process and not yet closed, totaling over
    $352 million. The seventy one closed guarantees will provide over 4,200
    rural rental units at an average rent per unit of approximately $500
    per month.
        The rural housing program recently published a final rule to
    address program concerns from our secondary market partners and make
    the program easier to use and understand. We look forward to
    administering the fiscal year 2006 proposed budget of $200 million,
    which will enable Rural Development to fund a significant number of
    additional guaranteed loan requests.
        The fiscal year 2006 budget also request funds $42 million in loans
    and $14 million in grants for the Section 514/516 farm labor housing
    program, $2 million in loans for MFH credit sales, and $10 million for
    housing preservation grants.

                         SINGLE FAMILY HOUSING PROGRAMS

        The Single Family Housing (SFH) programs provide several
    opportunities for rural Americans with very low- to moderate-incomes to
    purchase homes. Of the $4.7 billion in program level requested for the
    SFH programs in fiscal year 2006, $3.7 billion will be available as
    loan guarantees of private sector loans, including $207 million for
    refinancing more affordable loans for rural families. Also, with $1
    billion available for direct loans, our commitment to serving those
    most in need in rural areas remains strong. This level of funding will
    provide homeownership opportunities for 40,400 rural families.
        Effective outreach and an excellent guarantee, coupled with
    historically low interest rates have increased the demand for the
    section 502 guaranteed program. Approximately 2,000 lenders participate
    in the guaranteed SFH program. The competitive low-interest rate
    environment has enabled the rural housing program to serve low-income
    families that would typically receive a Section 502 direct loan with a
    guaranteed loan instead. In fiscal year 2004, approximately 32 percent
    of guaranteed loans were made to low-income families.

    Section 523 Mutual and Self-Help Housing
        The President's fiscal year 2006 budget requests $34 million for
    the mutual and self-help housing technical assistance program.
        The fiscal year 2004 ended with over $35 million awarded for
    contracts and 2-year grants. There were 39 ``pre-development'' grants
    awarded in fiscal year 2004, including many first-time sponsors,
    several faith-based groups, and groups in States with no self-help
    housing programs. Pre-development funds may be used for market
    analysis, determining feasibility of potential sites and applicants,
    and as seed money to develop a full-fledged application. Groups in the
    pre-development phase typically need 6 to 12 months before they are
    ready to apply for full funding.
        The fiscal year 2006 proposed budget also includes $36 million in
    program level for home repair loan funds and $30 million for grants to
    assist elderly homeowners. It also includes $5 million in loan level
    for each of two site loan programs, $10 million in loan level for sales
    of acquired properties, and $1 million for supervisory and technical
    assistance grants.

                               COMMUNITY PROGRAMS

        The Community facilities budget request will provide essential
    community facilities, such as educational facilities, fire, rescue, and
    public safety facilities, health care facilities, and child care
    centers in rural areas. The total requested program level of $527
    million includes $300 million for direct loans, $210 million for loan
    guarantees, and $17 million for grants.
        In partnership with local governments, State governments, and
    federally recognized Indian tribes, the fiscal year 2006 budget will
    support more than 240 new or improved public safety facilities, 105 new
    and improved health care facilities, and approximately 80 new and
    improved educational facilities to serve rural Americans.
        In fiscal year 2004, we invested over $130 million in 113
    educational and cultural facilities serving a population totaling over
    3.3 million rural residents, over $97 million in 338 public safety
    facilities serving a population totaling over 1.7 million rural
    residents, and over $304 million in 141 health care facilities serving
    a population totaling over 3.2 million rural residents. Funding for
    these types of facilities totaled $531 million. The remaining balance
    was used for other essential community facilities such as: food banks,
    community centers, early storm warning systems, child care centers, and
    homeless shelters.

                               PROGRAM HIGHLIGHTS

        I am pleased to provide you with an update on several highlights
    from our major programs, as well as key initiatives being undertaken.

    Rental Assistance
        We have continued to improve the internal controls in the Rental
    Assistance (RA) program and plan to implement a number of new
    initiatives in this regard with the recent publication of a
    comprehensive revision of our regulations. The new initiatives include
    an increased emphasis on verification methods and procedures for
    certifying income reported by tenants and improving management of
    tenants with no reported income. We are currently in discussions with
    the Department of Health and Human Services concerning USDA receiving
    access to the National Directory of New Hires database. This will
    enable us to match the data in the national directory against the
    information provided by the tenant, and therefore reduce fraud and
    abuse within the program. Additional training of borrowers and property
    managers will also be the key to reducing errors when certifying
    tenants for residency in MFH properties.
        The automated RA forecasting tool is now in place and operational.
    The forecasting tool was used to develop the fiscal year 2006 RA budget
    and is able to forecast when RA contracts will either exhaust funds or
    reach their 4-year term limit. The forecasting tool can also develop
    the cost of new contracts based on an actual RA usage rate or a
    selected inflation rate. The fiscal year 2006 RA budget, an inflation
    rate of 2.4 percent was used, as recommended by the General Accounting
    Office. We will continue to provide State offices with additional
    guidance on the transfer of RA units and will centralize the
    redistribution of unused RA.

    Automation Initiatives
        Last year, we reported that the rural housing program was
    developing a data warehouse for MFH and SFH loans to improve our
    reporting capabilities. I am pleased to report that we are currently
    utilizing our data warehouses, making needed improvements, and training
    staff on how to expand their reporting capabilities. Our Multi-Family
    Information System (MFIS) database is now in Phase 5 of development,
    following a very successful completion of Phase 4, which integrated
    electronic debiting and crediting of borrowers accounts and eliminated
    funds handling in area offices. We now have a website available to the
    public to locate all MFH properties, with property and contact
    information. Also implemented is the Management Agent Interactive
    Network Connection (MAINC), which allows property managers to transmit
    tenant and property data electronically to MFH via the Internet. This
    data goes directly into the MFIS database and the data warehouse.
        Last year, we also reported that an Automated Underwriting System
    (AUS) was being developed that would allow lenders to input SFH
    customer application data, pull credit, and determine immediately
    whether the rural housing program would issue a commitment. The AUS
    should be fully operational by next winter.
        In December 2004 our Centralized Servicing Center (CSC) in St.
    Louis, Missouri began the centralization of loss claims submitted by
    lenders under our SFH guaranteed program. As of September 30, 2004, CSC
    provided loss mitigation for approximately 110,000 guaranteed loans.
    CSC is also supporting the rollout of the Lender Interactive Network
    Connection (LINC), which is an Internet-based alternative for lenders
    to submit loss claims electronically. Centralization will improve
    efficiency, consistency, customer service to lenders, and provide
    better management data to program officials.

         USDA'S FIVE STAR COMMITMENT TO INCREASE MINORITY HOMEOWNERSHIP

        The rural homeownership rate continues to outpace the national
    rate. In 2004, it stood at 76.1 percent compared to the national rate
    of 69.2 percent. But, while rural America has the highest percentage of
    homeownership, we are committed to do more, particularly to assist more
    minority families in living the American Dream. For USDA's part, we
    developed a Five-Star Commitment to increase minority homeownership
    opportunities.

    Reducing Barriers to Minority Homeownership
        Origination fees can now be incorporated into the loan amount.
    Through reduction of such barriers the program guaranteed a total of
    $3.18 billion in loans in fiscal year 2004, a record for the program.

    Doubling the Number of Self-Help Participants by 2010
        Over 54 percent of the families who participate in this program are
    minorities. In fiscal year 2004, we helped over 1,100 families build
    their own home.

    Increasing Participation by Minority Lenders Through Outreach
        Rural Development offices across the country have developed a
    marketing outreach plan to increase participation in the guaranteed
    loan program by lenders serving rural minorities.

    Promoting Credit Counseling and Homeownership Education--Critical to
            Successful Homeownership
        Since the signing of an agreement with the Federal Deposit
    Insurance Corporation to promote and utilize their ``Money Smart''
    training program, nearly 700 Rural Development field staff received
    training and will deliver the training to others. Over a third of our
    State offices have already made the Money Smart Program available to
    non-English speaking groups.

    Monitoring Lending Activities to Ensure a 10 Percent Increase in
            Minority Homeownership
        USDA has jointly developed with the Departments of Housing and
    Urban Development (HUD) and Veteran Affairs (VA) an internal tracking
    system to measure the success of each of the 53 States and territories
    we serve. Overall, the number of loans to minorities has increased by
    more than 1,000 per year--an increase of more than 12 percent.

    Improving Successful Homeownership
        We are also pleased to report our achievement in helping our
    customers remain successful homeowners. Rural Development has lowered
    its direct loan housing program gross delinquency rate by 35.6 percent
    and new loan delinquency rate by 61.8 percent over the past 5 years. As
    of today, our gross delinquency rate is 12.85 percent and the new loan
    delinquency rate is 1.92 percent. Our portfolio recently outperformed
    the delinquency rate for sub-prime mortgage loans as tabulated by the
    Mortgage Bankers Association's National Delinquency Survey.
        To ensure that we were also providing a high level of customer
    service, a satisfaction survey was recently completed. This was our
    first independent homeowner survey and established a benchmark for
    customer satisfaction. The survey was conducted by an outside
    contractor and showed an average homeowner satisfaction rate of 8.6 on
    a scale of 1 to 10. The study used the J.D. Power 2004 home mortgage
    study to compare these results to the results of other organizations
    providing financial services. The J.D. Power survey includes such well
    known and respected major lending institutions as Bank of America,
    Wells Fargo, and Chase. The average satisfaction level for the
    organizations included in the survey is 7.2 with the highest rating
    going to USAA (a private mortgage corporation) at 8.6. USDA Rural
    Development is at the top of the list for customer satisfaction at 8.6
    percent.

    Rural Partners
        In fiscal year 2006, we will continue to stretch the rural housing
    program's resources and its ability to serve the housing needs of rural
    America through increased cooperation with HUD and other partners. We
    are committed to working with these partners to leverage resources for
    rural communities. For example, we are working with HUD and expect to
    adopt their ``TOTAL'' scorecard, modified for SFH guaranteed loans.
    This cooperation between USDA and HUD will save time and money in
    system development. Additionally, Rural Development information
    technology staff and the CSC worked with HUD and VA to develop a one-
    stop web portal, www.homesales.gov, to market government homes for
    sale.
        In our MFH program, HUD has been extremely helpful in sharing data
    for development of our Comprehensive Property Assessment and in
    providing knowledgeable, professional staff from their Office of
    Affordable Housing Preservation to consult with before making
    determinations on our rural portfolio. This eliminates duplicative work
    and ensures better consistency.

                                   CONCLUSION

        Through our budget, and the continued commitment of President Bush,
    rural Americans will have the tools and opportunities they can put to
    work improving both their lives and their communities. We recognize
    that we cannot do this alone and will continue to identify and work
    with partners who have joined with the President to improve the lives
    of rural residents.
        I would like to thank each of you for your support of the rural
    housing program's efforts. I look forward to working with you in moving
    the fiscal year 2006 rural housing program budget forward, and welcome
    your guidance as we continue our work together.
                                     ______

      Prepared Statement of Peter Thomas, Administrator, Rural Business--
                               Coopertive Service

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to present the fiscal year 2006 President's Budget for USDA
    Rural Development's business and cooperative programs.
        This is my first opportunity to appear before you as administrator
    of the rural business and cooperative programs USDA Rural Development.
    I am honored to serve in this position, and to have the opportunity to
    work with you to carry out Rural Development's fundamental mission to
    increase economic opportunity and improve the quality of life in rural
    America. Everyday, we bring people and resources together.
        Mr. Chairman, the programs and services of Rural Development, in
    partnership with other public and private sector businesses, continue
    to improve the economic climate of rural areas through the creation or
    preservation of sustainable business opportunities and jobs. Rural
    Development programs help close the gap in opportunity for under-served
    rural areas and populations, moving them toward improved economic
    growth by providing capital, technology, technical assistance, and an
    improved quality of life. The $1.279 billion program level requested in
    this budget for the rural business and cooperative programs will assist
    in creating or saving 56,400 jobs.

                               BUSINESS PROGRAMS

    Business and Industry Guaranteed Loan Program
        For the business and industry (B&I) program, the fiscal year 2006
    budget includes $44 million in budget authority to support $900 million
    in guaranteed loans. We estimate that the funding requested for fiscal
    year 2006 will create or save about 24,560 jobs and provide financial
    assistance to 489 businesses. Through the lender's reduced exposure on
    guaranteed loans, they are able to meet the needs of more businesses at
    rates and terms the businesses can afford. B&I guaranteed loans may
    also be used by individual farmers to purchase cooperative stock in a
    start-up or existing cooperative established for value-added
    processing.
        I would like to share a story to illustrate how our programs work
    together to assist rural businesses. Unicep Packaging, Inc. is located
    in City of Sandpoint, Idaho. The area has been affected by the decline
    in the logging industry and has an increasing reliance on the tourism
    industry for its economic base in addition to light manufacturing.
        Dr. John Snedden started his business in 1990 in a Sandpoint
    business incubator. In 1995, with the help of a USDA Rural Economic
    Development Loan made through Northern Lights, Inc., the electric
    cooperative in the Sandpoint area, the company constructed its initial
    9,500 sq. ft. manufacturing plant, becoming the first company to
    ``graduate'' from the incubator. The business' original focus was
    manufacturing professional tooth whitening products. Since then it has
    shifted to unit-dose packaging and expanded its product lines and
    manufacturing capacity to include custom packaging and contract
    manufacturing for medical, dental, pharmaceutical, cosmetic,
    nutraceutical, and industrial customers.
        The B&I guaranteed loans of $2,150,000 to Unicep Packaging, Inc.
    and $2,410,000 to Dr. John and Mary Jo Snedden financed a major
    expansion completed in 2003, with the manufacturing facility now
    encompassing 64,000 square feet. Dr. Snedden and his wife own the land
    and building and lease the property to their business, Unicep
    Packaging, Inc. Originally projected to create 62 additional jobs, the
    expansion has resulted in the creation of 68 jobs. In addition, the
    project has saved 58 jobs. On November 10, 2004, Unicep Packaging,
    Inc., received the Business of the Year award from the Bonner County
    Economic Development Corporation (BCEDC).

    Intermediary Relending Program
        The fiscal year 2006 budget includes $14.7 million in budget
    authority to support $34 million in loans under the intermediary
    relending program (IRP). The proposed level of funding will create or
    save an estimated 26,172 jobs over the 30-year period of this year's
    loans.
        Participation by other private credit funding sources is encouraged
    in the IRP program, since this program requires the intermediary to
    provide, at a minimum, 25 percent in matching funds. To illustrate the
    benefits IRP provides to rural America, I would like to share with you
    a success story from rural Maine.
        Wrabacon, Inc. was established in 1986 to design and build food and
    drug packaging systems for customers throughout the United States. It
    is located in a rural community with a population of less than 6,000
    and a 5.8 percent state unemployment rate and a 7.1 percent town
    unemployment rate. Wrabacon, Inc. employs about 13 highly skilled
    engineers and technicians with an annual payroll in excess of $600,000.
    The economic slow-down of 2001 had a deep effect on the company's sales
    and cash flow. Recently, with the economic recovery, the company is
    experiencing increased orders and sales.
        Using IRP funds received from Rural Development, the Kennebec
    Valley Council of Governments provided a $150,000 gap loan to bring
    Wrabacon's accounts payable under control and to fund a part of the
    company's operations. As a result of the loan, Wrabacon was able to
    approach a commercial lender and received a $245,000 line of credit.
    The combination of financing tools enabled Wrabacon to obtain needed
    working capital, continue its growth, and maintain its level of
    success. While retaining their existing employees, Wrabacon is now
    anticipating the construction of a 30,000 square foot addition to their
    existing facility for storage and expanded manufacturing. This is
    expected to produce an additional 10 to 15 new jobs.

    Rural Business Enterprise Grant Program and Rural Business Opportunity
            Grant Program
        No funding is requested for the rural business enterprise grant and
    rural business opportunity grant programs. For grants like these that
    are for community organizations to stimulate economic development, the
    President's fiscal year 2006 Budget proposes to consolidate them into a
    new economic and community development program to be administered by
    the Department of Commerce. The new program would be designed to
    achieve greater results and focus on communities most in need of
    assistance.

    Rural Economic Development Loan and Grant Programs
        The fiscal year 2006 budget includes $25 million in rural economic
    development Loans (REDL) and $10 million in rural economic development
    grants (REDG). These programs represent a unique partnership, since
    they directly involve an Rural Development electric and
    telecommunications borrower in community and economic development
    projects. We provide zero-interest loans and grants to intermediaries,
    who invest the funds locally. The return on our equity from rural
    America is strong.
        The following is an example of how one REDLoan was utilized to
    expand capacity and create jobs with higher than average wages in
    Kentucky. P.J. Murphy Forest Products Corporation received a $250,000
    loan through the South Kentucky Rural Electric Cooperative Corporation.
    The family owned business, located in Bowling Green, produces bedding
    for laboratory animals and wood flour which is used as filler in the
    plastics industry. Demand for the company's products exceeded its
    production capacity. The company built a new facility in Wayne County,
    a designated Empowerment Zone, with an unemployment rate of 6.6 percent
    at the time of the loan, as compared to the national unemployment rate
    of 6 percent at the time of the loan. The $250,000 loan will be used to
    purchase new equipment for the new facility. By locating the new
    facility in the Empowerment Zone, the company will reduce its
    transportation and shipping costs and create up to 15 new jobs in Wayne
    County. These new jobs are expected to pay up to 1.8 percent above the
    current average per capita income for the county, demonstrating the
    Administration's commitment to increasing economic opportunities in
    isolated rural areas.

    Renewable Energy Grants Program
        The fiscal year 2006 budget for the renewable energy systems and
    energy efficiency improvements program proposes $10 million of budget
    authority to support a $5 million grant program and a $286 million
    guaranteed loan program. Fiscal year 2006 will be the first full year
    of implementation of this combined loan and grant program. We
    anticipate publishing a final rule to implement the program on a
    permanent basis by August 2005. To date, we have relied on annual
    notices of available funding, a procedure that is generally limited to
    grant making.
        These programs support the President's Energy Policy by helping to
    develop renewable energy supplies that are environmentally friendly. In
    addition, they contribute to local rural economies through the creation
    of jobs and the provision of new income sources to rural small
    businesses, farmers, and ranchers. We anticipate 292,000 households
    will be served, and 3 million-kilowatt hours of energy generated while
    reducing greenhouse gasses by 6.3 metric tons.
        In fiscal year 2004, for example, a $10,000 grant was provided to a
    farmer in Cassia County, Idaho. The farmer purchased and installed a
    20kW wind turbine which began producing power in June of 2004. The
    turbine produces power that is sold to Idaho Power. It also is expected
    to supply the majority of the power consumed by the farmer's farm
    machinery repair shop as well as his residence. The program directly
    supports the President's goals of decreasing reliance on foreign oil,
    increasing the use of renewable energy, and reducing toxic emissions
    into the atmosphere.

                              COOPERATIVE PROGRAMS

        The cooperative form of organizational governance continues to be a
    cornerstone of business development in our rural communities. From the
    large agricultural marketing cooperatives that bring additional value
    to its members' products, to the small rural telephone cooperative that
    brings broadband technology to its community's businesses and
    residents, cooperative organizations provide our rural residents with
    new and exciting job opportunities, enhanced educational and health
    care opportunities, and the products and services that enable viable
    rural communities to compete with their urban and suburban
    counterparts.
        The participatory, self-help foundation upon which cooperative
    organizations are based is evidence of the very grass roots effort that
    made our Nation great and continues to serve our rural communities
    well. The mission of Rural Development's cooperative programs is ``to
    promote the understanding and use of the cooperative form of business
    as a viable organizational option for marketing and distributing
    agricultural products.'' Cooperative program staffs successfully carry
    out their mission by providing an array of educational and technical
    assistance, research, and funding services to cooperatives, their
    members, directors, and managers. Cooperative program staffs identify
    and respond to the opportunities and challenges facing rural
    cooperatives and agricultural producers, with a special emphasis on
    helping its cooperative clientele adjust to the continually changing
    economic forces in which they operate and compete in today's global
    marketplace. The cooperative programs are relatively modest in size,
    yet provide opportunities to encourage farmers and rural residents to
    organize cooperatives as a way to expand their income base.

    Value-Added Producer Grant Program
        For fiscal year 2006, the budget requests $15.5 million for the
    value-added producer grant program. The value-added producer grant
    program encourages independent agricultural commodity producers to
    further refine or enhance their products, thereby increasing their
    value to end users and increasing the returns to producers. Grants may
    be used for planning purposes such as conducting feasibility analyses
    or developing business plans, or for working capital accounts to pay
    salaries, utilities and other operating costs. Program revisions were
    made in fiscal year 2005 that target grant funds to smaller, more
    economically challenged independent producers. In so doing, not only is
    Rural Development poised to infuse capital to meet rural America's most
    critical needs, but it is able to assist more producers by funding
    additional projects. With this budget request, Rural Development will
    be able to fund approximately 60 projects.
        The successful blending of modern technology with age-old tradition
    is evident in Northern Iowa and Southern Minnesota where Amish dairy
    farmers are producing and marketing blue cheese. With a $500,000 value-
    added producers grant for marketing expenses, the Golden Ridge Cheese
    Cooperative was able to turn a first place tie at the American Cheese
    Society's 2004 contest into a profitable business opportunity. After
    winning for its Schwarz und Weiss natural rind blue cheese at one of
    world's most prestigious contests for specialty cheeses, ``Cheese is
    now flying out of here.'' Forming a cooperative to produce cheese in a
    modern plant was a difficult decision for the group because Old Order
    Amish do not use modern machinery. However, the group went forward with
    the modern cheese plant in order to preserve their way of life for
    their families to enjoy. The plant now uses about 5,000 pounds of milk
    a day that is purchased from the cooperative members and processed into
    the Schwarz und Weiss cheese, as well as two other brands of blue
    cheese. The plant employs about 20 full-time staff.
        Since the passage of the Farm Bill in 2002, funding for the
    Agricultural Marketing Resource Center (AgMRC) has been set at 5
    percent of the funding made available to the other value-added
    programs. Therefore, $775,000 of the $15.5 million budget request will
    fund the AgMRC's activities. AgMRC is an electronically based
    information center that creates, processes, analyzes, and presents
    information on value-added agriculture. The center is housed at Iowa
    State University and has partners at Kansas State University and the
    University of California--Davis. The center provides producers,
    processors, and other interested parties with critical information
    necessary to build successful value-added businesses.

    Rural Cooperative Development Grant Program
        For fiscal year 2006, the budget requests $5.0 million for the
    rural cooperative development grant program. The rural cooperative
    development grant program provides funds to establish and operate
    centers for developing new cooperatives and improving the operations of
    existing cooperatives, with the primary goal of improving the economic
    conditions of rural areas. This program complements our national and
    State office technical assistance efforts by increasing outreach and
    developing feasibility studies and business plans for new cooperatives
    and assisting existing cooperatives in meeting the demands of today's
    ever-changing global economy. With this budget request, Rural
    Development will be able to fund additional 3 or 4 centers.
        A rural cooperative development grant made in 2003 enabled a rural
    Missouri cotton growers' cooperative to participate in today's emerging
    global markets. With assistance from the Missouri Enterprise Business
    Assistance Center in Rolla, Missouri, Delta Fibers, located in
    Caruthersville, Missouri, was introduced to Porter Tech, a Mexican
    import company. After visiting the Delta Fibers site, officials from
    Porter Tech entered into an agreement with Delta Fibers and in the
    summer of 2004, Missouri cotton began shipment into Mexico.

    Cooperative Research Agreements
        For fiscal year 2006, the budget requests $500,000 for cooperative
    research agreements to encourage the study of those issues essential to
    the development and sustainability of cooperatives. Because so much of
    rural America's business endeavors are cooperatively formed, their
    continued success is critical for the continued sustainability of the
    Nation's rural communities. Through cooperative research agreements,
    Rural Development can continue to develop and maintain the information
    base vital for innovative, creative, and prudent decision making.

                                   CONCLUSION

        Mr. Chairman, and Members of the Subcommittee, this concludes my
    testimony for the Rural Development fiscal year 2006 budget for rural
    business and cooperative programs. I look forward to working with you
    and other Committee members to administer our programs. I will be happy
    to answer any questions the Committee might have.
                                     ______

     Prepared Statement of Curtis M. Anderson, Acting Administrator, Rural
                               Utilities Service

        Mr. Chairman, Members of the Subcommittee, thank you for the
    opportunity to present the fiscal year 2006 President's Budget for
    Rural Development utilities programs.
        A strong rural America is important for a strong Nation. We
    consider the rural utilities programs an important part of the USDA
    Rural Development mission. Safe, affordable, modern utility
    infrastructure is an investment in economic competitiveness and serves
    as a fundamental building block of economic development. Changes in the
    landscape of rural America, along with developments in technology, and
    changes in market structure combined with an aging utility
    infrastructure is occurring in the electric, telecommunications and
    water sectors. Without the help of USDA Rural Development's rural
    utility programs, rural citizens face monumental challenges in
    participating in today's economy as well as maintaining and improving
    their quality of life.
        The $40 billion RUS loan portfolio includes investments in 7,500
    small community rural water and waste disposal systems and
    approximately 2,000 electric and telecommunications systems serving
    rural America. This local/Federal partnership is an ongoing success
    story. Eighty percent of the Nation's landmass continues to be rural,
    encompassing 25 percent of the population. For an economy to prosper,
    we need infrastructure investment to spur economic growth, create jobs
    and improve the quality of life in rural America.

                                ELECTRIC PROGRAM

        The electric program budget proposes $6 million in budget authority
    to support a program level of $2.52 billion. The President's budget
    requests $920,000 in budget authority for a hardship program level of
    $100 million and over $5 million in budget authority for a $100 million
    program level for municipal rate loans. The direct Treasury rate loan
    program level is proposed to be $700 million provided for with a budget
    authority of $70 thousand. The guarantee of Federal Financing Bank
    (FFB) direct loans is proposed at a program level of $1.62 billion with
    no budget authority required. The FFB loans are made at the cost of
    money to the Federal Government plus one-eighth of a percent. As a
    result, no budget authority is required for this part of the FFB
    electric loan program. Over the past 4 years, we have eliminated most
    of the backlog of loan applications and we strongly believe that the
    President's budget request will meet the demand during the fiscal year
    2006.
        The electric program provides financing for rural electric
    cooperative to expand and upgrade the transmission and distribution
    systems needed to meet the demands of economic growth across our
    Nation.

                  ADVANCED TELECOMMUNICATIONS IN RURAL AMERICA

        The area of rural telecommunications is the most rapidly changing
    aspect of rural utilities infrastructure. Job growth, economic
    development, and continued quality of life in rural America require
    access to today's high speed telecommunications.
        At the forefront of our telecommunications program is the broadband
    program created by the 2002 Farm Bill. The broadband loan program is
    distinctive from all other lending programs within the agency's
    portfolio. Nearly half of the applicants are ``start-up'' companies
    with little, if any, history of doing business in this industry. In
    addition, two distinctly different characteristics are at play--
    competition (rather than a monopolistic environment) and multi-state
    businesses (rather than a single cooperative or independent company
    serving a single rural community). Very few of the applications are
    designed to serve a single rural community or even a small grouping of
    geographically close rural communities. Most are applications
    requesting to serve 50, 75, or in excess of 100 rural communities in
    multiple States. In these multiple community applications, the vast
    majority of the communities already have broadband service available in
    some of the proposed service area; in some instances, from more than
    one provider. As you can imagine, these factors contribute to increased
    review and processing efforts.
        In fiscal year 2004, the agency made 33 loans totaling $602.9
    million which will serve 535 communities. This means those communities
    are connected to global business opportunities, improved quality
    education and modern health care that was not available without those
    high speed telecommunications connections. Since 2001,
    telecommunications loan programs have provided funding to make
    available internet access to 1.3 million rural residents.
        In order to balance fiduciary responsibility with mission delivery,
    USDA is focusing on ``quality loans.'' A failed business plan
    translates not only into loss of taxpayer investment, but deprives
    millions of citizens living in rural communities of the technology
    needed to attract new businesses, create jobs, and deliver quality
    education and health care services.
        Building on USDA's experience and local presence in serving rural
    communities, we bring a unique lending expertise that includes the
    tools necessary to examine, and provide solutions for, the financial
    and the technical challenges facing entities dedicated to serving rural
    America. This model has resulted in a lending agency with unprecedented
    success in our other programs and we are dedicated to bringing that
    same level of success to this program.
        From the beginning, the President has recognized the importance of
    broadband technology to our rural communities. The President stated,
    ``. . . we must bring the promise of broadband technology to millions
    of Americans . . . and broadband technology is going to be incredibly
    important for us to stay on the cutting edge of innovation here in
    America.'' The Bush Administration has been unwavering in its support
    for this and other programs that will revitalize and strengthen our
    rural communities.
        Let me assure you that we are on track, we remain focused, and we
    will complete our mission. We must continue to balance fiduciary
    responsibility with mission delivery everyday. Our unique lending
    expertise--the marriage of financial and technical analysis--helps to
    maximize the success rate of borrowers' business models. We will strive
    to do our part for rural America in fulfilling the President's promise
    of bringing broadband service to millions of citizens.

                           TELECOMMUNICATIONS BUDGET

        The fiscal year 2006 budget proposes a broadband loan program level
    of $359 million driven by $10 million in budget authority. This
    replaces the mandatory funding provided in the Farm Bill. In addition,
    $1.6 billion in unused loan authority that the Farm Bill provided
    remains available.
        Included in the discretionary broadband loans is $30 million in
    direct 4 percent loans requiring $2.4 million in budget authority; $299
    million in direct Treasury rate loans requiring $6.4 million in budget
    authority and $30 million in guaranteed loans requiring $1.1 million in
    budget authority.
        In the regular telecommunications program, the fiscal year 2006
    Budget calls for a program level of $669 million. Included is $145
    million in direct 5 percent loans, $424 million in direct Treasury rate
    loans, and $100 million in Federal Financing Bank (FFB) direct loans
    guaranteed by RUS. All of this is driven by $212,000 thousand in budget
    authority.
        The budget also reflects the Administration's commitment to resolve
    the complicated issues involving the administration of the Rural
    Telephone Bank by proposing dissolution. When the Rural Telephone Bank
    was created in 1971, there was no lender other than what was available
    through the USDA. However, there are now major lenders that provide a
    commercial source of rural telecommunications financing. In addition,
    funding for this program has exceeded demand. There are about $300
    million in unadvanced loan balances for loans available for 5 years or
    more. Dissolution will result in the government being repaid for all
    outstanding stock and the borrowers receiving a cash payout for their
    outstanding stock. Since the Administration is recommending
    dissolution, the budget does not request any budget authority to
    support RTB lending for fiscal year 2006. To ensure that rural
    telecommunications providers have access to adequate levels of
    financing, the budget requests that the standard RUS telecommunications
    loan programs be increased by $175 million.

                       DISTANCE LEARNING AND TELEMEDICINE

        Distance learning and telemedicine technologies are having a
    profound impact on the lives of rural residents. Helping rural schools
    and learning centers to take advantage of the information age and
    enabling rural hospitals and health care centers to have access to
    quality medical services only found in large hospitals, the distance
    learning and telemedicine (DLT) program pulls together the best of
    Federal assistance and local leadership.
        The DLT grants are budgeted at $25 million, the same as Congress
    appropriated for fiscal year 2005. The Budget proposes to zero out the
    loan program, simply because the nature of the prospective applicants,
    schools and hospitals, have placed the ability to repay loans out of
    reach.

                        WATER AND ENVIRONMENTAL PROGRAMS

        The water and environmental programs provide the most basic of
    infrastructure needs for rural citizens: clean, safe, affordable
    drinking water and ecologically sound waste disposal. No element is
    more vital to human life and dignity as clean, safe water. Rural
    communities are challenged to provide this vital service while facing
    increasing regulatory requirements and persistent drought conditions
    across a large area of the country.
        The budget request seeks $449.6 million in budget authority for a
    program level of $1.455 billion in loans and grants. The proposed loan
    levels are $1 billion in direct loans and $75 million in loan
    guarantees for water and waste disposal programs. The direct loan
    program requires $69 million in budget authority. To augment the loan
    programs, the budget request includes $377 million in grants. In
    addition, the budget requests an additional $3.5 million in solid waste
    management grants.

                                    SUMMARY

        Rural utility infrastructure programs are interwoven in the fabric
    of USDA Rural Development programs. To provide safe, clean, water;
    modern communications; and reliable electric power means businesses can
    develop, homes can have light and heat, and markets can be opened to
    the rest of the world.
                                     ______

                      Prepared Statement of Joseph J. Jen

        Mr. Chairman, members of the Subcommittee, it is my pleasure to
    appear before you to discuss the fiscal year 2006 budgets for the
    Research, Education, and Economics (REE) mission area agencies of the
    USDA. I have with me today Deputy Under Secretary Rodney Brown,
    Administrator of the Agricultural Research Service (ARS) Edward
    Knipling, Administrator of the Cooperative State Research, Education,
    and Extension Service (CSREES) Colien Hefferan, Administrator of the
    Economic Research Service (ERS) Susan Offutt, Administrator of the
    National Agricultural Statistics Service (NASS) Ronald Bosecker, and
    Office of Budget and Program Analysis' (OBPA) Deputy Director for
    Budget, Legislative, and Regulatory Systems Dennis Kaplan. Each
    Administrator has submitted written testimony for the record.
        Before addressing the fiscal year 2006 budget, I want to express my
    appreciation for the support received from Congress in our
    appropriations for fiscal year 2005. We fully understand the pressure
    the Congress, in addition to the Executive branch, is under to keep a
    tight reign on the budget and control the Federal deficit. As much as
    that was needed in developing the budget for fiscal year 2005, it is
    even more true for the fiscal year 2006.
        As you know, the President is committed to cutting the Federal
    deficit in half over the next 5 years. Reducing the Federal deficit is
    critical for continuing the current strength of the economy. As
    Secretary Johanns said in his testimony before this subcommittee, ``no
    department can opt out of helping in Federal deficit reduction. USDA
    must play its role as much as any department.'' In the same way, REE is
    not exempt from helping USDA achieve this government-wide goal.
        The President's fiscal year 2006 budget proposes $2.320 billion for
    the four REE agencies, $347.2 million less than the fiscal year 2005
    appropriations, and close to the fiscal year 2005 President's proposed
    budget of $2.403 billion. The importance of research in promoting a
    competitive and secure food and agriculture sector, safe food, and a
    healthy population, remains critical, even under constrained budgets.
    Recently at the Agricultural Outlook Forum, Secretary Johanns said,
    ``Advances in science and technology have always been a part of our
    success and they will continue to be.'' The phenomenal increases in
    agricultural productivity over many decades in this country are the
    product of science and technology. The same can be said for the
    increasingly environmentally-friendly production practices used across
    the Nation. Much of the improvement in our food safety system can be
    attributed to research, and the recently released Dietary Guidelines
    for Americans 2005 are firmly based on up-to-date research findings.
    The bottom line is that science and technology are the foundation of
    the American food and agricultural system.
        REE agencies are at the center of the research system, supporting
    the food and agricultural sector. They have a proud history over many
    decades of finding solutions to the challenges confronting farmers,
    ranchers, and others involved in agriculture, resulting in a high
    return on the Federal investment to our Nation, which enjoys a
    plentiful, affordable, and safe food supply. This remarkable history of
    success continues today, yielding new knowledge, technologies,
    statistics, and analysis for effectively addressing today's problems
    and building the scientific and technological foundation for addressing
    tomorrow's problems and opportunities.
        However, high quality and relevant research cannot guarantee a
    successful, competitive food and agricultural sector. Natural events,
    market conditions, and resistance to the adoption of new technologies
    can be barriers to the translation of new knowledge and technology into
    business gains. At the same time, in the absence of such research, the
    food and agricultural sector runs the risk of losing its competitive
    edge in global markets.
        A most notable example of addressing today's problems relates to
    the recent arrival of soybean rust on our shores. For some time
    scientists have been saying that this plant disease would inevitably
    arrive in the United States, carried by winds from South America where
    the disease has been residing for several years. REE agencies, their
    partners in other USDA agencies, the research and scientific community,
    State departments of agriculture, and soybean industry organizations,
    have been preparing for this anticipated event that became a reality
    last November in Louisiana. There are now 29 confirmed cases in nine
    States.
        Effective management and control of soybean rust relies on early
    detection, correct identification, and proper and timely application of
    fungicides. Starting in 1998, REE agencies have played a critical
    leadership role with the ultimate goal of providing producers with
    effective disease management options. For example, ARS scientists have
    developed a real-time rapid detection test that has been adopted by the
    Animal and Plant Health Inspection Service (APHIS). It will provide a
    quick, easy and accurate means to detect soybean rust as part of a
    national surveillance system. CSREES has been at the forefront of
    training first detectors. In June of 2004, a regional soybean rust
    teleconference attracted nearly 1,000 participants who grow or service
    nine million acres of soybeans. CSREES, in collaboration with APHIS,
    has also been instrumental in establishing a National Plant Diagnostic
    Network of strategically located university-based laboratories that
    support APHIS laboratories, facilitating rapid and accurate detection.
        In September 2004, ERS published an article on the economic risks
    of soybean rust in the United States in its publication, Amber Waves.
    The article indicated that the economic effects of the pathogen's entry
    into the United States could vary considerably, depending on growing
    conditions, the severity and spread of the disease, and producers'
    responses. This analysis presented policymakers and the soybean
    industry with information to make more informed decisions in responding
    to the detection of the soybean rust in 2004.
        Similar to our work on soybean rust, the REE agencies and their
    partners in the research community are also collaborating effectively
    in genomics research. The future of agriculture is in genomics and
    related fields such as proteomics and functional genomics. Sequencing
    the genome of important agricultural plants and animals and learning
    about the functions of different genes and genetic markers hold the
    promise of a whole new generation of agricultural products that are
    nutritionally enhanced, disease resistant, and less dependent on
    fertilizers and herbicides. Genetic research is also central to the
    development of rapid diagnostic tests, such as the ones used by APHIS
    to identify avian influenza and exotic Newcastle disease.
        Genomics is a prime example of research that takes years to
    complete and years to realize many of the benefits, but that fact makes
    it no less valuable. The ARS budget proposes an increase of $12.8
    million for animal and plant genomics and related research and
    preservation of animal and plant genetic resources. Under CSREES'
    National Research Initiative (NRI), $11 million is proposed for
    agricultural genomics research focused on the maize and swine genomes.
        Another pioneering research direction, such as nanotechnology,
    provides a new approach for addressing perennial challenges in
    agriculture and capitalizing on new possibilities. Nanotechnology
    refers to research and development at the atomic, molecular or
    macromolecular levels, in the length scale of approximately 1 to 100
    nanometer range. The technology takes advantage of novel properties and
    functions of systems and structures because of their size. Already used
    in both the medical and environmental arena, we are only beginning to
    explore the promise this technology holds for agriculture. For example,
    it could be used to develop healthy and tasty foods and products that
    can be identified and tracked based on nanoscale bar codes. Eight
    million dollars of the proposed increase in NRI funding will be
    allocated to nanotechnology.
        I would like to highlight three high priority programs in which the
    REE agencies have a major role that would be enhanced with additional
    funding in the President's proposed budget.
        Food and Agriculture Defense Initiative.--The interagency Food and
    Agriculture Defense Initiative, now in its second year, focuses on
    strengthening the Federal Government's capacity to identify and
    characterize bioterriorist attacks. The USDA component specifically
    relates to protecting the food supply and agricultural production,
    protecting USDA facilities, and ensuring USDA staff preparedness for a
    potential event. The fiscal year 2006 budget provides increased program
    funding of $35 million and $26 million for ARS and CSREES,
    respectively, to expand their participation in this initiative. This
    investment is just another step in President Bush's commitment to
    protect homeland security.
        The ARS increases will allow the agency to expand the National
    Plant Disease Recovery System designed to ensure that disease resistant
    seed varieties are continually developed and made available to
    producers in the event of a natural or intentional catastrophic disease
    or pest outbreak. The increased funds will also support the
    strengthening of ongoing ARS research on rapid response systems to
    selected agents, improved vaccines, and identification of genes
    affecting disease resistance.
        A $59 million request in the ARS buildings and facilities account
    will complete the modernization of the National Centers for Animal
    Health in Ames, Iowa. This consolidated ARS and APHIS facility will
    house and support an integrated, multidisciplinary scientific
    capability, combining animal disease research with the development of
    diagnostic tools and vaccines. Including its biosecurity level two
    (BSL-2), BSL-3, and BSL-3 Ag spaces, the Centers will be a state-of-
    the-art facility, unique in the world.
        The budget provides CSREES with $30 million, an increase of $21
    million, to maintain and enhance the National Diagnostic Laboratory
    Network of public agricultural institutions that serves as a backup to
    APHIS' diagnostic laboratories for both animals and plants. The network
    is playing an important role in the detection and control of soybean
    rust and sudden oak death. The network laboratories are now in a
    position to do confirmatory tests of soybean rust at the county and
    farm level and are ready to detect and track the rust in the coming
    growing season. The diagnostic laboratory network has also been
    important in identifying sudden oak death on nursery stock before being
    sold to the public. The initiative also includes $5 million for a
    CSREES competitive program that would promote the training of food
    system defense professionals who are critically needed in securing our
    Nation's agricultural and food supply.
        BSE Related Activities.--Bovine Spongiform Encephalopathy (BSE)
    continues to be a challenge for the livestock sector. While no new BSE
    has been detected in the United States since the first case in December
    2003, two cases have been identified in Canada. Building on its current
    BSE and related prion research program, the budget provides ARS with an
    additional $7.5 million to further our scientific understanding of the
    disease and develop technology needed by regulatory agencies to
    establish science-based policies and control programs.
        Nutrition Research and Education.--Concern continues regarding the
    epidemic of obesity in our Nation. Particularly disquieting is the
    incidence of obesity in children, estimated to be approximately 15
    percent and essentially doubling between 1980 and 2000. At any age and
    for any group, the causes of obesity are many and complex. They include
    reduction in physical activity, greater reliance on convenience foods
    and restaurants, and more basically, the consumption of more calories.
    The reasons behind these behavior choices are complicated and not well
    understood. Moreover, without a better understanding of the drivers of
    these behaviors, it will be difficult to design effective types of
    interventions, such as education programs, public information
    announcements, or community campaigns, to help individuals and families
    achieve and maintain healthy weights.
        USDA, with its food assistance, nutrition education, and nutrition
    research programs, plays an important role in promoting healthy
    nutrition and weight, in general, and in addressing the obesity, in
    particular. Contributing to the President's Healthier United States
    initiative, the fiscal year 2006 budget proposes increases for ARS,
    CSREES, and ERS that will strengthen the Department's capacity to
    address this major national health problem and associated issues. The
    increases will focus principally on gaining a better understanding of
    the factors influencing food consumption patterns and the development
    of effective interventions to promote healthy dietary choices and
    prevent obesity.
        An ARS increase of $6 million will improve the accuracy and ethnic
    representation of ``What We Eat in America,'' a component of the
    National Health and Nutrition Examination Survey (NHANES). This joint
    USDA/Centers for Disease Control and Prevention survey is the principal
    source of Nation-wide information on individuals' food consumption and
    associate health status. An additional $2.3 million will be used for
    nutrition research on obesity and nutrition survey research on the
    energy and nutrient content of food consumed by minority populations.
        The CSREES increase of $7.5 million in the NRI will focus on
    understanding the environmental and social factors influencing
    behaviors leading to childhood obesity.
        A $0.6 million increase in the ERS budget will support a behavioral
    economic research program to identify strategies for developing
    effective nutrition messages that motivate consumers to adopt more
    healthful diets.
        The Expanded Food and Nutrition Education Program (EFNEP) in the
    CSREES budget works directly with low-income individuals to help them
    better manage food budgets, gain skills in safe food preparation, and
    improve their diets. The program has a very impressive track record of
    achieving positive, sustained behavioral changes related to food and
    diet. The fiscal year 2006 proposed budget provides EFNEP an increase
    of $4.5 million to $63 million, reaching a legislatively required
    funding level needed for the 1890 Land-Grant Institutions to
    participate in the program. The increase allows the program to reach
    more people in more counties.
        Before turning specifically to the REE agency budgets, I would like
    to discuss a specific proposal found in the CSREES budget. The
    Administration strongly believes that competitive research programs
    provide the best mechanism for ensuring the allocation of funds to the
    highest quality projects. Consistent with this policy position, this
    year's CSREES budget proposes the redirection of funds from the Hatch
    and McIntire-Stennis formula research programs to competitively awarded
    grant programs over the next 2 years, and the reallocation of Animal
    Health research formula funds in fiscal year 2006. A new State
    Agricultural Experiment Station (SAES) Competitive Grants Program of
    $75 million will support the same types of research at Agricultural
    Experiment Stations that are currently supported by formula funds. The
    budget also proposes eliminating the cap on indirect costs for CSREES
    grants. Instead, the indirect cap for grants will be at a negotiated
    level for each institution, a practice consistent with most other
    Federal research grant programs.
        Finally, all four REE agencies are currently initiating or
    strengthening a formal process framed by the criteria of relevance,
    quality and performance called for in the President's Management Agenda
    initiative on research and development programs. These agency processes
    are centered on reviews by external scientists that provide valuable
    objective insights and recommendations for the programs, as well as
    ratings that are used in the Program Assessment Rating Tool (PART)
    employed by the Office of Management and Budget under the President's
    Management Agenda. I am pleased to report that the three REE agency
    programs that were reviewed under the PART in fiscal year 2004 received
    scores of moderately effective, and we continue to improve agency
    performance measures as part of a larger effort to enhance the
    effectiveness of the REE programs.

                      REE AGENCY FISCAL YEAR 2006 BUDGETS

        I would now like to turn briefly to the budgets of the four REE
    agencies.
        Agricultural Research Service.--As the principal intramural
    biological and physical science research agency in USDA, ARS plays a
    critical role for the Department and the larger agricultural community
    in conducting research to develop new scientific knowledge and
    technologies to solve high priority agricultural problems of broad
    scope. It also is home to the National Agricultural Library (NAL), the
    Nation's major information resource in the food, agricultural and
    natural resource sciences. The fiscal year 2006 budget requests $1.1
    billion for ARS. Within that total, $996 million is proposed for
    research and information programs, approximately $100 million less than
    was appropriated in fiscal year 2005. The $65 million proposed for
    buildings and facilities is principally directed to complete the
    modernization of the National Centers for Animal Health in Ames, Iowa.
        The ARS budget proposes increases totaling $97 million for high
    priority program areas of national and regional importance, such as
    food safety, emerging and exotic diseases, BSE, human nutrition/
    obesity, genomics and genetic resources, and climate change. To offset
    these increases the budget proposes the elimination of approximately
    $175 million in Congressional earmarks and $28 million in other project
    terminations.
        In addition to those previously described, the ARS budget proposes
    increases for controlling emerging diseases and invasive species
    affecting animals ($8.6 million) and plants ($17.7 million), a
    significant portion of which is included in the Food and Agriculture
    Defense Initiative. Targets for the fiscal year 2006 animal protection
    research program include developing systems for rapid response to
    selected agents and implementing a vaccine research program for control
    and eradication of biological threat agents. Plant protection research
    targets for fiscal year 2006 include developing and releasing to
    producers new varieties of plant stock with insect and disease
    resistance. An increase of $15.3 million in food safety research is
    proposed to develop surveillance, sampling, and detection methods to
    rapidly detect and identify foodborne pathogens as part of the Food and
    Agriculture Defense Initiative.
        High energy prices, instability in petroleum exporting countries,
    environmental concerns, and the potential for new markets for
    agricultural products have generated great interest in the development
    of bioenergy. ARS continues to conduct research to generate scientific
    knowledge and technologies to support production of affordable
    bioenergy products. An increase of $2.5 million will be used to
    accelerate this bioenergy research and technology program, as well as
    other biobased products research. Fostering increased use of renewable
    fuels and decreasing our dependence on foreign oil is a key component
    of the President's energy plan.
        Agricultural production is vulnerable to changes in climate, such
    as rising temperatures, changing amounts of precipitation, increased
    variability in weather, and increases in the frequency and intensity of
    extreme weather events. These environmental changes also offer
    opportunities for agriculture to help address the undesirable
    accumulation of greenhouse gasses. An increase of $3.2 million in the
    President's budget for the Climate Change Research Initiative will
    support research providing information on balancing carbon storage,
    emissions, and agricultural productivity in different agricultural
    systems across the Nation. In particular, the research will generate
    new knowledge on how to manage livestock, manures, fertilizers,
    biological nitrogen fixation, and soils to minimize emissions and
    increase sinks for greenhouse gasses. Other increases will support
    research on agricultural air quality ($0.9 million) and water
    protection and management ($0.9 million).
        In the age of digital information, NAL is providing national
    leadership through the development of the National Digital Library of
    Agriculture. The requested increase of $1.9 million will allow NAL to
    enhance development and delivery of content for the digital library, as
    well as continue to integrate the AGRICOLA database into the digital
    library.
        Advances in information technology (IT), including the ability to
    store and share information, are enabling agencies, such as ARS, to
    gain great efficiencies and collaborative power in conducting research.
    These advances, however, also make ARS' IT infrastructure more
    vulnerable to cybersecurity attacks. The safety of sensitive research
    information from unauthorized intruders is critical to the agency's
    research program. As part of the USDA Homeland Security request, the
    fiscal year 2006 budget proposes $3.6 million to strengthen ARS'
    cybersecurity program by increasing the number of cybersecurity
    officers and securing and implementing new cybersecurity tools.
        Cooperative State Research, Education, and Extension Service.--The
    President's fiscal year 2006 budget provides just over $1 billion for
    CSREES. Compared to fiscal year 2005, the budget includes an increase
    of $38 million in on-going programs and the elimination of $181 million
    in unrequested increases. The Administration's request places a strong
    emphasis on increases in the REE mission area for Food and Agriculture
    Defense and peer-reviewed competitive grants. In providing critical
    funding for the research, education, and extension programs of the Land
    Grant system and other universities and organizations across the
    country, CSREES continues to play a central role in the generation of
    new knowledge and technology and the transfer of that knowledge and
    technology to producers and consumers.
        As described above, the budget proposes shifting the research
    formula funds under the Hatch Act, Cooperative Forestry Research
    Program (McIntire-Stennis), and Animal Health and Disease Research
    programs to competitive programs over the next 2 years. The proposal
    for fiscal year 2006 redirects half of the Hatch and McIntire-Stennis
    funds and all of the Animal Health and Disease funds. State
    Agricultural Experiment Stations will be eligible to apply for grants
    under the new State Agricultural Experiment Station (SAES) Competitive
    Grants Program funded at $75 million. Other formula funds will be
    shifted to the NRI which would be funded at $250 million, an increase
    of $70 million over the fiscal year 2005 appropriation level. The
    details of the new SAES program will be developed by CSREES in
    consultation with the land grant institutions and other stakeholders.
        Administration of research previously funded under the competitive
    406 integrated program has been moved to the NRI and SAES Competitive
    Grants Program, where the same range of research will be supported.
    Finally, the budget proposes eliminating the current indirect cost cap
    for CSREES grants, currently set at 20 percent. Instead, the cap will
    be negotiated for each institution, following the standard practice of
    most other Federal competitive research programs. Lifting the cap
    responds to frequently voiced concerns that researchers in some
    institutions are discouraged from applying for NRI grants because the
    20 percent cap does not cover true indirect costs to the grantee
    institution.
        The NRI, the agency's flagship competitive program, continues to be
    a very valuable avenue for supporting cutting-edge research conducted
    by the finest scientists across the country. The $70 million increase
    in the NRI for fiscal year 2006 will support new research in genomics,
    nanotechnology for functional foods and food safety, and emerging
    issues in food and agricultural defense. The investment in food and
    agricultural defense will help fill critical knowledge gaps in real
    time or near real time rapid detection tests and monitoring
    surveillance systems of animal and plant disease. Extensive efforts are
    underway in several agencies to produce rapid, sensitive detection
    tools. However, their value relies on their being used correctly to
    help minimize the probability that animal disease outbreaks in the
    United States may spread widely before containment procedures begin.
    CSREES will support research that fills this critical knowledge gap on
    the use of these tests in real time or near real time detection and
    monitoring.
        The budget calls for an increase of $1.5 million in the CSREES
    Graduate Fellowship Grant Program. Despite recent gains in support for
    minority-serving institutions and programs encouraging diversity in
    higher education and the workforce, the Nation faces chronic challenges
    in promoting human capital development that enables all citizens to
    realize their educational potential. The food and agricultural system
    would benefit from an expanded base of skilled scientists, technicians,
    and other professionals as the baby-boomers begin to retire. The
    proposed increase will allow CSREES to further expand the number of
    fellowships offered at the Master of Science level, essential for
    recruiting minority graduate students.
        Economic Research Service.--ERS is provided $80.7 million in the
    President's fiscal year 2006 budget. As the Department's principal
    intramural economics and social science research agency, ERS conducts
    research and analysis on the efficiency, efficacy, and equity aspects
    of issues related to agriculture, food safety, human nutrition, the
    environment, and rural development. Its programs and products are
    shaped principally to serve key decision-makers who routinely make or
    influence public policy and program decisions.
        The budget provides an increase of $5.8 million to continue the
    development of ERS's Consumer Data and Information System, a data and
    analysis framework of the post-farm gate food system. It is designed to
    identify, understand and track changes in food support and consumption
    patterns for use in policy decisions in the food, health, and consumer
    arenas. Fiscal year 2005 appropriations provided funds for implementing
    one component of the system, the Flexible Consumer Behavior Survey
    Module (FCBSM). The survey will be coordinated with the NHANES survey
    managed by the National Center for Health Statistics of the Centers for
    Disease Control and Prevention. in order to link data on individual's
    knowledge and attitudes about dietary guidance and food safety with
    data on food intake, dietary status, and health outcomes.
        The increased funds will support a second component, a Rapid
    Consumer Response Module that will provide real-time information on
    consumer reactions to unforeseen events and disruptions, current market
    events, and government policies. The funds will also be used to create
    a Food Market Surveillance System of surveys and analyses to identify
    food consumption patterns and how consumers respond to changes in the
    food market place and in customers' lifestyles over time.
        The data and analytical capacity made possible through the proposed
    Consumer Data and Information System is crucial to understanding the
    quickly evolving consumer-driven food and agricultural system. The
    information from this system will help producers and processors to
    continue competing effectively in domestic and global markets and will
    help policymakers to identify and develop strategies addressing
    nutrition and obesity issues at different levels of the food system.
        National Agricultural Statistics Service.--NASS' budget requests
    $145.2 million, an increase of $16.7 million over fiscal year 2005.
    NASS' comprehensive, reliable, and timely data are critical to policy
    decisions, maintaining stable agricultural markets, and ensuring a
    level playing field for all users of agricultural statistics.
        The budget provides $7 million for continuing a multiyear
    initiative begun in fiscal year 2004 to restore and modernize NASS'
    core estimates program to meet data users' needs with an improved level
    of precision. A second increase of $1.8 million will incrementally
    improve statistically defensible survey precision for small area
    statistics that are used by the Risk Management Agency and the Farm
    Service Agency in USDA, among others.
        The Census of Agriculture, conducted by NASS, provides
    comprehensive data on the agricultural economy on a 5-year cycle. In
    the fiscal year 2006 budget, NASS is requesting an increase of $6.5
    million to prepare for the 2007 Census, including finalizing, field
    testing and evaluating the questionnaire.

                                    SUMMARY

        In summary, I want to reinforce the message that, while developed
    within the context of the need to reduce the Federal deficit, the REE
    budget reflects a continuing commitment to investment in high priority
    agricultural research, statistics, education, and extension programs.
    As such, it supports the Federal commitment to solving today's problems
    and challenges faced by agricultural producers and to developing the
    knowledge and tools of cutting-edge science to address future problems
    and explore new scientific advances. This concludes my statement. Thank
    you for your attention.
                                     ______

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

        Mr. Chairman and members of the Subcommittee, I appreciate this
    opportunity to present the Agricultural Research Service's (ARS) budget
    recommendations for fiscal year 2006. The President's fiscal year 2006
    budget request for ARS' research programs is $996.1 million, a net
    decrease of $105.9 million from the fiscal year 2005 funding level. The
    budget recommends $87.9 million in new and expanded research programs
    which address the Nation's highest food and agriculture priorities.
    Nearly half of the increase requested, $42.6 million, is in support of
    the Federal Government's initiative to strengthen the Nation's homeland
    security. ARS homeland security research focuses on the areas of food
    safety, emerging and exotic diseases of animals and crops, and the
    National Plant Disease Recovery System. There are also new and expanded
    initiatives in critical research areas, such as Bovine Spongiform
    Encephalopathy (BSE), invasive species of animals and plants, and
    obesity. Other ARS program initiatives include research on genetics and
    genomics, biobased products and bioenergy, air and water quality, and
    climate change. The Agency is also requesting an increase of $9.3
    million to finance pay costs required in fiscal year 2006.
        The budget again proposes the termination of unrequested research
    projects and resources appropriated in recent years. The appropriations
    associated with the proposed project terminations total $203.1 million.
    The savings to be achieved through the proposed terminations will be
    redirected to finance the higher priority research initiatives proposed
    in ARS' budget, as well as to help reduce overall Federal spending.
        The ARS budget also includes $64.8 million under the Buildings and
    Facilities account for the design, modernization, and construction of
    ARS facilities. In particular, the budget requests $58.8 million for
    the completion of the modernization of the National Centers for Animal
    Health at Ames, Iowa.

                           PROPOSED PROGRAM INCREASES

        Food Safety ($15.3 million).--Ensuring the safety of the Nation's
    food supply is essential and vitally important to U.S. Homeland
    Security. Bioterrorism against our food supply would affect the health
    and safety of consumers and their confidence in the safety of the food
    they consume. It would also have far-reaching impacts on the country's
    economy, given that U.S. agriculture contributes over $1 trillion to
    the gross domestic product. ARS research will focus on assessing the
    vulnerabilities of the food supply, strengthening and expanding
    laboratory preparedness, and developing technologies that rapidly
    identify suspected food pathogens and toxins. ARS will work in these
    areas of prevention, detection, and response with the Food Safety and
    Inspection Service and other USDA agencies through programs such as the
    Collaboration for Animal Health and Food Safety Epidemiology.
        Emerging and Exotic Diseases of Animals and Plants ($19.5
    million).--The United States is increasingly vulnerable to emerging
    animal and plant diseases which could threaten the country's Homeland
    Security. The threat of new diseases--whether they are a result of
    bioterrorism or of naturally occurring epidemics--is an urgent and
    growing challenge to livestock producers. Bovine Viral Diarrhea in
    cattle, Porcine Reproductive Respiratory Syndrome in swine, and Marek's
    disease virus in chickens are examples of these exotic diseases.
    Harmful animal diseases introduced into the United States in recent
    years from foreign countries include Avian Influenza and Exotic
    Newcastle Disease. Brucellosis, Leptospiroris, and West Nile Virus are
    still other examples of zoonotic diseases that pose a threat not only
    to animals but to humans as well. Similarly, exotic and emerging plant
    diseases--wheat and barley rusts, citrus canker, and corn viruses--
    present a potential threat to the Nation. With the proposed increase,
    ARS will develop vaccines, intervention strategies, and diagnostics for
    the prevention, detection, identification, control, and eradication of
    biological threat agents. ARS will also strengthen its collaborative
    partnerships at the national and international levels to obtain access
    to essential agents and data.
        National Plant Disease Recovery System ($4.2 million).--The
    emergence or spread of certain plant diseases, such as soybean rust,
    citrus variegated chlorosis, or bacterial wilt, could seriously harm
    America's agriculture. Recovery from a significant disease outbreak
    requires a national system to manage host/pathogen interactions and
    deploy resistant plant resources using cultural, biological, and
    chemical control strategies. Homeland Security Presidential Directive
    (HSPD-9) has charged ARS with the responsibility for leading this
    effort with the Cooperative State Research, Education and Extension
    Service (CSREES), the Animal and Plant Health Inspection Service
    (APHIS), and others. ARS will use the proposed increase to minimize the
    impacts of devastating crop diseases by documenting and monitoring
    plant diseases, developing germplasm and plant varieties with improved
    disease resistant characteristics, implementing integrated pest
    management approaches, and transferring genetic resources (i.e.,
    disease resistant plant varieties) to its customers.
        Bovine Spongiform Encephalopathy ($7.5 million).--BSE is a
    progressive, degenerative, fatal disease affecting the central nervous
    system of adult cattle. It is believed that eating contaminated beef
    products particularly from BSE-affected cattle causes a variant form of
    Creutzfeldt-Jacob Disease in humans. The first case of BSE was
    identified in the United States on December 23, 2003. We must discover
    the cause of BSE and develop diagnostic tools to protect the U.S. food
    animal industry and human health. The proposed increase will allow ARS
    scientists to enhance the implementation of a national, coordinated
    research program (with European scientists and others) in BSE
    pathogenesis, diagnostics, and intervention.
        Invasive Species ($6.8 million).--The security of the U.S.
    livestock and poultry industries is threatened by the emergence of
    animal parasites. Of particular concern is the worldwide emergence of
    drug resistant nematodes and protozoa. Plants are also at risk. Sudden
    Oak Death has had negative effects on California's plant nurseries.
    Salt Cedar and Yellow Starthistle (invasive weeds) have caused
    agricultural and environmental damage in several western States. Lobate
    Lac Scale, Asian Longhorned Beetle, and Emerald Ash Borer (invasive
    insects) have caused damage to a wide range of plant species. ARS will
    use the proposed increase to target its research on controlling Sudden
    Oak Death, Salt Cedar, Yellow Starthistle, Lobate Lac Scale, Asian
    Longhorned Beetle, and Emerald Ash Borer. It will also develop control
    technologies for invasive drug resistant nematodes and protozoa of
    livestock and poultry. These new technologies will help facilitate
    trade of U.S. commodities and reduce the risk of new harmful species
    being inadvertently introduced into the United States.
        Geonomics ($9.2 million).--Genomics holds the key to maintaining
    America's agricultural competitiveness in global markets. Advances in
    genomics research can improve the production and quality of food
    products, prevent animal and plant diseases, and produce foods which
    are richer in nutrients. ARS needs to continue its work on
    characterizing, identifying, and manipulating the useful properties of
    genes and genomes. In this regard, ARS will use the proposed increase
    to identify genes that influence animal and plant growth and quality,
    disease resistance, and other economically important traits. ARS will
    continue to coordinate its genomics research with NIH's National Human
    Genome Research Institute, CSREES, and the National Science Foundation.
        Genetic Resources ($3.6 million).--The rate of extinction of lines
    and strains of food animals and plants is rapidly accelerating. The
    Nation needs a more comprehensive program to maintain threatened
    germplasm to prevent the loss of genetic diversity. An adequate supply
    of useful genes is essential in the event of bioterrorism or other
    crises (e.g., Foot and Mouth Disease, Exotic Newcastle Disease, etc.).
    With the proposed increase, ARS will enhance its ability to collect,
    identify, characterize, and incorporate plant germplasm into
    centralized gene banks. The additional funding will help sustain ARS'
    National Plant Germplasm System repositories. The additional funding
    will also enable further development of cryopreservation technologies
    for the long-term storage of important animal germplasm (i.e., of
    poultry, aquaculture, cattle and swine).
        Human Nutrition/Obesity Research ($8.3 million).--Obesity is one of
    this country's fastest growing public health problems. It contributes
    to heart disease, cancer, diabetes, and other illnesses resulting in
    hundreds of billions of dollars in health care costs each year.
    Understanding food consumption trends and the factors that influence
    dietary choices is critical for developing strategies for preventing
    and mitigating obesity. ARS will use the proposed increase to conduct
    nutrition surveys and research to prevent obesity in children, middle-
    aged adults and others.
        Biobased Products/Bioenergy Research ($2.5 million).--Soaring
    energy prices, environmental concerns, and depressed agricultural
    commodity prices highlight the need to develop alternative domestic
    sources of energy. In addition, chemical and energy companies are
    seeking renewable feedstocks for the production of chemicals and
    materials that are currently made from petroleum feedstocks. The
    Biomass Research and Development Act of 2000 promotes the use of
    biobased industrial products, and the Food Security and Rural
    Investment Act of 2002 encourages the development and use of bioenergy.
    ARS will focus its research on: (1) improving the quality and quantity
    of agricultural biomass feedstocks for the production of energy, (2)
    developing technologies to produce biofuels from agricultural
    commodities, and (3) developing technologies leading to new value-added
    products from food animal byproducts. Increased development of
    bioenergy and biobased products will expand market opportunities for
    U.S. agriculture and reduce the Nation's dependence on petroleum
    imports from unstable regions.
        Air and Water Quality ($1.8 million).--Millions of Americans are
    exposed to air pollution levels that exceed the Environmental
    Protection Agency's air quality standards. Agricultural activities,
    such as animal production operations, which produce ammonia,
    particulate matter, and volatile organic compounds, can adversely
    affect air quality. Another concern is the Nation's 11,000 small
    watershed dams that no longer meet current safety standards and need to
    be updated. ARS will use the proposed increase to develop new
    technologies that reduce gaseous and particulate matter emissions from
    animal feeding operations. It will also improve water quality and
    environmental benefits through agricultural systems research, as well
    as develop technologies which can be used to rehabilitate the Nation's
    aging watershed dams.
        Global Climate Change ($3.2 million).--Climate change encompasses
    global and regional changes in the earth's atmospheric, hydrological,
    and biological systems. Agriculture is vulnerable to these
    environmental changes. The objective of ARS' global change research is
    to develop the information and tools necessary for agriculture to
    mitigate or adapt to climate change. ARS has research programs on
    carbon cycle/storage, trace gases (i.e., methane and nitrous oxide),
    agricultural ecosystem impacts, and weather/water cycle changes. ARS
    will use the proposed increase to develop climate change mitigation
    technologies and practices for the agricultural sector. Specifically,
    ARS will: (1) conduct interdisciplinary research leading to
    technologies and practices for sustaining or enhancing food and fiber
    production and carbon sequestration by agricultural systems exposed to
    multiple environmental and management conditions, (2) expand the
    existing network of ARS sites conducting measurements of greenhouse gas
    fluxes between the atmosphere and the land, and (3) identify ways to
    decrease methane emissions associated with livestock.
        National Digital Library for Agriculture and Improved Agricultural
    Information Services ($1.9 million).--In 2001, both a ``Blue Ribbon
    Panel'' and an advisory board concluded that NAL needed increased
    resources to meet its potential, taking advantage of technological
    innovations for timely information access and retrieval. The proposed
    funding will support the development of additional information content
    for emerging diseases effecting crops and continue the revitalization
    of NAL, enabling it to better deliver relevant information products,
    satisfy increasingly complex customer demands, and provide leadership
    as the premier agricultural information resource of the United States.
        Information Technology ($4.2 million).--ARS information technology
    (IT) systems and networks are exposed to an unprecedented level of
    risk. Of particular importance is safeguarding the agency's pathogenic,
    genomic, and other sensitive research information from being acquired
    or destroyed by unauthorized intruders through unprotected or
    undetected cyber links. Agencywide centralized security measures are
    needed to counter security threats. ARS must also ensure that its IT
    infrastructure (i.e., computers, network hardware, etc.) is up-to-date
    and reliable. ARS will use the proposed increase to replace, upgrade,
    and secure its IT equipment and systems.

                          PROPOSED OPERATING INCREASES

        In addition to the proposed research initiatives, ARS' fiscal year
    2006 budget provides funding to cover costs associated with pay raises.
    An increase of, $9.3 million, is critically needed to avoid erosion of
    the agency's base resources. Absorption of these costs reduces the
    number of scientists and support personnel essential for conducting
    viable research programs.

                           PROPOSED PROGRAM DECREASES

        ARS' budget proposes a decrease of $203.1 million that currently
    finances unrequested or lower priority research projects added in
    recent years. The fiscal year 2006 budget requires that we exercise
    fiscal discipline to live within available resources. Within those
    resource levels, the Administration has had to exercise its judgment
    about what is needed to fund the highest priority programs. The
    initiatives described earlier meet that test. Therefore, other
    programs, such as those not previously requested by the Administration,
    could not be funded within the Budget.

                 PROPOSED FUNDING FOR BUILDINGS AND FACILITIES

        The fiscal year 2006 budget recommends $64.8 million for ARS'
    Buildings and Facilities account. Most of the proposed funding, $58.8
    million is for the National Centers for Animal Health in Ames, Iowa.
    The National Centers for Animal Health are critical to supporting
    American agriculture from both domestic and foreign diseases
    intentionally or unintentionally introduced. The new facility combines
    ARS' National Animal Disease Center with the Animal and Plant Health
    Inspection Service's National Veterinary Services Laboratory and the
    Center for Veterinary Biologics. The Centers will provide an
    integrated, multidisciplinary scientific capability, combining animal
    disease research with the development of diagnostic tools and vaccines.
    This request will provide the remaining funds necessary to complete
    this state-of-the-art complex.
        ARS is also recommending $3 million for the planning and design of
    new, up-to-date containment facilities at the Foreign Disease Weed
    Science Research Laboratory at Ft. Detrick, Maryland. ARS scientists at
    this facility conduct research on foreign plant pathogens that must be
    kept under containment and pose a potential threat to American
    agriculture.
        In addition, ARS is recommending $3 million for continuation of
    repairs to the National Agricultural Library. Constructed in 1968, many
    of the building's systems and structures require replacement. In fiscal
    year 2006 ARS plans to finance the replacement of windows and to
    complete the repairs to the brick veneer.
        Mr. Chairman, this concludes my presentation of ARS' budget
    recommendations for fiscal year 2006. I will be happy to respond to any
    questions the Committee my have.
                                     ______

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

        Mr. Chairman and Members of the Committee, I appreciate the
    opportunity to submit the proposed fiscal year 2006 budget for the
    Cooperative State Research, Education, and Extension Service (CSREES),
    one of the four agencies in the Research, Education, and Economics
    (REE) mission area of the United States Department of Agriculture
    (USDA).
        The CSREES fiscal year 2006 budget proposal is just over $1
    billion. CSREES, in concert with the Secretary of Agriculture and the
    intent of Congress, works in partnership with the land-grant university
    system, other colleges and universities, and public and private
    research and education organizations to initiate and develop
    agricultural research, extension, higher education, and related
    international activities to advance knowledge for agriculture, the
    environment, human health and well-being, and communities. In addition,
    CSREES implements grants for organizations to better reach and assist
    disadvantaged farmers in accessing programs of USDA. These partnerships
    result in a breadth of expertise that is ready to deliver solutions to
    problems facing U.S. agriculture today.
        The fiscal year 2006 CSREES budget request aligns funding and
    performance with the USDA strategic goals. CSREES manages its many
    budget elements in support of research, education, extension, and
    outreach programs as part of a cohesive whole supporting all five of
    the Department's strategic goals. Distinct performance criteria,
    including strategic objectives and key outcomes with identified annual
    targets, are defined for each program or activity. As part of an
    integrated budget and performance process, CSREES conducts periodic
    portfolio reviews by external experts to monitor overall program
    progress, suggest alternative approaches, and propose management
    improvements.
        The CSREES fiscal year 2006 budget proposal supports the
    Administration's commitment to competitive programs, in which awards
    are made based on an objective peer-review process, and to streamlining
    program delivery. Over the past several years, CSREES has demonstrated
    the capacity to reshape competitive programs to address not only
    fundamental science through individual investigator research, but also
    programmatic, multi-institutional efforts aimed at short to
    intermediate term problem solving, while maintaining the highest
    standard of peer-review. We believe this is the most effective way of
    achieving quality results that respond to critical program needs.
    Therefore, the fiscal year 2006 budget proposes to: (a) phase out
    funding for the Hatch Act and McIntire-Stennis Cooperative Forestry
    programs within 2 years; (b) eliminate the Animal Health and Disease,
    Section 1433 Research Program; and (c) redirect funding for Section 406
    activities, formerly supported under the Integrated Activities account,
    to the Research and Education account. Activities for these programs
    will be supported through the National Research Initiative (NRI) and
    the new State Agricultural Experiment Station (SAES) Competitive Grants
    Program. This shift of funding will allow greater flexibility and
    responsiveness to critical agricultural issues.
        CSREES continues to provide new opportunities for discoveries and
    advances in knowledge through the NRI program. The fiscal year 2006
    budget request of $250 million for the NRI is a significant step
    towards reaching the authorized level of $500 million, and it is a
    strong statement of the importance that the Administration places on
    competitively awarded grants to advance knowledge for agriculture. The
    NRI will continue to support current high priority programs with an
    emphasis on critical issues. Through the NRI Coordinated Agricultural
    Project (CAP), multi-million dollar awards support multi-year large-
    scale projects to promote collaboration, open communication, and
    coordinate activities among individuals, institutions, States, and
    regions to address priority issues of national importance. A $5 million
    CAP award supports research to improve rice crops by using new genomic-
    based tools. The support included a multidisciplinary team of 14
    institutions that will engage rice extension and industry personnel in
    agricultural genomics research to explore the potential of the
    technology. Extension personnel also will educate the public on the
    merits of applying genome information to improve agricultural crops.
    Another $5 million CAP award is being led by the University of Maryland
    and includes researchers and extension specialists representing 17
    States. It is expected that the research and education from this
    project will help prevent and control avian influenza, a disease that
    continues to threaten the commercial poultry industry with millions of
    dollars in losses.
        Expanded partnerships with other Federal agencies on research
    topics of mutual interest will be possible with the increase in the NRI
    funding. For example, research on the maize genome will be supported
    through partnership with the National Science Foundation and the U.S.
    Department of Energy. A comprehensive sequence resource will be
    developed for the maize genome, providing the scientific community with
    accurate and detailed information in a timely and cost-effective
    manner. This information will include a complete sequence of all maize
    genes and the full integration of the sequence with genetic and
    physical maps leading to improved maize varieties. The NRI also will
    support research on swine genomics. The Interagency Working Group on
    Domestic Animal Genomics has identified the swine genome as a high
    priority. The complete genomic sequence of swine is needed to provide
    the basic information to pursue studies of gene function and marker-
    assisted selection of animals for genetic improvement of swine in
    production systems. We are requesting an increase of $11 million in the
    NRI to support genomics research.
        An increase of $4.6 million is proposed to address emerging issues
    in food and agricultural defense under the NRI. The requested funding
    will support research, education, and extension activities to increase
    the safety and security of U.S. agriculture and food systems to
    minimize threats to domestic plants and animals posed by infectious
    diseases and invasive species.
        In fiscal year 2006 an increase of $8 million is proposed under the
    NRI for nanotechnology for functional foods and food safety. The
    requested funds will support innovative research in nanoscale science
    and engineering that will have specific applications to agriculture and
    food systems. Nanotechnology studies will lead to nutrient dense,
    healthful and flavorful foods with consumer appeal. Food function will
    be enhanced by using nanotechnologies to facilitate the delivery of
    health-providing bioactive nutrients to consumers.
        Under the NRI, an increase of $7.5 million is proposed in fiscal
    year 2006 for nutrition and obesity studies with emphasis on research
    and evaluation methods to prevent childhood obesity. Research efforts
    will be specifically aimed at understanding the environmental and
    social factors influencing behaviors leading to childhood obesity and
    how to change them to reduce and prevent obesity. In addition,
    requested under the NRI is an increase of $39.3 million for ongoing
    research and integrated research and education projects that focus on
    water quality, food safety, and pest-related programs formerly funded
    under the Integrated Activities account.
        The fiscal year 2006 budget also proposes a change to the general
    provisions of the fiscal year 2005 Consolidated Appropriations Act to
    increase from a maximum of 20 percent to a maximum 30 percent the
    amount provided for the NRI that may be used for competitive integrated
    activities.
        As part of a coordinated plan to shift formula funding to
    competitively awarded grants and replace some of the multistate efforts
    currently supported by formula funds, CSREES requests $75 million for
    the new SAES Competitive Grants Program. As with the current multi-
    State program, funding would be available to all State Agricultural
    Experiment Stations. This program will support systemwide research
    planning and coordination, as well as regional, State, and local
    research in such areas as new products/new uses, social sciences, and
    the environment, including ecosystem management. In fiscal year 2006,
    it is proposed that research programs focused on methyl bromide and
    organic transition could be supported through this program. However, we
    will work closely with the SAES to ensure that this program also is
    responsive to their needs.
        In continuing and expanding our efforts for agricultural security
    and in support of the President's Food and Agriculture Defense
    Initiative, CSREES, through cooperative efforts with the Animal and
    Plant Health Inspection Service, has established a unified Federal-
    State network of public agricultural institutions to identify and
    respond to high risk biological pathogens in the food and agricultural
    system. The network is comprised of 13 State animal diagnostic
    laboratories and 6 plant diagnostic laboratories, strategically located
    around the country. These 19 key laboratories are developing a two-way,
    secure communications network with other university and State
    Department of Agriculture diagnostic laboratories throughout their
    respective regions. The diagnostic laboratories are responsible for
    identifying, containing, and minimizing the impact of exotic and
    domestic pests and pathogens that are of concern to the security of our
    food and agricultural production systems. For example, within a few
    weeks after soybean rust was first detected in Louisiana, private
    interest disease surveillance activities were conducted by first
    detectors. Samples submitted to diagnostic laboratories, as a result of
    these first detectors, identified soybean rust in Mississippi, Florida,
    Georgia, Alabama, Arkansas, Missouri, South Carolina, and Tennessee.
    The budget proposal requests an increase of $21.1 million for a total
    of $30 million to maintain the national diagnostic laboratory network.
    The proposed increase also will allow the optimization of the security
    value of the diagnostic network which includes: a coordinated ground
    surveillance and response component with appropriate educational and
    training programs, a more extensive plant and animal disease and pest
    diagnostic capability, upgraded and enhanced equipment, increased
    information technology, expanded connectivity of State laboratories,
    and targeted research to develop improved diagnostic and treatment
    capabilities. The network will continue its link with the Extension
    Disaster Education Network (EDEN) to disseminate information to
    producers and professionals at the State and county level, and to
    expand these activities to provide more current and timely educational
    resources.
        CSREES proposes $5 million for the Agrosecurity Education Program
    that will support educational and professional development for
    personnel in securing the Nation's agricultural and food supply. The
    program will develop and promote curricula for undergraduate and
    graduate level higher education programs that support the protection of
    animals, plants, and public health. The program is designed to support
    cross-disciplinary degree programs that combine training in food
    sciences, agricultural sciences, medicine, veterinary medicine,
    epidemiology, microbiology, chemistry, engineering, and mathematics
    (statistical modeling) to prepare food system defense professionals.
        Also within the fiscal year 2006 budget request is a proposed
    increase of $4.5 million for the Expanded Food and Nutrition Education
    Program (EFNEP). The EFNEP program reaches predominantly minority, low-
    income youth and families with nutrition education that leads to
    sustained behavior changes. EFNEP works with various partners in
    providing its services, including collaborating with the National
    Institute of Health on the 5-A-Day program promoting increased
    consumption of fruits and vegetables, and with the Centers for Disease
    Control and Prevention on their VERBtm program sharing curriculum
    material directed at teaching young people about the importance of
    nutrition and physical activity. Increased funding also will allow
    EFNEP to move forward with efforts to add a physical activity focus to
    help combat the rising problem of obesity in children and adults.
    Funding at this level will allow participation by 1890 institutions who
    are uniquely positioned to reach those in need of nutrition education.
        CSREES continues to expand diversity and opportunity with
    activities under 1890 base and educational programs, and 1994 and
    Hispanic-Serving Institutions educational programs. In fiscal year
    2006, the budget requests an increase of approximately $1.5 million for
    both the research and extension 1890 base programs. Funding for our
    1890 base programs provides a stable level of support for the
    implementation of research and extension programming that is responsive
    to emerging agricultural issues. Funding for the 1994 Institutions
    strengthens the capacity of the Tribal Colleges to more firmly
    establish themselves as partners in the food and agricultural science
    and education system through expanding their linkages with 1862 and
    1890 Institutions. Sustained funding for the Hispanic-Serving
    Institutions promotes the ability of the institutions to carry out
    educational training programs in the food and agricultural sciences.
    This proven path of research, extension, and educational program
    development rapidly delivers new technologies into the hands of all
    citizens, helping them solve problems important to their lives.
        CSREES also will continue to effectively reach underserved
    communities through sustained support for the Outreach and Assistance
    for Socially Disadvantaged Farmers and Ranchers Program (OASDFR).
    CSREES will fund competitive multi-year projects to support outreach to
    disadvantaged farmers and ranchers. Funds for the OASDFR program will
    encourage and assist socially disadvantaged farmers and ranchers in
    their efforts to become or remain owners and operators by providing
    technical assistance, outreach, and education to promote fuller
    participation in all USDA programs.
        The higher education programs contribute to the development of
    human capacity and respond to the need for a highly trained cadre of
    quality scientists, engineers, managers, and technical specialists in
    the food and fiber system. The fiscal year 2006 budget provides a $1.5
    million increase in the Food and Agricultural Sciences National Needs
    Graduate Fellowship program. This program prepares graduates to deal
    with emerging challenges in such areas as agricultural biosecurity to
    ensure the safety and security of our agriculture and food supply, new
    issues in natural resources and forestry, and human health and
    nutrition, including problems related to obesity such as diabetes and
    cardiovascular health. Other higher education programs will provide
    important and unique support to Tribal Colleges, the 1890 Land-Grant
    Colleges and Universities, and the 1862 Land-Grant Universities as they
    pilot important new approaches to expand their programs.
        CSREES is committed to improving the management of resources
    through the development and implementation of an electronic grants
    application and reporting system and the Research, Education, and
    Economics Information System (REEIS). The fiscal year 2006 budget
    proposes increases of $0.2 million and $0.3 million, respectively for
    these efforts. Currently, CSREES receives approximately 6,000 proposals
    annually, resulting in about 2,000 grants and cooperative agreements.
    These numbers are expected to grow with the proposed program increases
    in the fiscal year 2006 budget. We are committed to streamlining the
    process through participation in a common Federal electronic
    application and report system. We are rapidly developing and enhancing
    the capability to electronically receive, process, and award proposals,
    including electronic distribution to reviewers nationwide, and support
    for electronic financial and technical reporting on awards. We are
    implementing and expanding the capability of REEIS as a platform to
    link some 40 different databases and to serve as a single source of
    information on issues related to accountability, strategic planning,
    and performance assessment.
        CSREES also is requesting funds to accelerate and innovate the e-
    Extension network that will offer Americans unparalleled access to
    scientifically-derived and unbiased information, education, and
    guidance about the things that matter the most in their lives. The
    fiscal year 2006 budget proposal includes $3 million for the New
    Technologies for Ag Extension Program to support systems that will make
    available research-based education offered by the e-Extension network.
        Peer-reviewed competitive programs that meet national needs are a
    much more effective use of taxpayer dollars than earmarks that are
    provided to a specific recipient for needs that may not be national.
    Based upon its broad scope, including the expanded integrated
    authority, and proposed funding increase, alternative funding from the
    NRI could be used to provide a peer-reviewed forum for seeking and
    assessing much of the work funded through earmarks. For example in the
    past 4 years, CSREES supported research in animal identification and/or
    animal tracking under earmarked projects which fit within the scope of
    the NRI. In addition, earmarked projects for human nutrition and food
    safety are within the program areas of the NRI. In order to ensure the
    highest quality research which addresses national needs within
    available funding, the fiscal year 2006 budget has therefore proposed
    to eliminate earmarked projects.
        The fiscal year 2006 budget proposes changes in the general
    provisions including, as previously mentioned, increasing the amount
    provided for the NRI that may be used for competitive integrated
    activities from up to 20 percent to up to 30 percent. Also proposed is
    the elimination of the cap on indirect costs for competitively awarded
    grants. In the past indirect cost rate caps have resulted in
    recipients' inability to recover legitimate indirect costs, thus
    penalizing recipients who choose to do business with CSREES. This
    elimination allows full indirect cost recovery under competitive awards
    and places CSREES competitive programs on an equal footing with other
    Federal assistance programs.
        CSREES, in collaboration with university and other partners
    nationwide, continually meets the many challenges facing the food and
    fiber system. The programs administered by the agency reflect the
    commitment of the Administration to further strengthen the problem-
    solving capacity of Federally-supported agricultural research,
    extension, higher education, and outreach and assistance programs. In
    addition, we continue to enhance our responsiveness and flexibility in
    addressing critical agricultural issues.
        Mr. Chairman, this concludes my statement. I will be glad to answer
    any questions the Committee may have.
                                     ______

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

        Mr. Chairman and members of the Committee, I am pleased to have the
    opportunity to present the proposed fiscal year 2006 budget for the
    Economic Research Service (ERS).

                                    MISSION

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

                                     BUDGET

        The agency's request for 2006 is $80.7 million. The agency is
    requesting a $5.8 million increase to continue the development of an
    integrated and comprehensive data and analysis framework of the food
    system beyond the farm-gate that will provide a basis for
    understanding, monitoring, tracking, and identifying changes in the
    food supply and in consumption patterns.

                      CONSUMER DATA AND INFORMATION SYSTEM

        In fiscal year 2006, ERS is requesting an increase of $5.8 million
    to fully fund the Consumer Data and Information System which was
    partially funded in fiscal year 2005. The new data would be used to
    identify, understand and track changes in food supply and consumption
    patterns, and to explore the relationship between consumers' knowledge
    and attitudes and their consumption patterns.
        Understanding consumer behavior is critical for addressing many of
    the Nation's problems related to eating behavior. Obesity, in
    particular, has become a major problem by increasing the risk for
    chronic diseases, increasing medical costs, and reducing productivity.
    Studies estimate that obesity is responsible for 365,000 deaths
    annually, costs society $92.6 billion in increased medical
    expenditures, and taxpayers finance half of these costs through
    Medicare and Medicaid. Additionally, research is pointing to a decline
    in life expectancy in the United States caused by the dramatic rise in
    obesity, especially among young people and minorities. Many people
    believe that formulating more effective programs and policies to end
    obesity hinges on a clearer understanding of eating behaviors. This
    initiative will support research that will provide the information and
    knowledge to develop, implement, and target improved nutrition programs
    and policies to reduce obesity.
        Understanding consumer behavior is also critical for policy-making,
    and program development and implementation in many other USDA program
    areas. USDA officials require up-to-the-minute information on food
    prices, product movements, and potential consumer reactions to events
    to effectively make commodity support decisions, provide nutrition
    education, and ensure the safety of our food. This initiative will
    provide USDA with current food prices, sales volumes, food purchases, a
    data base on consumer characteristics and purchasing behavior, and the
    ability to quickly survey consumer reactions, knowledge, attitudes, and
    awareness on a host of issues.
        The Consumer Data and Information System has three major components
    providing intelligence across and within the food and agricultural
    complex. ERS has initiated work on the first component, a very limited
    version of the Food Market Surveillance Report, which will be issued
    quarterly to USDA officials. These quarterly reports will provide the
    Department with the most up-to-date information on food prices,
    purchases, and sales data publicly or privately available. This
    information is critical to improve USDA decision-making and to provide
    data for understanding consumer purchasing behaviors. Additional
    funding is necessary for full implementation that will integrate food-
    away-from-home consumption patterns and associated markets into the
    system.
        The second component, a new Rapid Consumer Response Module, will
    provide real-time information on consumer reactions to unforeseen
    events and disruptions, current market events, and government policies.
    The questions in the module will be asked to members of several
    proprietary consumer data panels currently maintained by private
    vendors. The first proposed module is a special survey that will
    provide a baseline for measuring consumer nutrition knowledge and
    implementation of the new Dietary Guidelines. A follow-up survey of the
    same respondents will provide information on consumer reaction to the
    guidelines. An examination of the respondents purchase records would
    reveal if dietary changes have actually occurred. Information will be
    used to better implement dietary guidance strategies and will provide
    policymakers with up-to-the-minute information and analyses. Another
    planned survey will measure consumer knowledge of BSE and quantify the
    relationships between knowledge levels and meat purchases.
        Using fiscal year 2005 funding, ERS has initiated development of
    the third component, a Flexible Consumer Behavior Survey (FCBS) that
    will complement data from the National Health and Nutrition Examination
    Survey (NHANES). The FCBS will provide information needed to assess
    linkages among individuals' knowledge and attitudes about dietary
    guidance, and food safety, their economic circumstances, their food-
    choice decisions, and their nutrient intakes. Combining the NHANES with
    this new survey allows analysis of how individual behavior,
    information, and economic factors affect food choices, dietary status,
    and health outcomes. A team of representatives from government and non-
    governmental entities is developing and implementing the survey.
    Additional funding will provide data and research to link food prices
    with the NHANES and FCBS data.
        Two additional components of the budget request are (1) additional
    staff to ensure the successful design and implementation of the
    Consumer Data and Information System and (2) a research grants program
    to complement and augment the ERS research program. A targeted research
    program will provide outside expertise to assist with the complex task
    of integrating survey information as well as provide seed funds for
    innovative nutrition and obesity studies using the data system. The
    design and implementation of this information system is currently being
    accomplished using existing staff through the reallocation of
    resources.

                    ERS CONTRIBUTIONS TO MISSION AREA GOALS

        ERS supports the five USDA strategic goals to: (1) enhance economic
    opportunities for agricultural producers; (2) support increased
    economic opportunities and improved quality of life in rural America;
    (3) enhance protection and safety of the Nation's agriculture and food
    supply; (4) improve the Nation's nutrition and health; and (5) protect
    and enhance the Nation's natural resource base and environment.

    Goal 1: Enhanced Economic Opportunities for Agricultural Producers
        ERS helps the U.S. food and agriculture sector adapt to changing
    market structures in rapidly globalizing, consumer-driven markets by
    analyzing the linkages between domestic and global food and commodity
    markets, as well as the implications of alternative domestic and
    international policies on competitiveness. ERS economists analyze
    factors that drive change in the structure and performance of domestic
    and global food and agriculture markets; provide economic assessments
    of structural change and competition in the agricultural sector;
    analyze the price impacts of evolving structural changes in food
    retailing; analyze how international trade agreements and foreign trade
    restrictions affect U.S. agricultural production, exports, imports, and
    income; and provide economic analyses that determine how fundamental
    commodity market relationships are adjusting to changing trade,
    domestic policy, and structural conditions. ERS will continue to work
    closely with the World Agricultural Outlook Board (WAOB) and USDA
    agencies to provide short- and long-term projections of United States
    and world agricultural production, consumption, and trade.
        In 2005, several initiatives are increasing the timeliness and
    availability of data and information, while simultaneously saving staff
    time. We are increasing the transparency of our commodity projections
    processes, automating calculations where possible, and embedding them
    within databases. Our goals are to: (1) make the work transparent,
    inviting critique from both internal and external users; (2) transition
    to fewer outlook analysts as retirements near, and (3) increase
    timeliness in the release of data. We will have databases available for
    all major crop and livestock commodities within the next 2 years.
        ERS provides assessment of the effects of farm policy on the food
    and agricultural sector. The agency led the development of analytical
    studies that responded to requests to USDA for studies in the 2002 Farm
    Act. For example, the 2004 USDA report, Economic Effects of U.S. Dairy
    Policy and Alternative Approaches to Milk Pricing, provides a
    comprehensive assessment of the effects of current U.S. dairy programs
    that takes into account the ongoing structural change in consumer
    demand, farm structure, and the processing industry.
        China is one of the top 10 markets for U.S. agricultural exports
    and is the world's largest producer and consumer of a range of
    commodities. ERS research continues to examine key factors that will
    shape the size and pattern of China's agricultural trade: water
    scarcity, implementation of WTO commitments, changes in Chinese
    consumers' demand for food, and factors influencing these changes,
    including the declining role of subsistence farming, effects of
    urbanization, and the rising demand for convenience. ERS' China
    briefing room (www.ers.usda.gov/briefing/china) provides access to
    reports that cover both specific market conditions and policy
    developments.
        ERS continues to expand research on how the dynamics of consumer
    demand, notably the growing consumption of and trade in high value
    products, are shaping global markets. The United States has one of the
    most complex trade patterns for high value food products, including
    strong growth in imports. This is attributable to its large productive
    capacity, high-income consumers, and its heavy involvement in overseas
    investment in food processing and brand licensing. Research to
    understand the relative importance of these and other factors builds on
    recently completed studies and takes advantage of newly available
    global data sets on the food retail industry.
        Organic farming continues to be one of the fastest growing segments
    of U.S. agriculture and can potentially enhance environmental
    protection, as well as economic opportunities for producers.
    Appropriations received in fiscal year 2005 allow ERS to continue to
    explore in greater depth the market for organic products and other
    commodities, and foods that are differentiated in the marketplace by
    virtue of how or where they are produced. In 2004, ERS co-sponsored a
    workshop with the Farm Foundation and Giannini Foundation that brought
    together industry leaders, academics and government agency staffers to
    identify research needed to understand the potential oversight role of
    government relative to various types of differentiated products, and
    the implications of alternative public or private regulatory
    approaches. In 2005, ERS is adding a targeted sample of organic dairy
    producers to USDA's annual Agricultural Resources Management Survey
    (ARMS). Survey data for both organic and conventional operations will
    enable, for the first time, a side-by-side comparison of the economic,
    structural, and production characteristics of these farms.
        Food price determination is increasingly important for
    understanding domestic and international markets and for seizing
    opportunities to promote U.S. agriculture. ERS food markets research
    focuses on enhancing knowledge and understanding of food prices, both
    their objective measurement and how they are set by firms at different
    stages of the food system. ERS has begun to use micro-level household
    and store scanner data to measure the impact of changing store formats
    on food prices in order to focus on the changing economic environment
    and how these changes could affect customers' retail food purchasing
    habits.
        In 2005, ERS will publish a series of reports on the impacts of
    concentration and consolidation along the food marketing chain. One
    report focuses on the dramatic change in the competitive dynamics of
    retail markets, measuring the price impact of Wal-Mart's success in
    marketing food. Another report examines supermarkets' resulting
    consolidations and measures the extent by which associated increases in
    the efficiency of supermarket operations would reduce food prices.
    Another report summarizes research on consolidation and structural
    change in the following food industries: meat packing, meat processing,
    poultry slaughter and processing, cheese, fluid milk, flour milling,
    feeds, and oilseed (corn, cottonseed, and soybean) processing. Findings
    to be published in 2005 suggest that even industries with growing
    demand experienced consolidation, and that technological change was the
    primary driver of consolidation from 1970-90. In addition, during the
    period under investigation, firms tended to acquire highly productive
    plants and then improve their performance. The evidence refutes the
    claim that mergers and acquisitions lead to worker dislocations and
    lost wages.
        For producers, contracting can reduce income risks of price and
    production variability, ensure market access, and provide higher
    returns for differentiated farm products. For processors and other
    buyers, vertical coordination through contracting is a way to ensure
    the flow of products, obtain differentiated products, ensure
    traceability for health concerns, and guarantee certain methods of
    production. ERS continues to conduct research to improve understanding
    by decision-makers of changes in the agricultural sector's structure
    (for example, the implications for producers of the increasing
    replacement of open markets by contractual arrangements and vertical
    integration). ERS is currently examining the potential efficiency-
    enhancing motives for the increasing use of contracts by food
    manufacturers and processors. At the farm level, the new Family Farm
    Report--Structural and Financial Characteristics of U.S. Farms, which
    was published in March 2005--documents the ongoing changes in farms'
    structure, financial performance, and business relationships in
    response to consumer demands, competitive pressures, and changing
    opportunities for farm families. This report is based on analysis of
    2001 ARMS data. A shorter Family Farm report based on 2003 ARMS data
    will be released later in 2005.
        ERS will continue to work closely with the Foreign Agricultural
    Service (FAS) and the Office of the U.S. Trade Representative to ensure
    that ongoing negotiations on the Doha Development Agenda under the
    auspices of the World Trade Organization (WTO) and regional trade
    agreements are successful and advantageous for U.S. agriculture. The
    demands of developing countries for sharp cuts in domestic agricultural
    policies, along with exemptions that would limit the opening of their
    markets, serve as stumbling blocks to reaching an agreement in current
    WTO negotiations. While ERS analysis of the global benefits of trade
    liberalization shows potential gains for all types of countries,
    developing countries remain skeptical. Two common critiques are that
    the analysis does not include potential market effects of decoupled
    payments and does not include preferential market access by developing
    countries to developed country markets. Current ERS research addresses
    these questions with reports forthcoming in 2005 on the effects of farm
    programs and an analysis of preferential trade programs.
        Since 1980, legislation has encouraged patenting and license
    agreements by Federal laboratories as a means of technology transfer.
    The ERS report, Government Patenting and Technology Transfer, which
    will be released in 2005, examines issues raised by government
    patenting behavior through a case study of the Agricultural Research
    Service. The report describes trends in patent use and considers its
    effectiveness toward this policy goal. The report compares patenting
    with alternative methods of technology transfer--such as scientific
    publication--and analyzes factors that determine the most effective
    means of promulgating the results of public research. Among the
    findings are that increased patenting and licensing by USDA has
    supplemented, not supplanted, the traditional instruments of technology
    transfer such as scientific publications.
        Data from ARMS underlie important estimates of farm income and
    well-being, and constitute an essential component in much of ERS'
    research. In 2004, the ARMS survey sample was expanded sufficiently to
    allow ERS, with the National Agricultural Statistics Service (NASS), to
    produce State level estimates for the largest fifteen States (as
    measured by value of farm output). Also in 2004, ERS collaborated with
    NASS to develop new survey instruments and data collection approaches
    that merge mail surveys with in-person surveys, thereby reducing
    respondent burden and improving the efficiency of data collection. In
    addition, ERS has developed a path-breaking, web-based, secure ARMS
    data retrieval and summarization prototype tool that is easy to use.
    Implemented in 2004 in both public and restricted-access web versions,
    this system retrieves ARMS data in formats customized to the customers'
    needs, while assuring that sensitive data are not disclosed.

    Goal 2: Support Increased Economic Opportunities and Improved Quality
            of Life in Rural America
        ERS research explores how investments in rural people, businesses,
    and communities affect the capacity of rural economies to prosper in
    the new and changing global marketplace. The agency analyzes how
    demographic trends, employment opportunities, educational improvements,
    Federal policies, and public investment in infrastructure and
    technology affect economic opportunity and quality of life for rural
    Americans. The rural development process is complex and sensitive to a
    wide range of factors that, to a large extent, are unique to each rural
    community. Nonetheless, ERS assesses general approaches to development
    to determine when, where, and under what circumstances rural
    development strategies will be most successful.
        ERS assesses rural needs by examining the changing demographic,
    employment, education, income and housing patterns of rural areas. Data
    from the 2000 Census and other Federal information sources provide the
    most up-to-date information on the current conditions and trends
    affecting rural areas, and provide the factual base for rural
    development program initiatives. In 2005, the agency is continuing its
    series of publications that report current indicators of social and
    economic conditions in rural areas for use in developing policies and
    programs to assist rural people and their communities. Rural America at
    a Glance: 2005, Rural Transportation at a Glance, Rural Children at a
    Glance, and Rural Minorities at a Glance, all designed for a policy
    audience, will summarize the most current information relevant
    information on these topics.
        In fiscal year 2005, ERS will disseminate research findings from an
    ERS--Cornell University conference on ``Population Change and Rural
    Society,'' held in January 2004. This conference showcased an
    integrated set of demographic studies by leading social scientists that
    analyzed critical demographic trends from the 2000 Census and drew
    conclusions about their implications for economic and social life in
    rural America. The conference focused on the policy implications of
    changing demographic composition, economic restructuring, changing land
    use patterns, and geographic patterns of chronic disadvantage and
    emerging growth. The compendium of papers marks the first comprehensive
    look at rural America based on data from the 2000 Census.
        For over 30 years, ERS has captured aspects of the broad economic
    and social diversity among rural areas in various county
    classifications. These typologies have been widely used by policy
    analysts and public officials to determine eligibility for and the
    effectiveness of Federal programs to assist rural America. In August of
    2004, ERS released a new county typology that maps out a geographic
    portrait of the rich diversity of rural America in ways that are
    meaningful for developing public policies and programs. In fiscal year
    2005, ERS will publish a series of policy briefs that will address how
    the economic, demographic, and policy themes identified in this
    typology translate into effective rural development strategies for
    enhancing rural economic opportunities and well being.
        ERS is at the forefront of analysis assessing the critical role of
    education in local, regional, and national economic development. The No
    Child Left Behind Act of 2002 created a new era of increased school
    accountability to ensure that our public schools adequately prepare
    students for the increasingly high-skill ``new economy'' in which we
    now live. However, rural schools and communities present a distinct set
    of challenges to education reform. In 2005, findings from a conference
    sponsored by ERS and the Southern Rural Development Center will be
    published as special issues of two academic journals, the Review of
    Regional Studies and the Journal of Research in Rural Education.
    Research findings will focus on student achievement in rural schools,
    and the linkages among schools, rural communities, and the labor
    market.
        Rural communities view increased educational investments as an
    important part of economic development but are sensitive to the partial
    loss of their investment in the form of youth outmigration to areas
    with better opportunities. ERS is partnering with land-grant
    universities in a research program designed to measure the relationship
    between education and economic outcomes, both for the individual worker
    and rural community, to help local communities better target their
    economic development and school improvement efforts.
        ERS also continues its long tradition of economic research on the
    welfare of disadvantaged population groups in rural areas, including
    low-income families, children, the elderly, and racial/ethnic groups,
    as well as the Federal assistance programs that serve them. Through its
    research on the measurement and dimensions of rural poverty, ERS helps
    to better target and improve the effectiveness of Federal assistance
    programs. In 2005, ERS will publish a study of the changing nature of
    the rural low-skill labor force and its implication for the economic
    well being of rural areas.
        ERS conducts ongoing research on the impact and effectiveness of
    Federal programs in rural areas. For example, ERS assists USDA's Rural
    Development mission area in efforts to improve the delivery and
    effectiveness of rural development programs through targeted economic
    analysis. In 2005, ERS will continue to work with Rural Development
    staff and cooperators at the University of Missouri to develop
    measurable performance indicators for USDA rural business programs. In
    addition, ERS is now focusing greater attention on the effects of
    Federal farm policy on rural areas and farm households in preparation
    for the upcoming debate over the 2007 Farm Bill. A 2005 conference,
    jointly sponsored by ERS and the National Center for Food and
    Agricultural Policy, will help provide policymakers with a better
    understanding of the linkages between farm policy, farm households, and
    rural communities. A new ERS briefing room on our website will be
    continually updated during 2005 to provide an economic assessment of
    the implications of farm policy reform and adjustment for agriculture
    and rural America.

    Goal 3: Enhance Protection and Safety of the Nation's Agriculture and
            Food Supply
        ERS research is designed to support food safety decision-making in
    the public sector and to enhance the efficiency and effectiveness of
    public food safety policies and programs. The program focuses on
    valuing the societal benefits of reducing and preventing illnesses
    caused by microbial pathogens; assessing the costs of alternative food
    safety policies; assessing industry incentives to enhance food safety
    through new technologies and supply chain linkages; evaluating
    regulatory options and change; and exploring linkages between food
    safety and international trade. ERS has worked closely with various
    USDA agencies and the Centers for Disease Control and Prevention (CDC)
    on various pathogen risk assessments and on analyzing the benefits and
    costs of implementing the Hazard Analysis and Critical Control Points
    (HACCP) rule. ERS and the Food Safety and Inspection Service (FSIS)
    work together to identify research projects and activities that address
    the needs of the Department.
        As part of several national homeland security activities, ERS
    continues to develop the capacity to assess the impact of accidental
    and intentional disruptions to our food and agricultural system. ERS
    staff are prepared to conduct the complex economic analysis needed to
    assess the cost of securing our food supply, which includes protecting
    production, processing, distribution, and consumption of food and
    agricultural products. ERS is working with the Animal and Plant Health
    Inspection Service (APHIS) and the Food and Drug Administration (FDA)
    to improve tools for the analysis of disruption and disease mitigation
    strategies that require both sound biological and economic analysis.
        ERS has become well-known for its pioneering estimates of the
    societal costs associated with foodborne illnesses due to E. coli and
    other known pathogens. ERS and researchers from Harvard and the
    University of Wyoming are collaborating to develop new methodologies
    for more accurately eliciting and measuring the value of reductions in
    health risk associated with foodborne pathogens. Results from both
    studies are expected in 2005.
        ERS is heading a project supporting the Department's reevaluation
    of the appropriate roles for performance versus process standards in
    enhancing food safety. Recent massive recalls of beef and poultry
    products, the creation of international food safety standards, and a
    recent court ruling rejecting failure to meet Salmonella standards as a
    legal basis for closing a meat-processing plant have created concern
    about the basic principles behind U.S. food safety regulation. This
    project analyzes the costs and benefits of food safety performance
    standards and develops guidelines for the application of such
    standards. Preliminary results indicate that recent advances in testing
    technology provide more accurate results, shorter time to result,
    greater ease of use, and lower costs than in the past.
        In the event that unsafe food enters the marketplace, public health
    officials and food safety regulators ultimately rely on records
    maintained by private industry and retailers to track the manufacture
    and distribution of that food. Privately maintained traceability
    bookkeeping records provide investigators with information on the
    extent and distribution of a contaminated product--and on how to remove
    such a product from distribution channels efficiently. The strength of
    private traceability systems and the readiness of the food industry to
    track and recall a contaminated product is important for safeguarding
    the Nation's food supply. In 2005, ERS is working with agricultural
    economists from the University of Arkansas to investigate how various
    food companies in different industries handle product recalls, the
    operation of designated recall teams, and the frequency and results of
    mock recalls. The research will examine the type and scope of
    information collected from auditing and certification activities,
    characteristics of firms with recall practices, and the proportion of
    firms in given sectors participating in auditing and certification
    activities.
        In response to increased risks to the Nation's agriculture and food
    supply due to bio-terrorism, ERS embarked on an ambitious project known
    as Geo-Spatial Economic Analysis (GSEA). The GSEA system merges an
    extensive Geographic Information System with the analytical expertise
    of ERS's economists and the Security Analysis System for U.S.
    Agriculture (SAS-USA), which is a framework to tie systematically all
    food supply processes from farm production, food manufacturing,
    distribution of food products, to food consumption in every region of
    the country. The GSEA system is designed to serve as a platform for
    collaborative analysis across agencies in USDA and with appropriate
    groups in FDA and the Department of Homeland Security (DHS). These
    capabilities mean that emergencies can be managed efficiently and
    expeditiously by assessing vulnerabilities and predicting outcomes. In
    2005, the GSEA team expects to launch joint projects with the Army
    Corps of Engineers and several national labs to improve our ability to
    measure the economic consequences in the food and agricultural
    industries caused by disruptions in other critical infrastructures. In
    support of broad USDA initiatives such as the National Plant Disease
    Recovery System, the GSEA system will serve as a tool to improve
    economic assessments of crop and animal disease outbreaks using
    alternative control strategies.

    Goal 4: Improve the Nation's Nutrition and Health
        ERS studies the relationships among the many factors that influence
    food choices and eating habits and their health outcomes. The roles of
    income, age, race and ethnicity, household structure, knowledge of diet
    and health relationships, nutrition information and labeling, and
    economic incentives and policies that affect food prices and
    expenditures are of particular interest. Reducing obesity through
    understanding its costs to individuals and society, how income, diet
    and health knowledge affect obesity status, and considering private
    versus public roles in reducing obesity is a priority for this
    Administration.
        ERS research has a major focus on the economic dimensions of
    obesity, including understanding the societal costs of obesity,
    explaining obesity trends among different demographic and income
    groups, and assessing the benefits and costs of alternative options for
    influencing Americans' food choices and dietary behaviors, including
    roles for nutrition education and Federal food and nutrition assistance
    programs. In 2005, ERS is investigating the factors that influence
    consumers' food choices when eating away from home using the NHANES
    data. This research will focus on discovering consumer preferences,
    such as convenience and entertainment that compete with healthy eating.
    Information about these factors help social marketers design effective
    campaigns to influence consumers' away from home eating behavior.
        Through the Food Assistance and Nutrition Research Program (FANRP),
    ERS conducts studies and evaluations of the Nation's food and nutrition
    assistance programs. FANRP research is designed to meet the critical
    information needs of USDA, Congress, program managers, policy
    officials, clients, the research community, and the public at large.
    FANRP research is conducted through internal research at ERS and
    through a portfolio of external research. Through partnerships with
    other agencies and organizations, FANRP also enhances national surveys
    by adding a food and nutrition assistance dimension. FANRP's long-term
    research themes are dietary and nutritional outcomes, food program
    targeting and delivery, and program dynamics and administration.
        ERS continues to fund a national survey of food security and
    hunger, conducted by the Census Bureau, as a supplement to the Current
    Population Survey (CPS). The survey measures the number of U.S.
    households that face difficulties in putting enough food on the table.
    A new ERS effort, in cooperation with USDA's Food and Nutrition
    Service, is designed to assess and strengthen food security measurement
    by providing support for a National Academy of Sciences panel. The
    panel is reviewing methods and procedures that underlie the current
    measure and will consider various approaches to enhance these methods
    for monitoring, evaluation, and related research purposes.
        As part of our effort to improve the timeliness and quality of the
    Department's food consumption data, in 2003 ERS launched an interagency
    effort to develop a proposal for an external review of USDA's food
    consumption data needs and gaps. Enhancements to the food consumption
    data infrastructure are critical to understanding and addressing many
    market and policy issues in the Department. The interagency effort led
    to the funding of a review by the National Research Council's Committee
    on National Statistics. A panel of experts was compiled, and the first
    stage of the data review was a workshop held in the spring of 2004. A
    final report will be issued by the Committee in 2005.

    Goal 5: Protect and Enhance the Nation's Natural Resource Base and
            Environment
        In this area, ERS research and analytical efforts, in cooperation
    with the Natural Resources Conservation Service (NRCS), support the
    development of Federal farm, conservation, and environmental policies
    and programs. These efforts require analyses of the profitability and
    environmental impacts of alternative production management systems in
    addition to the cost-effectiveness and farm income impacts of public
    sector conservation policies and programs.
        With passage of the Farm Security and Rural Investment (FSRI) Act
    of 2002, USDA looked to ERS to provide comprehensive, detailed, and
    understandable information to public and private users, including
    information on programs in the Conservation Title. In addition, ERS
    provided extensive support to other USDA agencies in developing rules
    for implementation of Farm Bill conservation programs. ERS participated
    in Farm Service Agency (FSA) and NRCS working groups on the
    Conservation Reserve Program (CRP), the Environmental Quality
    Incentives Program (EQIP), the Conservation Security Program (CSP), and
    implementation of conservation technical assistance by third-party
    technical service providers. In 2004, ERS contributed substantially to
    the NRCS benefit-cost assessment for CSP. For instance, ERS helped to
    prepare the NRCS report, Conservation Security Program: Benefit Cost
    Analysis released in June 2004. ERS analysts played a central role in
    both conceptualizing and developing a model of CSP participation that
    is recognized by NRCS and others within USDA as an important
    contribution to USDA's analytic capability with respect to conservation
    programs. ERS assisted FSA with the implementation of the CRP program
    by providing input data and suggesting ways to improve the Willingness-
    to-Bid model used by FSA to set an environmental benefits index (EBI)
    cutoff for enrollment in the twenty-ninth signup. ERS also participated
    in forward-looking planning exercises concerning major CRP enrollment/
    reenrollment decisions expected in 2007.
        The FSRI sharply increased conservation funding and earmarked most
    of it for working lands conservation rather than for farmland
    retirement. The ERS report, ``Flexible Conservation Measures on Working
    Land: What Challenges Lie Ahead?'' to be released in 2005, tackles the
    issues and complexities that pertain to the design of working-land
    payment programs (WLPPs). Program design and implementation will
    largely determine the extent to which environmental goals are achieved,
    and whether they are achieved cost-effectively, i.e., at a minimum cost
    to society. A cost-effective program: (1) anticipates economic and
    environmental outcomes associated with enrolling specific producers;
    and (2) attracts and enrolls producers that are most likely to deliver
    the desired outcomes. The report analyzes the critical role of program
    design in gathering information (from producers in a bidding process)
    and using that information to identify and enroll producers who,
    collectively, are most likely to achieve program objectives cost-
    effectively. Empirical analysis also shows how the environment,
    commodity prices, and farm incomes could be affected by alternative
    designs.
        In 2004, ERS transmitted to Congress the report, The Conservation
    Reserve Program's Economic and Social Impacts on Rural Counties, as
    mandated by the FSRI, as well as the public version released in October
    2004, The Conservation Reserve Program: Economic Implications for Rural
    America. These reports address a number of concerns about the
    unintended consequences of high levels of enrollment in the CRP. Our
    research finds no statistically significant evidence that high
    enrollments in the CRP have had a systematic, adverse effect on
    population or community services in rural counties across the country.
        In the course of the production of food and fiber, agriculture also
    produces many by-products (externalities) such as open space,
    recreational amenities, scenic views, groundwater recharge, and
    wildlife habitat. Historically, the standard policy practice has been
    to address each externality through a separate policy instrument.
    However, when the transaction costs of administering policies (e.g.,
    information gathering, contract formulation, enforcement) are positive,
    using one instrument to address each externality or objective may not
    be optimal. Using an empirical analysis focusing on the CRP, the ERS
    report The Multiple Objectives of Agri-Environmental Policy, to be
    released in 2005, explores the extent to which environmental attributes
    may be jointly produced, e.g., efforts to reduce soil erosion may also
    reduce nutrient runoff and increase soil carbon, with implications for
    simultaneously targeting multiple environmental and cost objectives.
    The report also provides an in-depth look at the costs, benefits, and
    tradeoffs associated with the use of indices (such as the EBI used to
    implement the CRP) for simultaneously targeting multiple environmental
    and cost objectives.
        Furthermore, applying environmental policies in an uncoordinated
    fashion fails to account for interactions among environmental mediums
    (i.e., air, land, water). This can result in conflicting policies, in
    that addressing one environmental problem can make another worse. The
    ERS report, Manure Management for Multimedia Environmental Improvement:
    A Comparison of Single Media versus Multi-Media Policy Optimization, to
    be released in 2005, provides a concrete example of the tradeoffs of
    alternately and simultaneously meeting air and water quality
    objectives, in terms of farmers' costs, production decisions, and
    environmental indicators, by focusing on livestock and poultry
    production. Among the results in the report is that, if enacted,
    restrictions on ammonia emissions from concentrated animal feeding
    operations could increase the cost of meeting Clean Water Act
    regulations for spreading manure.
        Many economists, ecologists, and wildlife biologists have argued
    that less productive agricultural lands are environmentally sensitive.
    If true, then this would have important implications for agricultural
    policy. For instance, programs that stimulate production may cause
    farmers to bring the relatively less productive lands that are
    environmentally more sensitive into production. Using data from the
    USDA's National Resources Inventory, the ERS report to be released in
    late 2005, Land-Use Change and the Environment at the Extensive Margin
    of Cropland, finds that there is a general relationship between lower
    productivity and environmental sensitivity in terms of several agri-
    environmental indicators examined, but this relationship does not hold
    within all locations.
        In fiscal year 2004, ERS continued the Program of Research on the
    Economics of Invasive Species Management (PREISM) that was initiated in
    fiscal year 2003. PREISM supports economic research and the development
    of decision support tools that have direct implications for USDA
    policies and programs for protection from, control/management of,
    regulation concerning, or trade policy relating to invasive species.
    Program priorities have been selected through extensive consultation
    with APHIS, the Office of Budget and Program Analysis (OBPA) and other
    agencies with responsibility for program management. In 2004, APHIS
    used an ERS-supplied pest ranking decision tool to determine which
    pests would be on its 2004 Federal-State Cooperative Agricultural Pest
    Survey list, making transparent the basis for selecting the pests for
    which State cooperators could receive targeted pest surveillance and
    detections funds. The recent and rapid spread of the pathogen, soybean
    rust (SBR), in South America prompted ERS, in April 2004, to publish a
    study of the economic and policy impacts of its windborne entry into
    the United States, Economic and Policy Implications of Wind-Borne Entry
    of Asian Soybean Rust into the United States. This study quantifies the
    potential economic impacts in the United States in both the first year
    of SBR's entry and subsequent years when producers have adapted to this
    new pest. On November 10, 2004, APHIS confirmed the presence of SBR on
    soybean leaf samples taken from two plots associated with a Louisiana
    State University research farm. The already published ERS analysis was
    used by the USDA in refining rapid response strategies in anticipation
    of SBR entry to North America.
        In addition to ERS-led analysis of invasive species issues, PREISM
    has allocated over $2.4 million in extramural research cooperative
    agreements through a peer- reviewed competitive process. To share
    review progress made by cooperators who received PREISM funding, and to
    provide a forum for dialogue on economic issues associated with
    agricultural invasive species, ERS organized a workshop in August 2004
    with 90 attendees from academia and Federal agencies. Among the
    projects funded in fiscal year 2004 were a GIS-based decision support
    tool to help forest land managers prioritize their efforts to eradicate
    or control invasive species, and a decision tool for establishing
    efficient border protection controls against potentially damaging
    species under conditions of extreme uncertainty and limited budgets.

    Customers, Partners, and Stakeholders
        The ultimate beneficiaries of ERS' programs are the American
    people, whose well-being is improved by informed public and private
    decision-making that leads to more effective resource allocation. ERS
    shapes its program and products principally to serve key decision-
    makers who routinely make or influence public policy and program
    decisions. This clientele includes White House and USDA policy
    officials and program administrators/managers; the U.S. Congress; other
    Federal agencies, and State and local government officials; and
    domestic and international environmental, consumer, and other public
    organizations, including farm and industry groups interested in public
    policy issues.
        ERS depends heavily on working relationships with other
    organizations and individuals to accomplish its mission. Key partners
    include: NASS for primary data collection; universities for research
    collaboration; the media as disseminators of ERS analyses; and other
    government agencies and departments for data information and services.
    Closing Remarks
        I appreciate the support that this Committee has given ERS in the
    past and look forward to continue working with you and your staff to
    ensure that ERS makes the most effective and appropriate use of public
    resources. Thank you.
                                     ______

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

        Mr. Chairman and members of the Committee, I appreciate the
    opportunity to submit a statement for this Committee's consideration in
    support of the fiscal year 2006 budget request for the National
    Agricultural Statistics Service (NASS). This agency administers the
    U.S. agricultural statistics program, created in USDA in 1863, and,
    beginning in 1997, conducts the U.S. Census of Agriculture, first
    collected in 1840. Both programs support the basic mission of NASS to
    provide timely, accurate, and useful statistics in service to U.S.
    agriculture.
    major activities of the national agricultural statistics service (nass)
        The continual progression of American farms and ranches to make
    greater use of agricultural science and technology, coupled with the
    growing complexity of global marketing, increases the need for modern
    and reliable statistical information. The periodic surveys and censuses
    conducted by NASS contribute significantly to economic decisions made
    by policymakers, agricultural producers, lenders, transporters,
    processors, wholesalers, retailers, and ultimately, consumers. Voids in
    relevant, timely, and accurate data contribute to wasteful
    inefficiencies throughout the entire production and marketing system.
        The Farm Security and Rural Investment Act of 2002 created the need
    for several new data series. For example, the 2002 Census of
    Agriculture data were used to help prepare the first annual report to
    Congress on USDA program participation of socially disadvantaged
    farmers and ranchers. Census data on race, ethnicity, and gender were
    used at the county level in preparing the report. These Census of
    Agriculture data are the only source of comprehensive information
    available on the agricultural sector. The 2002 Farm Bill also
    reinforced the importance of existing data series to ensure the
    continuation of farm security and rural investments. For example,
    counter-cyclical payments are determined in part by market year average
    prices determined by NASS. Each $0.01 change in the average corn price
    may have resulted in a change of more than $110 million in counter-
    cyclical payments during 2004. Similarly, large payment changes also
    apply for the other program crops. These are only a few specific data
    needs required by the Statute, but they clearly highlight the
    importance of a strong, reliable agriculture statistics program.
        NASS works cooperatively with each State Department of Agriculture
    throughout the year to provide commodity, environmental, economic, and
    demographic statistics for agriculture. This cooperative program, which
    began in 1917, has served the agricultural industry well and is often
    cited by others as an excellent model of successful State-Federal
    cooperation. This joint State-Federal program helps meet State and
    national data needs while minimizing overall costs by consolidating
    both staff and resources, eliminating duplication of effort, and
    reducing the reporting burden on the Nation's farm and ranch operators.
    NASS' 46 field offices, which cover all 50 States and Puerto Rico,
    provide statistical information that serves national, State, and local
    data needs.
        NASS statistics contribute to providing fair markets where buyers
    and sellers have access to the same official statistics, at the same
    pre-announced time. This prevents markets from being unduly influenced
    by ``inside'' information, which might unfairly affect market prices
    for the gain of an individual market participant. Empirical evidence
    indicates that an increase in information improves the efficiency of
    commodity markets, minimizing price fluctuations for U.S. producers.
    Measures relating to the competitiveness of our Nation's agricultural
    industry have become increasingly important as producers rely more on
    world markets for their sales.
        NASS statistical reports are critically important to assess the
    current supply of and demand for agricultural commodities. They are
    also extremely valuable to producers, agribusinesses, farm
    organizations, commodity groups, economists, public officials, and
    others who use the data for decision-making. For example, the U.S.
    cattle and hog industries requested joint reports of United States and
    Canadian livestock. The resulting publications provide composite
    information on potential supplies and inventories of cattle and hogs.
    This information can be used to make informed decisions, such as
    marketing, expansion, or contraction, in today's global economy.
    Without these data, the United States would be at a disadvantage in
    global trade discussions and would find it very difficult to secure
    global contracts and develop strong, reliable relations with our
    trading partners.
        NASS has been a leader among Federal agencies in providing
    electronic access to information. All reports issued by NASS'
    Agricultural Statistics Board are made available to the public at a
    previously announced release time to ensure that everyone is given
    equal access to the information. All of NASS' national statistical
    reports and data products, including graphics, are available on the
    Internet, as well as in printed form. Customers are able to
    electronically subscribe to NASS reports and can download any of these
    reports in a format easily accessible by standard software. A summary
    of NASS and other USDA statistical data are produced annually in USDA's
    Agricultural Statistics, available on the Internet through the NASS
    Home Page, on CD-ROM disc, or in hard copy. All of NASS's 46 field
    offices have Home Pages on the Internet, which provide access to
    special statistical reports and information on current local commodity
    conditions and production.
        NASS released the results of the 2002 Census of Agriculture in the
    Spring of 2004. The Census of Agriculture is taken every 5 years and
    provides comprehensive data at the national, State, and county level on
    the agricultural sector. The Census of Agriculture is the only source
    for this information on a local level, which is extremely important to
    the agricultural community. Detailed information at the county level
    helps agricultural organizations, suppliers, handlers, processors, and
    wholesalers and retailers better plan their operations. Important
    demographic information supplied by the Census of Agriculture also
    provides a very valuable database for developing public policy for
    rural areas. The 2002 Census of Agriculture included for the first time
    data on demographic information for up to three operators, enhanced
    data on agricultural activity on American Indian Reservations, acreage
    of organically produced crops, and information on production contracts
    used in agriculture. Additionally, agriculture census results reflected
    the status of all U.S. farms instead of only those represented on the
    census mail list as was done previously. New statistical methodology
    was employed to provide the most complete picture of U.S. agriculture
    in many years. Census data were also released for agriculture census
    programs in Puerto Rico, Guam, and the Commonwealth of the Northern
    Mariana Islands. All of these results are available on the NASS
    Website.
        Statistical research is conducted to improve methods and techniques
    used for collecting and processing agricultural data. This research is
    directed toward achieving higher quality census and survey data with
    less burden to respondents, producing more accurate and timely
    statistics for data users, and increasing the efficiency of the entire
    process. For example, NASS officially deployed its Electronic Data
    Reporting (EDR) system in 2004, which provides respondents with the
    ability to electronically complete the data collection process and thus
    reduces reporting burden. Plans are to complete the system with the
    electronic availability of the 2007 Census of Agriculture. The growing
    diversity and specialization of the Nation's farm operations have
    greatly complicated procedures for producing accurate agricultural
    statistics. Developing new sampling and survey methodology, expanding
    modes of data collection including electronic data reporting, and
    exploiting computer intensive processing technology enables NASS to
    keep pace with an increasingly complex agricultural industry.
        The fiscal year 2005 budget included $2.7 million for agricultural
    estimates restoration and modernization. These funds provided the
    continued development of a foundation for quality improvements in
    forecasts and estimates. The 2005 funds are being used to improve the
    precision level from commodity surveys conducted by NASS. The majority
    of the funding is being allocated to increasing sample sizes and the
    data collection activities of local interviewers throughout the Nation.
        The primary activity of NASS is to provide reliable data for
    decision-making based on unbiased surveys each year, and the Census of
    Agriculture every 5 years, to meet the current data needs of the
    agricultural industry. Farmers, ranchers, and agribusinesses
    voluntarily respond to a series of nationwide surveys about crops,
    livestock, prices, chemical use and other agricultural activities each
    year. Periodic surveys are conducted during the growing season to
    measure the impact of weather, pests, and other factors on crop
    production. Many crop surveys are supplemented by actual field
    observations in which various plant counts and measurements are made.
    Administrative data from other State and USDA agencies, as well as data
    on imports and exports, are thoroughly analyzed and utilized as
    appropriate. NASS prepares estimates for over 120 crops and 45
    livestock items which are published annually in over 400 separate
    reports.
        Approximately 65 percent of NASS's staff are located in the 46
    field offices; 21 of these offices are collocated with State
    Departments of Agriculture or land-grant universities. NASS' State
    Statistical Offices issue approximately 9,000 different reports each
    year and maintain Internet pages to electronically provide their State
    information to the public.
        NASS has developed a broad environmental statistics program under
    the Department's water quality and food safety programs. Until 1991,
    there was a serious void in the availability of reliable pesticide
    usage data. Therefore, beginning in 1991 NASS cooperated with other
    USDA agencies, the Environmental Protection Agency (EPA), and the Food
    and Drug Administration, to implement comprehensive chemical usage
    surveys that collect data on certain crops in specified States. NASS
    data allows EPA to use actual chemical data from scientific surveys,
    rather than worst case scenarios, in the quantitative usage analysis
    for a chemical product's risk assessment. Beginning in fiscal year
    1997, NASS also instituted survey programs to acquire more information
    on post-harvest application of pesticides and other chemicals applied
    to commodities after leaving the farm. These programs have resulted in
    significant new chemical use data, which are important additions to the
    database. Surveys conducted in cooperation with the Economic Research
    Service (ERS) also collect detailed economic and farming practice
    information to analyze the productivity and the profitability of
    different levels of chemical use. American farms and ranches manage
    nearly half the land mass in the United States, underscoring the value
    of complete and accurate statistics on chemical use and farming
    practices to effectively address public concerns about the
    environmental effects of agricultural production.
        NASS conducts a number of special surveys, as well as provides
    consulting services for many USDA agencies, other Federal or State
    agencies, universities, and agricultural organizations on a cost-
    reimbursable basis. Consulting services include assistance with survey
    methodology, questionnaire and sample design, information resource
    management, and statistical analysis. NASS has been very active in
    assisting USDA agencies in programs that monitor nutrition, food
    safety, environmental quality, and customer satisfaction. In
    cooperation with State Departments of Agriculture, land-grant
    universities, and industry groups, NASS conducted 138 special surveys
    in fiscal year 2004 covering a wide range of issues such as farm
    injury, nursery and horticulture, farm finance, fruits and nuts,
    vegetables, and cropping practices. All results from these reimbursable
    efforts are publicly available.
        NASS provides technical assistance and training to improve
    agricultural survey programs in other countries in cooperation with
    other government agencies on a cost-reimbursable basis. NASS's
    international programs focus on developing and emerging market
    countries in Asia, Africa, Central and South America, and Eastern
    Europe. Accurate information is essential for the orderly marketing of
    farm products. NASS works directly with countries by assisting in the
    application of modern statistical methodology, including sample survey
    techniques. This past year, NASS provided assistance to Brazil, China,
    El Salvador, Guatemala, Kazakhstan, Mexico, Nepal, Russia, and the
    Ukraine. In addition, NASS conducted training programs in the United
    States for 219 visitors representing 24 countries. These assistance and
    training activities promote better quality data and improved United
    States access to data from other countries.
        NASS annually seeks input on improvements and priorities from the
    public through the Secretary of Agriculture's Advisory Committee on
    Agriculture Statistics, displays at major commodity meetings, data user
    meetings with representatives from agribusinesses and commodity groups,
    special briefings for agricultural leaders during the release of major
    reports, and through numerous individual contacts. As a result of these
    activities, the agency has made adjustments to its agricultural
    statistics program, published reports, and expanded electronic access
    capabilities to better meet the statistical needs of customers and
    stakeholders.

                             FISCAL YEAR 2006 PLANS

        The fiscal year 2006 budget request is for $145.2 million. This is
    a net increase of $16.7 million from fiscal year 2005.
        The fiscal year 2006 request includes increases to continue
    restoration and modernization of NASS' core survey and estimation
    program ($7.0 million); improvement in the statistical integrity and
    standardization of the data collection and processing activities of the
    Local County Agricultural Estimates program ($1.9 million); cyclical
    activities associated with preparing and conducting the Census of
    Agriculture ($6.5 million); and funding for increased pay costs ($1.3
    million).
        An increase of $7.0 million and 10 staff years are requested to
    fund the continuation of the restoration and modernization of NASS'
    core survey and estimation program. This increase will be directed at
    continuing to restore and modernize the core survey and estimation
    program for NASS to meet the needs of data users at necessary levels of
    precision for State, regional, and national estimates. Decisions
    affecting billions of dollars in the U.S. food and agricultural sectors
    are facilitated in both public and private venues through access to
    reliable statistical information. The USDA NASS statistical program
    serves most agricultural commodity data needs in the United States, as
    well as supplying important economic, environmental, and demographic
    data that are used to impact lives of rural residents. Escalating
    survey expenses, staff costs, and operating expenses, including higher
    contract costs, forced detrimental adjustments to many of the Agency's
    survey and estimates programs. These actions over time led to
    reductions in the quality of the survey data on which NASS estimates
    are based. Funding received in fiscal year 2004 and fiscal year 2005
    was part of this multi-year initiative to restore survey accuracy to
    previous levels. These changes were designed to increase precision at
    the State and regional levels to promote the NASS goal for fiscal year
    2005 of reaching precision target levels at least 75 percent of the
    time for major survey indications. The additional funding requested in
    fiscal year 2006 will allow continued improvements and provide the
    necessary resources to reach precision target levels an estimated 83
    percent of the time.
        An increase of $1.9 million and 4 staff years are requested to
    provide for data acquisition for the annual integrated Local County
    Agricultural Estimates program. Local area statistics are one of the
    most requested NASS data sets, and are widely used by private industry,
    Federal, State and local governments and universities. This funding
    supports the NASS goal to incrementally improve survey precision for
    small area statistics. Current estimates are derived through a survey
    process that does not support scientific probability design to produce
    statistically defensible survey precision. Proper follow-up data
    collection activities and redesign of survey systems will improve the
    critical annual county-level data. The Risk Management Agency (RMA)
    uses these statistics in indemnity calculations for Group Risk Plans
    and the Group Risk Revenue Plans as part of the risk rating process.
    This affects premium levels paid by producers. The FSA uses county
    estimates to weight posted county prices to national loan deficiency
    payments, and as an input to assist producers to update their base
    acreage and yields as directed by the 2002 Farm Bill. In addition,
    financial institutions, agriculture input suppliers, agricultural
    marketing firms, and commodity transport firms utilize county level
    data to make informed business decisions.
        An increase of $6.9 million and 15 staff-years is requested for the
    Census of Agriculture. The Census of Agriculture budget request is for
    $29.1 million. This includes a cyclical program cost increase of $6.5
    million and $389,000 for employee compensation. The available funding
    includes monies to prepare for the 2007 Census of Agriculture and to
    conclude analysis and publication of the Census of Aquaculture in
    December 2006. The increase will be used to finalize questionnaire
    content for the 2007 Census of Agriculture. Mail list development
    activities will continue during fiscal year 2006 with the assistance of
    locally employed enumerators. Contract employees will aid in updating
    and streamlining census processing systems needed for conducting the
    Census of Agriculture and its follow-on surveys. Finally, hardware and
    software will be upgraded to allow for testing and implementation of
    the processing systems.
        This concludes my statement, Mr. Chairman. Thank you for the
    opportunity to submit this for the record.
                                     ______

                        Prepared Statement of J.B. Penn

        Mr. Chairman and Members of the Committee, I am pleased to appear
    before you this afternoon to present the 2006 budget and program
    proposals for the Farm and Foreign Agricultural Services (FFAS) mission
    area of the Department of Agriculture (USDA). The FFAS mission area is
    comprised of three agencies: the Farm Service Agency, Risk Management
    Agency, and Foreign Agricultural Service.
        Statements by the Administrators of the FFAS agencies, which
    provide details on their budget and program proposals for 2006, have
    already been submitted to the Committee. My statement will summarize
    those proposals, after which I will be pleased to respond to any
    questions you may have.
        Mr. Chairman, the programs and services of the FFAS mission area
    provide the foundation for the Department's efforts to ``enhance
    economic opportunities for American agricultural producers'', one of
    the five primary goals in the Department's strategic plan. The wide
    range of services provided by our agencies--price and income support,
    farm credit assistance, risk management tools, and trade expansion and
    export promotion programs--are the bedrock for ensuring the economic
    health and vitality of American agriculture.
        FFAS also plays an important role in protecting and enhancing the
    Nation's natural resource base and environment, another of the
    Department's strategic goals, by providing critical support for
    improved management of private lands.
        The 2006 President's budget supports continuation of these diverse
    activities and ensures our continued efforts on behalf of America's
    agricultural producers. Although the budget does contain proposals for
    savings in both discretionary and mandatory programs as part of
    government-wide efforts to reduce the deficit, it fulfills our
    priorities of promoting and enhancing the economic opportunities of our
    farmers and ranchers and for protecting the environment.

                              FARM SERVICE AGENCY

        The Farm Service Agency (FSA) is our lead agency for delivering
    farm assistance. It is the agency that the majority of farmers and
    ranchers interact with most frequently. Producers rely on FSA to access
    farm programs such as direct and countercyclical payments, commodity
    marketing assistance loans, loan deficiency payments, farm ownership
    and operating loans, disaster assistance, and certain conservation
    programs, such as the Conservation Reserve Program (CRP). Because FSA
    is the prime delivery agency for most of the major farm assistance
    programs, the budget places a priority on maintaining and enhancing
    FSA's ability to provide efficient, responsive services to our
    producers.

    Farm Program Delivery
        The 2002 Farm Bill required FSA to undertake the massive task of
    implementing a complex set of new farm programs within a short time
    period, and the agency met that challenge successfully and with
    distinction. With the major workload associated with Farm Bill
    implementation having been completed, FSA recently has faced other
    program implementation challenges that have required the full
    commitment of agency resources. Last October, the President signed a
    disaster assistance bill that included more than a dozen programs and
    $2.9 billion for farmers and ranchers who were affected by drought and
    other weather-related problems in 2003 and 2004. Sign-up for crop
    disaster assistance began March 14th, and payments began by March 30th.
    FSA also has implemented an emergency relief program, supported with
    $600 million of section 32 funds, for Florida's citrus, nursery, and
    vegetable growers who were affected by three hurricanes last year.
        Also enacted last October was legislation containing the so-called
    tobacco buy-out provisions that has major consequences for the Federal
    tobacco program. Under those provisions, transition payments will be
    made to tobacco quota holders and producers, ending all elements of the
    Federal tobacco price support program effective with the 2005 crop. FSA
    is now actively engaged in the steps needed to implement the
    legislation as quickly and efficiently as possible. Sign-up for the
    transition payment program began on March 14th and will continue
    through June 17th.
        The 2006 budget is designed to ensure the agency's efforts can move
    forward. It provides a total program level for FSA salaries and
    expenses of nearly $1.4 billion, a net increase of $70 million above
    2005. The requested level will support a ceiling of about 5,500 Federal
    staff years and 10,300 non-Federal staff years. Staff levels have been
    reallocated among FSA's program activities to reflect the decreased
    workload associated with farm income program support and other areas,
    while accommodating rising workload needs for conservation and other
    programs. Permanent full time non-Federal county staff years are
    estimated to remain unchanged from this year's level, while temporary
    staff years are reduced with the completion of disaster assistance
    activities.
        FSA is taking other actions designed to improve their services on
    behalf of America's producers. Among the most important of these are
    information technology (IT) improvements, including the adoption of
    web-based applications that allow farmers to sign up for programs, as
    well as receive payments, on line. This reduces the paperwork burden
    significantly and provides for more timely receipt of payments. By
    2006, FSA expects all of its major programs will be web-based and
    available on-line.
        FSA also continues to implement Geospatial Information Systems
    (GIS) and Global Positioning System technology that will provide
    increasingly better services in the future and should result in
    significant long-term savings. Funding for FSA IT modernization and
    related GIS initiatives has been provided in the Common Computer
    Environment account managed by the Department's Chief Information
    Officer.
        Finally, FSA is making considerable progress in reaching out to its
    small farm and minority constituency base. In January, final guidelines
    were implemented that provide reforms to ensure fair representation for
    socially disadvantaged farmers and ranchers in county committee
    elections. This has been complemented by expanded communication and
    outreach activities to increase the number of minority and women
    nominees in the election process.

    Commodity Credit Corporation
        Domestic farm commodity price and income support programs are
    financed through CCC, a Government corporation for which FSA provides
    operating personnel. CCC also provides funding for conservation
    programs, including the CRP and certain programs administered by the
    Natural Resources Conservation Service. In addition, CCC funds most of
    the export programs administered by the Foreign Agricultural Service.
        In 2004, as a result of strong prices and a healthy farm economy,
    CCC net expenditures declined 39 percent below the previous year to
    $10.6 billion. For 2005 and 2006, CCC outlays are expected to increase
    significantly due to recent large crops that have contributed to
    growing supplies and weakened prices. CCC outlays are now projected to
    reach $24.1 billion in 2005 and then decline to $19.8 billion in 2006.
        The President's budget includes a number of proposals to reduce the
    level of farm spending consistent with the government-wide goal of
    reducing the Federal deficit. These proposals are designed to work
    within the existing structure of the 2002 Farm Bill and achieve savings
    over the next 10 years. The proposals, which are spread across the
    entire agricultural production sector, include reducing commodity
    payments across the board by 5 percent; basing marketing loan benefits
    on historical production; tightening payment limits; lowering dairy
    program costs while extending the Milk Income Loss Contract program for
    2 years; and reinstituting a 1.2 percent marketing assessment on sugar
    processors.
        These proposals are expected to save $587 million in 2006 and $5.7
    billion over 10 years. The majority of the savings is achieved through
    the across-the-board reduction in program payments.
        The budget also proposes to limit the CCC bioenergy incentive
    program to $60 million, similar to the limitation of $100 million that
    applies to the 2005 program. An assessment of this program has found
    that additional incentives for ethanol are less critical than other
    Federal assistance, including tax credits and production mandates and
    that greater emphasis should be placed on incentives for biodiesel
    production rather than ethanol.

    Conservation Programs
        The 2002 Farm Bill provided for significant growth in the
    Department's conservation programs. The CRP, which is funded by CCC and
    administered by FSA, is the Department's largest conservation/
    environmental program. The Farm Bill extended CRP enrollment authority
    through 2007 and increased the enrollment cap by 2.8 million acres to a
    total of 39.2 million acres.
        As of the end of December, CRP enrollment totalled 34.7 million
    acres. Another 1.2 million acres were accepted in the 29th general
    signup in 2004 and will be enrolled once contracts are finalized. Once
    that step is completed, the CRP will have reached more than 90 percent
    of the total acreage authorized in the Farm Bill.
        Our current baseline assumptions are that CRP acreage will increase
    gradually to 39.2 million acres by 2008 and remain at that level
    through 2015.

    Farm Loan Programs
        FSA plays a critical role for our Nation's agricultural producers
    by providing a variety of direct loans and loan guarantees to farm
    families who would otherwise be unable to obtain the credit they need
    to continue their farming operations. By law, a substantial portion of
    the direct loan funds are reserved each year for assistance to
    beginning, limited resource, and socially disadvantaged farmers and
    ranchers. For 2006, 70 percent of direct farm ownership loans are
    reserved for beginning farmers and 20 percent are reserved for socially
    disadvantaged borrowers, who may also be beginning farmers.
        The 2006 budget includes funding for about $937 million in direct
    loans and $2.9 billion in guarantees. We believe these proposed loan
    levels will be sufficient to meet demand in 2006.
        The 2006 budget also maintains funding of $2 million for the Indian
    Land Acquisition program. For the Boll Weevil Eradication loan program,
    the budget requests $60 million, a reduction of $40 million from 2005.
    This reduction is due to the successful completion of eradication
    efforts in several areas. The amount requested is expected to fund
    fully those eradication programs operating in 2006. For emergency
    disaster loans, the budget requests $25 million. About $175 million is
    currently available for use in 2005, and a portion of that is likely to
    carry over into 2006. The combined request and anticipated carryover
    are expected to provide sufficient credit in 2006 to producers whose
    farming operations have been damaged by natural disasters.

                             RISK MANAGEMENT AGENCY

        The Federal crop insurance program represents one of the strongest
    safety net programs available to our Nation's agricultural producers.
    It provides risk management tools that are compatible with
    international trade commitments, creates products and services that are
    market driven, harnesses the strengths of both the public and private
    sectors, and reflects the diversity of the agricultural sector.
        In 2004, the crop insurance program provided about $46 billion in
    protection on over 221 million acres, which is about 3 million acres
    more than were insured in 2003. Our current projection is that
    indemnity payments to producers on their 2004 crops will be about $2.9
    billion which is about $1 billion less than in 2003. Our current
    projection for 2006 shows a modest decrease in the value of protection.
    This projection is based on the Department's latest estimates of
    planted acreage and expected declines in market prices for the major
    agricultural crops, and assumes that producer participation remains
    essentially the same as it was in 2004.
        The 2006 budget requests an appropriation of ``such sums as are
    necessary'' as mandatory spending for all costs associated with the
    program, except for Federal salaries and expenses. This level of
    funding will provide the necessary resources to meet program expenses
    at whatever level of coverage producers choose to purchase.
        Despite the successes of the crop insurance program, more can be
    done to improve its effectiveness. One of the overarching goals of the
    crop insurance program has been the reduction or elimination of ad hoc
    disaster assistance. However, in recent years Congress has passed four
    disaster bills covering 6 crop years and costing the Government about
    $10 billion. Therefore, the budget includes a proposal to link the
    purchase of crop insurance to participation in farm programs, such as
    the direct and counter-cyclical payment programs. This proposal would
    require farm program participants to purchase crop insurance protection
    for 50 percent, or higher, of their expected market value or lose their
    farm program benefits. This level of coverage is nearly double the
    amount of protection provided at the catastrophic level.
        Additionally, participants in the Federal crop insurance program
    would contribute to the President's deficit reduction program. The
    budget includes several proposals that would reduce subsidies paid to
    producers and approved insurance providers. In total, these changes are
    expected to save about $140 million annually beginning in 2007.
        In addition, the budget includes a general provision that would
    provide $3.6 million in mandatory funds to continue data warehousing
    and data mining activities authorized in the Agricultural Risk
    Protection Act of 2000 (ARPA). ARPA provided $23 million in mandatory
    funds for a variety of purposes, including data mining; however, that
    funding expires in 2005. Data mining is an instrumental part of the
    Department's efforts to combat fraud, waste, and abuse in the crop
    insurance program. In its first year of operation, data mining is
    estimated to have prevented the payment of about $94 million in
    potentially fraudulent claims and assisted in the identification and
    recovery of about $35 million in claims that should not have been paid.

    Salaries and Expenses
        For salaries and expenses of the Risk Management Agency (RMA), $88
    million in discretionary spending is proposed, an increase of $17
    million from the 2005 level of about $71 million. This net increase
    includes additional funding for IT, increased staff years to improve
    monitoring of the insurance companies, and pay costs.
        RMA has an aging IT system; the last major overhaul occurred about
    10 years ago. At that time, the crop insurance program offered seven
    plans of insurance covering roughly 50 crops and providing about $14
    billion in protection. In 2004, protection was offered through 20 plans
    of insurance covering 362 crops, plus livestock and aquaculture, and
    providing over $46 billion in protection.
        Several major changes also have occurred over the years in the way
    producers protect their operations from losses. In 1994, there were no
    plans of insurance which offered protection against changes in market
    prices. Today, over 50 percent of the covered acreage has revenue
    protection and nearly 62 percent of the premium collected is for
    revenue based protection. In addition, ARPA authorized the development
    of insurance products to protect livestock. RMA has implemented several
    new livestock price protection products. Because livestock production
    occurs year-round, these products must be priced and sold in a
    different manner than traditional crop insurance. The advent of new
    types of insurance, not contemplated when the IT system was designed,
    has placed tremendous strain on an aging system.
        ARPA also instituted new data reconciliation, data mining, and
    other anti-fraud, waste, and abuse activities that require the data to
    be used in a variety of new ways. The current IT system was not
    designed to handle these types of data operations. Consequently, the
    data must be stored in multiple databases which increases data storage
    costs and processing times and increases the risk of data errors.
        The development of the new IT system will result in some additional
    up-front costs to the Government because we will be required to finance
    both the developmental costs as well as the increasingly expensive
    maintenance costs of the legacy system. However, once the new system is
    operational, the legacy system will be eliminated, and a substantial
    reduction in maintenance costs is projected.
        Finally, I would note that the budget for RMA includes a request
    for 17 additional staff years. This increase will provide RMA with the
    additional resources necessary to monitor the financial and operational
    condition of the companies participating in the crop insurance program.
    In 2002, American Growers', the Nation's largest crop insurance
    company, failed. RMA, in concert with the Nebraska Department of
    Insurance, did a tremendous job of ensuring that both the producers'
    and the Government's interests were protected, indemnities paid, and
    policies transferred to other insurance providers. The additional
    staffing will help to ensure that a similar failure does not occur in
    the future.

                          FOREIGN AGRICULTURAL SERVICE

        I would now like to turn to the international programs and
    activities of the FFAS mission area. As Secretary Johanns highlighted
    in his recent testimony before the Committee, expanding trade is
    critically important for the economic health and prosperity of American
    agriculture. Expanding international market opportunities and promoting
    trade are among the most important means the Department has to enhance
    economic opportunities for our farmers and ranchers.
        We have made solid progress during the past year in our market
    expansion activities. Central to these efforts is the Framework
    Agreement on agriculture that was reached last July by Members of the
    World Trade Organization (WTO) as part of the current round of
    multilateral trade negotiations. The agreement incorporates key U.S.
    objectives for the negotiations and provides strong principles for
    further liberalization of agricultural trade. Much work remains to be
    done to translate those principles into actual reform commitments,
    however, and we are working very diligently to achieve consensus among
    WTO Members on as many areas as possible by this summer. This should
    pave the way for a successful WTO Ministerial meeting next December in
    Hong Kong.
        Regional and bilateral trade agreements provide another important
    avenue for opening new markets, and we continue to participate in the
    ambitious agenda that has been established for the negotiation of such
    agreements. During the past year, agreements were concluded with
    Australia, Morocco, Bahrain, five Central American countries, and the
    Dominican Republic. Negotiations are continuing with Panama, Thailand,
    three Andean countries, the five members of the Southern African
    Customs Union, the United Arab Emirates, Oman, and 34 countries that
    will comprise the Free Trade Area of the Americas.
        Our efforts to maintain and expand market access are not limited to
    the negotiation of new agreements, however. Trade agreement monitoring
    and compliance activities are vital if we are to protect U.S. trade
    rights.
        During the past year, among our highest priorities has been our
    work to recover access to markets for U.S. beef that were closed due to
    the December 2003 discovery of one case of bovine spongiform
    encephalopathy (BSE) in the United States. To date, we have recovered
    markets worth $1.2 billion, based on 2003 values. Most recently, Egypt
    opened its market to U.S. beef and beef products from animals less than
    30 months of age.
        The current focus of our efforts is restoring access to the
    Japanese market, and we are committed to reaching a resolution of this
    matter as soon as possible. In October, the United States and Japan
    reached agreements on the terms by which trade in U.S. beef would
    resume. Since that time, U.S. experts have traveled to Japan to provide
    additional technical explanations. We have worked across the
    Administration to apply pressure to convince the Japanese that they
    must open their market expeditiously. Last month, their Food Safety
    Commission adopted a new domestic standard excluding cattle 20 months
    of age and younger from mandatory testing. This is progress. We now
    need an expedited import review process to get the market reopened.

    Salaries and Expenses
        The Foreign Agricultural Service (FAS) is the lead agency for the
    Department's international activities and is at the forefront of our
    efforts to expand and preserve overseas markets. Through its network of
    78 overseas offices and its headquarters staff here in Washington, FAS
    carries out a wide variety of activities that contribute to the goal of
    expanding overseas market opportunities.
        As the Committee may be aware, FAS is currently undergoing an
    extensive review of its activities, organization, and operations. Many
    factors have prompted this assessment, including the changing nature of
    the global agricultural trade and trade-related issues; the need for
    greater efficiency in the delivery of services to the public; and
    budgetary constraints stemming in large part from significantly
    increased overseas operating costs. Recent declines in the value of the
    dollar relative to other currencies, coupled with local wage and price
    increases at overseas posts, have created major challenges in managing
    the agency's overseas presence.
        FAS has already taken steps to respond to these challenges. Earlier
    this year, the agency exercised buy-out and early-out authorities,
    approved by the Office of Personnel Management, to reduce staff levels
    at headquarters. In addition, its travel budget has been reduced by 50
    percent, and promotional activities carried out by FAS overseas staff
    and other international programs have been sharply curtailed.
        Even with the actions that have been taken thus far and further
    steps that are likely to result from the current organizational review,
    FAS will continue to face fiscal hurdles as it strives to maintain the
    services it provides to American agriculture. These factors were taken
    into account during development of the 2006 budget, with particular
    attention given to maintaining FAS' overseas presence so the agency can
    continue to represent and advocate for U.S. agricultural interests on a
    global basis.
        The budget provides a program level of $152 million for FAS
    activities in 2006, an increase of just over $11 million above 2005.
    This includes funding to meet higher operating costs at the agency's
    overseas posts, including increased payments to the Department of State
    for administrative services that State provides at overseas posts.
        Funding also is provided for FAS' contribution to the Capital
    Security Cost Sharing program. Under that program, which is being
    implemented this year, agencies with an overseas presence in U.S.
    diplomatic facilities will contribute a proportionate share of the
    costs of the construction of new, safe U.S. diplomatic facilities over
    a 14-year period.
        The budget also requests funding to support an FAS presence in the
    new embassy in Baghdad, Iraq, as well as funding for increased agency
    personnel costs.

    Export Promotion and Market Development Programs
        FAS administers the Department's export promotion and market
    development programs which play an important role in our efforts to
    assist American producers and exporters take advantage of new market
    opportunities overseas.
        The CCC export credit guarantee programs provide payment guarantees
    for the commercial financing of U.S. agricultural exports. Those
    guarantees facilitate exports to buyers in countries where credit is
    necessary to maintain or increase U.S. sales, but where financing may
    not be available with CCC guarantees. For 2006, the budget projects a
    program level of $4.4 billion for CCC export credit guarantees.
        For the Department's market development programs, including the
    Market Access Program and Foreign Market Development Program, the
    budget provides funding of $173 million. This is somewhat below the
    2005 current estimate reflecting a proposal to limit the Market Access
    Program to $125 million. That proposal is intended to achieve savings
    in mandatory spending and contribute to government-wide deficit
    reduction efforts.
        The budget also includes $52 million for the Dairy Export Incentive
    Program and $28 million for the Export Enhancement Program.

    International Food Assistance
        The United States continues to be the world's leader in global food
    aid efforts, providing over one-half of world food assistance. In
    support of our commitment to help alleviate hunger and malnutrition in
    developing countries, the supplemental appropriations package submitted
    by the President on February 14th includes a request for $150 million
    to support additional Public Law 480 Title II food donations to meet
    critical needs in Sudan and other emergency situations. It also
    requests funding for recovery and reconstruction activities in tsunami-
    affected countries and allows a portion of those funds to cover the
    cost of Public Law 480 Title II commodities used to respond after the
    tsunami.
        For 2006, the budget continues our support for these efforts by
    providing a program level of approximately $1.8 billion for U.S.
    foreign food assistance activities, including $300 million that is
    being requested in the Foreign Operations Appropriations Bill.
        The Public Law 480 programs remain the primary vehicle for
    providing U.S. foreign food assistance. The 2006 budget provides
    funding that would support a Title I credit and grant program level of
    $145 million. For Title II donations, funding is provided to support a
    program level of $964 million. These estimated program levels include
    unobligated funds carried over from previous years and projected
    reimbursements from the Maritime Administration for costs associated
    with meeting U.S. cargo preference requirements in prior years.
        In the case of Title II, the level of appropriated funding
    requested has been reduced by $300 million below the level requested in
    recent annual budgets, and an equivalent level of funding is being
    requested in the Agency for International Development's (AID)
    International Disaster and Famine Assistance account to support
    emergency food assistance activities that will be administered
    separately by AID. This change is intended to expedite the response to
    emergencies overseas by allowing food aid commodities to be purchased
    more quickly and closer to their final destination, while increasing
    the total amount of commodities that can be procured to meet those
    emergencies.
        For the McGovern-Dole International Food for Education and Child
    Nutrition Program, the budget provides appropriated funding of $100
    million, an increase of 15 percent above the 2005 enacted level. That
    funding will be supplemented by anticipated reimbursements from the
    Maritime Administration, and the total combined program level of $106
    million is expected to support assistance for as many as 2.6 million
    women and children.
        The budget also includes an estimated program level of $137 million
    for the CCC-funded Food for Progress program, which supports the
    adoption of free enterprise reforms in the agricultural economies of
    developing countries. The budget also assumes that donations of nonfat
    dry milk will continue under the authority of section 416(b) of the
    Agricultural Act of 1949. The total value of the commodity assistance
    and associated costs is projected to be $151 million.

    Trade Adjustment Assistance
        The budget includes $90 million for the Trade Adjustment Assistance
    (TAA) for Farmers Program, as authorized by the Trade Act of 2002. This
    program provides assistance to producers of raw agricultural
    commodities who have suffered lower prices due to import competition,
    and to fishermen who compete with imported aquaculture producers. In
    order to qualify for assistance, the price received by producers of a
    specified commodity during the most recent marketing year must be less
    than 80 percent of the national average price during the previous 5
    marketing years. In addition, a determination must be made that
    increases in imports of like or competitive products ``contributed
    importantly'' to the decline in prices.
        During 2004, the first full year of implementation, 12 petitions
    for TAA assistance were approved. Commodities that were certified for
    assistance included blueberries, Pacific salmon, shrimp, catfish, and
    lychees. The total program costs for 2004 are estimated at $16 million.
        The deadline for submission of petitions for 2005 TAA assistance
    closed on January 31st. Thus far, TAA assistance has been certified for
    Pacific salmon fishermen in 2 States, shrimpers in 7 States, Concord
    juice grape producers in 3 states, black olive producers in California,
    and potato producers in Idaho. Additional petitions are currently under
    review, and decisions on their eligibility should be announced in the
    near future.
        That concludes my statement, Mr. Chairman. I would be pleased to
    answer any questions that you and other Members of the Committee may
    have. Thank you.
                                     ______

      Prepared Statement of James R. Little, Administrator, Farm Service
                                     Agency

        Mr. Chairman and Members of the Subcommittee, I appreciate the
    opportunity to present the fiscal year 2006 budget for the Farm Service
    Agency (FSA). Since we met last year, I am pleased to report that FSA
    has made substantial progress in a number of areas to enhance customer
    service. We are putting in place an infrastructure that will help us
    quickly respond to new legislation and provide better access to our
    programs and data for our customers and business partners. We have made
    great strides in reaching out to our small and disadvantaged
    constituency base and engaging our stakeholders to help us develop a
    new Strategic Plan that is aligned with the Secretary's plan, all
    designed to support productive farms and ranches that are competitive
    in global markets; promote a secure and affordable food and fiber
    supply; and conserve natural resources and enhance the environment.
        This budget is fiscally responsible and proposes several measures
    to achieve savings in farm programs. It also includes a number of
    projects and initiatives designed to achieve substantial and systemic
    improvements that will position us for prompt implementation of the
    next farm bill or any other enacted legislation. Your support for the
    budget request will enable FSA to meet the challenges of a shifting
    economic environment and the influence of natural and man-made
    disasters. Before I begin addressing the details of the budget, I would
    like to comment on some of our recent successes, some of the
    initiatives we currently have underway, and some of the challenges we
    face.

    Disaster Assistance
        The past year provided us with tremendous challenges from Mother
    Nature, with record rainfall in parts of the country, a pervasive
    drought in the West, and the worst hurricane season in decades. In all
    cases FSA showed its colors and responded proactively to provide
    support in record time. The disaster assistance bill signed by the
    President on October 13, 2004, included more than a dozen programs and
    $2.9 billion for farmers and ranchers who have been affected by drought
    and other weather-related problems in 2003 and 2004, including damage
    caused by the devastating 2004 hurricanes and tropical storms that
    ravaged Florida, the Southeast and Eastern shore. Delivery of these
    programs has been a massive undertaking, which included implementing
    the Emergency Conservation Program in 12 days following passage of the
    bill that provided new funding. In total, this important legislation
    provided relief for losses of crops, livestock, dairy, cottonseed, and
    trees, including orchards, timber and pecans. In addition, FSA
    implemented an emergency relief program utilizing over $600 million
    from Section 32 funds for Florida's citrus, nursery, and vegetable
    growers who were especially impacted by back-to-back hurricanes
    Charley, Frances and Jeanne.
        FSA is working diligently to implement all of these disaster
    programs as soon as possible. Signup for the Section 32 initiative
    began last October, with more than $315 million already paid out.
    Various other programs are being phased in; for example, the Tree
    Assistance Program began February 7 and the major Crop Disaster Program
    began March 14. I am pleased to note that these delivery times are
    consistent with previous ad hoc disaster programs, which have generally
    been implemented within 5\1/2\ months of enactment.
        In addition, we continued the very successful Nonfat Dry Milk (NDM)
    Livestock Feed Assistance Initiative, which provided drought relief to
    foundation livestock producers in States hardest hit by drought.
    Surplus Commodity Credit Corporation (CCC) stocks of NDM, which have
    been denatured to prevent human consumption, are provided to
    participating States at a greatly reduced cost. Under the 2004
    initiative, 135.8 million pounds of NDM, including some of the unused
    NDM from the 2003 initiative, was made available to eligible producers
    in 96 counties in Arizona, Idaho, Montana, Nebraska, Nevada, New
    Mexico, Oregon, Utah, and Wyoming.

    Tobacco Transition Program
        On October 22, 2004, President Bush signed into law the American
    Jobs Creation Act of 2004, which includes the Fair and Equitable
    Tobacco Reform provisions commonly referred to as the Tobacco Buyout.
    Under this statute, payments will be made to tobacco quota holders and
    producers, ending all aspects of the Federal tobacco support program,
    including marketing quotas and non-recourse marketing loans, effective
    with the 2005 crop. This is an historic event, Mr. Chairman, since the
    tobacco price support program has been in place since the 1930's and
    has defined a way of life for many of our Nation's small family
    farmers.
        Current tobacco program requirements for the 2004 marketing year
    will remain in effect through the end of the 2004 marketing season,
    which ends June 30, 2005, for flue-cured tobacco and September 30,
    2005, for all other types of tobacco. The funds required to pay for the
    transition, estimated to total $10.14 billion over a 10-year period,
    will be obtained through assessments on manufacturers and importers of
    all tobacco products sold in the United States. The payments to
    producers will be made in 10 equal annual installments beginning in
    2005 and ending September 30, 2014.
        A sign-up period began on March 14. Tobacco quota holders will
    receive payments of $7 per pound based on their basic quota at the 2002
    marketing year level. Producers of quota tobacco will receive payments
    of $3 per pound based on their shares of risk in the 2002, 2003, and
    2004 crops of quota tobacco. FSA is working aggressively to implement
    this historic piece of legislation as quickly and effectively as
    possible. We are also working diligently to put in place a
    comprehensive communication and educational strategy to ensure all
    farmers, especially minority and disadvantaged farmers, are aware of
    the program and informed about how to sign up and obtain their
    benefits.

    Technology Modernization
        Over the past year, FSA has moved aggressively and collectively to
    a more streamlined environment using state-of-the-art information
    technology. FSA made significant progress in moving our systems to a
    web-based environment, improving the way we do business, providing
    better access to our data for our customers and business partners, and
    improving customer service. In keeping with the President's Management
    Initiatives on making programs more accessible using today's
    technology, last April Secretary Veneman unveiled the USDA Customer
    Statement, which enables producers to view all their program
    information through one Web portal. According to the 2002 Census of
    Agriculture, approximately 48 percent of all farmers have access to the
    Internet, enabling them to check on their CCC payments, collections,
    debt, and IRS reporting, via the Web. FSA Web-based applications also
    allow farmers to sign up for the Direct and Counter-cyclical Payment
    Program on line and receive their loan deficiency payments on line,
    significantly reducing the paperwork burden and providing benefits more
    timely. In addition, other partners are being provided electronic
    access. For example, participating U.S. banks and exporters can now
    electronically submit registrations, evidence of exports, and notices
    of default under the General Sales Manager's Export Credit Guarantee
    Program.
        To take advantage of USDA's and FSA's electronic commerce (e-
    commerce) programs, the FSA is encouraging all producers to sign up for
    the capability. Over the next several months, we will be conducting an
    extensive public relations campaign to promote e-commerce and its
    benefits. Through a substantial modernization effort, FSA expects that
    by 2006 all of its major programs will be Web-based and available on
    line to our customers and partners.
        In addition to e-commerce, FSA, along with other USDA agencies,
    continues to implement Geospatial Information System (GIS) and Global
    Positioning System (GPS) technology. GIS and GPS are helping FSA staff
    more efficiently measure land features by allowing computer-generated
    maps to interact with databases that store information about the land
    and its characteristics and background. In collaboration with the Risk
    Management Agency (RMA), FSA has digitized 80-90 percent of our most
    critical component of GIS--the Common Land Unit, which is the smallest
    land unit or field. This is the first major step toward creating a
    common management information system that can be shared by FSA and RMA
    and tremendously reduce redundancies.

    Conservation
        This past year, FSA set new standards for the Conservation Reserve
    Program (CRP), which is the Federal Government's largest private lands
    conservation program, assisting farm owners and operators in conserving
    highly erodible and other environmentally sensitive land to improve
    soil, water quality, air quality, and wildlife resources. I will talk
    more about the Conservation Reserve Program in the ``Budget Requests''
    section of this statement.

    Program Outreach
        Over the last year, FSA made great strides in reaching out to its
    small farm and minority constituency base with support from Secretary
    Veneman. Most importantly, on August 17, 2004, Secretary Veneman
    published in the Federal Register Proposed Uniform Guidelines for
    conducting FSA County Committee (COC) elections. The guidelines
    mandated reforms intended to ensure fair representation of socially
    disadvantaged farmers and ranchers on COCs. Detailed actions contained
    in the guidelines include improved outreach and communications;
    improved election procedures; nominations by the Secretary; and
    additional reporting and accountability requirements, which were
    implemented for the 2004 COC elections held December 6, 2004. FSA also
    launched a massive communications campaign in partnership with many
    minority and small farm organizations, with the specific goal to
    increase the numbers of minority and women nominees on COC election
    ballots. Analysis of the election data is under way, and FSA
    anticipates some positive results. In keeping with congressional
    intent, USDA will continue to review the results of the elections and
    determine what next steps are needed to ensure adequate minority
    representation on COCs.
        Last year, FSA and the USDA Office of Civil Rights crossed a major
    milestone when it implemented the Minority Farm Register and sponsored
    several listening sessions to allow minority farmers to interact with
    top Agency officials to discuss their problems and ways to improve
    customer service. FSA has teamed with the Cooperative State Research,
    Education, and Extension Service (CSREES) to train minority-serving
    institutions to teach minority producers how to apply for farm loans
    and operate their farms more efficiently. The partnership between FSA
    and CSREES has been extremely proactive and should prove very
    beneficial in helping improve FSA's program delivery.

    Budget and Performance Management System
        As part of FSA's vigilance towards our mission and meeting the
    President's Management Agenda focusing on improved customer service,
    FSA has developed the framework for a new performance-based, results-
    focused Strategic Plan. Known as the Budget and Performance Management
    System (BPMS), this framework aims to improve Agency and individual
    performance, accountability, and decision-making; fully comply with
    President's Management Agenda objectives; and ensure a customer focus
    to all activities. To accomplish all this, FSA formed a BPMS Core Team
    representing all major Agency functions. The Core Team looked at
    everything FSA does to help farmers, ranchers, and agricultural
    partners as well as how FSA manages its employees. Over 450 external
    and internal stakeholders participated in the plan's development. The
    Strategic Plan focuses on what FSA will do; BPMS focuses on how the
    Agency will get it done. The BPMS involves a range of activities to
    ensure taxpayer dollars are directed to efficient and effective
    programs that get results. The cornerstone of BPMS is the new Strategic
    Plan.
        BPMS is the vehicle that will help FSA meet its performance goals.
    Technology changes associated with BPMS will integrate all aspects of
    budget and performance and associated costs for improved decision-
    making and accountability to stakeholders and taxpayers. FSA has begun
    to examine requirements for fully costing the performance measures it
    uses to deliver results.

    Organizational Efficiency
        FSA is actively engaged in a comprehensive review of its operations
    and organization at all levels, including headquarters, State offices,
    and our 2,400 service centers. This review is necessary to better
    understand how to meet the demands of a dynamic and ever changing
    United States and world agricultural marketing system. FSA needs to
    better utilize current technology, encourage e-government and web-based
    programs, and expand GIS capabilities to improve customer service
    across all business lines. Our review is examining ways to make access
    to and delivery of our programs more efficient and at less cost, with
    the help of technology and a streamlined infrastructure.

    Fiduciary Accomplishments
        Fiscal year 2004 marks the third consecutive year in which FSA and
    CCC earned unqualified (clean) audit opinions for their activities,
    which have program levels exceeding $25 billion.

                                BUDGET REQUESTS

        Turning now to the specifics of the 2006 Budget, I would like to
    highlight our proposals for the commodity and conservation programs
    funded by the Commodity Credit Corporation (CCC); the farm loan
    programs of the Agricultural Credit Insurance Fund; our other
    appropriated programs; and administrative support.

                          COMMODITY CREDIT CORPORATION

        Domestic farm commodity price and income support programs are
    administered by FSA and financed through the CCC, a government
    corporation for which FSA provides operating personnel. Commodity
    support operations for corn, barley, oats, grain sorghum, wheat and
    wheat products, soybeans, minor oilseed crops, upland cotton and extra
    long staple cotton, rice, milk and milk products, honey, peanuts, pulse
    crops, sugar, wool and mohair are facilitated primarily through loans,
    payment programs, and purchase programs.
        The 2002 Farm Bill authorizes CCC to transfer funds to various
    agencies for authorized programs in fiscal years 2002 through 2007. It
    is anticipated that in fiscal year 2005, $2.11 billion will be
    transferred to other agencies.
        The CCC is also the source of funding for the Conservation Reserve
    Program administered by FSA, as well as many of the conservation
    programs administered by the Natural Resources Conservation Service. In
    addition, CCC funds many of the export programs administered by the
    Foreign Agricultural Service.

    Program Outlays
        The fiscal year 2006 budget estimates largely reflect supply and
    demand assumptions for the 2005 crop, based on November 2004 data. CCC
    net expenditures for fiscal year 2006 are estimated at $19.8 billion,
    down about $4.3 billion from $24.1 billion in fiscal year 2005. If the
    President's proposals for farm program savings are enacted, CCC outlays
    would decline by an additional $587 million in fiscal year 2006.
        This net decrease in projected expenditures is attributable to
    decreases for crop, tree and livestock disaster payments, loan
    deficiency payments, and the Noninsured Assistance Program, partially
    offset by an increase in counter-cyclical payments.

    Reimbursement for Realized Losses
        CCC is authorized to replenish its borrowing authority, as needed,
    through annual appropriations up to the amount of realized losses
    recorded in CCC's financial statements at the end of the preceding
    fiscal year. For fiscal year 2004 losses, CCC was reimbursed $12.5
    billion in fiscal year 2005.

    Conservation Reserve Program
        The Conservation Reserve Program (CRP), administered by FSA, is
    currently USDA's largest conservation/environmental program. It is
    designed to cost-effectively assist farm owners and operators in
    conserving and improving soil, water, air, and wildlife resources by
    converting highly erodible and other environmentally sensitive acreage,
    normally devoted to the production of agricultural commodities, to a
    long-term resource-conserving cover. CRP participants enroll acreage
    for 10 to 15 years in exchange for annual rental payments as well as
    cost-share assistance and technical assistance to install approved
    conservation practices.
        The 2002 Farm Bill increased authorized enrollment under this
    program from 36.4 million acres to 39.2 million acres. Under the
    general signup that ended September 24, 2004, FSA accepted offers to
    bring nearly 1.2 million acres into the CRP. Also under the 2004
    continuous and Farmable Wetlands Program (FWP) signup, a combined total
    of 275,000 acres was enrolled. We issued incentive payments totaling
    approximately $85 million under continuous signup, Conservation Reserve
    Enhancement Program (CREP), and FWP under the incentives program that
    began in May 2000 to boost participation. As of April 5, 2005, total
    CRP enrollment is 34.8 million acres, nearly 90 percent of the 39.2
    million acres authorized under the Farm Bill.
        However, a challenge lies ahead. In 2007, 16 million acres
    currently under CRP contracts are scheduled to expire, followed by
    another 6 million acres in 2008, 4 million acres in 2009, and 2 million
    acres in 2010. To ensure that the benefits of CRP continue, in August
    2004 the President declared the Administration's commitment to full CRP
    enrollment and announced that FSA will offer early reenrollments and
    extensions of existing contracts. In addition, FSA encouraged public
    comment on CRP through a Federal Register notice. Over 5,100 comments
    were received, and FSA expects to complete its analysis and announce
    reenrollment and contract extension provisions later this year.
        President Bush also announced the Northern Bobwhite Quail
    Initiative, aimed at creating 250,000 acres of habitat for the northern
    bobwhite quail and other upland bird species, and a wetland restoration
    initiative to restore up to 250,000 acres of wetlands and playa lakes
    located outside the 100-year floodplain.
        The CREP is also a major initiative under CRP that seeks to address
    recognized environmental issues of States, Tribes, and the Nation. CREP
    is a voluntary program implemented through Memoranda of Agreement with
    partners, such as States, Federal agencies, and private groups. FSA
    currently has 30 CREP agreements with 25 States with over 1.7 million
    acres reserved for enrollment. The program is very popular with
    environmental and wildlife groups, in addition to States and private
    landowners. More than 600,000 acres are currently enrolled in CREP
    nationwide. Most recently, in March 2005, FSA launched a second new
    CREP project in Nebraska.
        The fiscal year 2006 budget assumes general signups in fiscal years
    2005 and 2006 to enroll approximately 1.0 million acres and 1.3 million
    acres, respectively. In each of fiscal years 2005 and 2006, we
    anticipate enrolling 450,000 acres under continuous signup and the
    CREP. About 50,000 acres are estimated to be enrolled in the FWP in
    fiscal year 2005 and 60,000 acres in fiscal year 2006.
        Overall, CRP enrollment is assumed to gradually increase from 34.7
    million acres at the end of fiscal year 2004 to 39.2 million acres by
    fiscal year 2008, and to remain at 39.2 million acres through fiscal
    year 2015, maintaining a reserve sufficient to provide for continuous
    signup and CREP.

                               FARM LOAN PROGRAMS

        The loan programs funded through the Agricultural Credit Insurance
    Fund provide a variety of loans and loan guarantees to farm families
    who would otherwise be unable to obtain the credit they need to
    continue their farming operations.
        The fiscal year 2006 Budget proposes a total program level of about
    $3.8 billion. Of this total, approximately $0.9 billion is requested
    for direct loans and nearly $2.9 billion for guaranteed loans offered
    in cooperation with private lenders. These levels should be sufficient
    to provide adequate funding for the neediest farmers and ranchers
    throughout the year.
        For direct farm ownership loans we are requesting a loan level of
    $200 million. The proposed program level would enable FSA to extend
    credit to about 1,700 small and beginning farmers to purchase or
    maintain a family farm. In accordance with legislative authorities, FSA
    has established annual county-by-county participation targets for
    members of socially disadvantaged groups based on demographic data.
    Also, 70 percent of direct farm ownership loans are reserved for
    beginning farmers, and historically about 35 percent are made at a
    reduced interest rate to limited resource borrowers, who may also be
    beginning farmers. Recently, however, the reduced-rate provisions have
    not been utilized since regular interest rates are lower than the
    reduced rates provided by law. For direct farm operating loans we are
    requesting a program level of $650 million to provide approximately
    14,775 loans to family farmers.
        For guaranteed farm ownership loans in fiscal year 2006, we are
    requesting a loan level of $1.4 billion. This program level will
    provide about 4,800 farmers the opportunity to acquire their own farm
    or to preserve an existing one. One critical use of guaranteed farm
    ownership loans is to allow real estate equity to be used to
    restructure short-term debt into more favorable long-term rates. For
    guaranteed farm operating loans we propose an fiscal year 2006 program
    level of approximately $1.5 billion to assist over 8,500 producers in
    financing their farming operations. This program enables private
    lenders to extend credit to farm customers who otherwise would not
    qualify for commercial loans and ultimately be forced to seek direct
    loans from FSA.
        We are particularly proud of all of our loan programs. As a matter
    of fact, since fiscal year 2000, our direct and guaranteed loans to
    minorities and women have increased every year. In fiscal year 2004,
    there was an increase in the percentage of direct loans to each
    minority group, and we set a record for guaranteed farm ownership
    loans.
        In addition, our budget proposes program levels of $2 million for
    Indian tribe land acquisition loans and $60 million for boll weevil
    eradication loans. For emergency disaster loans, our budget proposes a
    program level of $25 million to provide sufficient credit to producers
    whose farming operations have been damaged by natural disasters.

                          OTHER APPROPRIATED PROGRAMS

    State Mediation Grants
        State Mediation Grants assist States in developing programs to deal
    with disputes involving a variety of agricultural issues including
    distressed farm loans, wetland determinations, conservation compliance,
    pesticides, and others. Operated primarily by State universities or
    departments of agriculture, the program provides neutral mediators to
    assist producers--primarily small farmers--in resolving disputes before
    they culminate in litigation or bankruptcy. States with mediation
    programs certified by FSA may request grants of up to 70 percent of the
    cost of operating their programs. Legislative authority expires at the
    end of fiscal year 2005; the Department plans to propose extending the
    program through fiscal year 2010.
        For fiscal year 2005, grants have been issued to 34 States. With
    the requested $4.5 million for fiscal year 2006, we anticipate that
    between 30 and 34 States will receive mediation grants.

    Emergency Conservation Program
        Since it is impossible to predict natural disasters, it is
    difficult to forecast an appropriate funding level for the Emergency
    Conservation Program. No funding was provided for the program in 2002
    or 2003; however, it continued to operate throughout the 2 fiscal years
    using unobligated funds carried forward, together with recoveries of
    unused funds previously allocated to the States.
        For fiscal year 2004, the Consolidated Appropriations Act provided
    $11.9 million for use in southern California only. The Military
    Construction and Emergency Hurricane Supplemental Appropriations Act of
    2005, Public Law 108-324, provided $150 million for ECP--$100 million
    in direct appropriation and $50 million transferred from CCC. These
    funds are available until expended and will be used to provide
    emergency cost-share assistance to producers who suffered losses due to
    natural disasters such as droughts; Hurricanes Charley, Frances, Ivan,
    and Jeanne; and tornadoes. As of April 5, $153.8 million has been
    allocated to 45 States. The fiscal year 2006 budget proposes no funding
    for this program.

    Dairy Indemnity Program
        The Dairy Indemnity Program (DIP) compensates dairy farmers and
    manufacturers who, through no fault of their own, suffer income losses
    on milk or milk products removed from commercial markets due to
    residues of certain chemicals or other toxic substances. Payees are
    required to reimburse the Government if they recover their losses
    through other sources, such as litigation. As of April 5, we have paid
    fiscal year 2005 DIP claims totaling $35,089 in four States.
        The fiscal year 2006 appropriation request of $100,000, together
    with unobligated carryover funds expected to be available at the end of
    fiscal year 2005, would cover a higher than normal, but not
    catastrophic, level of claims. Extended through 2007 by the 2002 Farm
    Bill, DIP is a potentially important element in the financial safety
    net for dairy producers in the event of a serious contamination
    incident.

                             ADMINISTRATIVE SUPPORT

        The costs of administering all FSA activities are funded by a
    consolidated Salaries and Expenses account. The account comprises
    direct appropriations, transfers from loan programs under credit reform
    procedures, user fees, and advances and reimbursements from various
    sources.
        The fiscal year 2006 Budget requests $1.37 billion from
    appropriated sources including credit reform transfers, for a net
    increase of about $70 million over the fiscal year 2005 level. The
    request reflects increases in pay-related costs to sustain essential
    program delivery and increases in information technology investments to
    continue and enhance the modernization of FSA program and
    administrative systems. These increases are offset by decreases in both
    Federal and non-Federal county office staff years and operating
    expenses.
        The fiscal year 2006 request reflects a ceiling of 5,474 Federal
    staff years and 10,284 non-Federal staff years. Temporary non-Federal
    county staff years will be reduced to 1,000 from the fiscal year 2005
    level of 1,250 due to completion of disaster activities. Permanent non-
    Federal county staff years are estimated to remain at the 2005 level.
        Federal staff years have a net decrease of 24 staff years. FSA has
    taken aggressive actions since fiscal year 2004 to reduce discretionary
    spending in order to live within available funding. In fiscal year 2005
    these measures were supplemented by a reduction in the hiring ceiling
    which will culminate in a reduction of 39 staff years in fiscal year
    2006. This reduction is offset by an increase of 15 staff years which
    will be devoted to outreach activities aimed at increasing program
    participation of underserved customers, with special emphasis on
    socially disadvantaged and/or limited resource farmers, women, and
    members of minority groups such as African Americans, Asian-Pacific
    Americans, Hispanics, and Native Americans.
        Before closing I would like to note that support of FSA's
    modernization effort is also provided through the Department's Common
    Computing Environment account. Funding made available to FSA under this
    account will provide needed telecommunications improvements and permit
    us to continue implementation of GIS, which is so crucial to rapid and
    accurate program delivery.
        Mr. Chairman, this concludes my statement. I will be happy to
    answer your questions and those of the other Subcommittee Members.
                                     ______

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

        Mr. Chairman, members of the Subcommittee, I appreciate the
    opportunity to review the work of the Foreign Agricultural Service
    (FAS) and to present the President's budget request for FAS programs
    for fiscal year 2006.
        To help position our agency to meet the challenges of the future,
    we are going through an intensive self-assessment. Many factors have
    driven our review. For example, the outbreaks of bovine spongiform
    encephalopathy (BSE) and, to a lesser extent, avian influenza (AI) have
    made us keenly aware of the changing nature of the trade issues that we
    confront on a daily basis. Since the Uruguay Round Agreement on
    Agriculture, trade disruptions have shifted from tariffs and quotas to
    a host of more complex issues requiring scientific expertise along with
    diplomacy. Issues surrounding biotechnology have underscored the need
    for different skills in order to be effective in negotiating and
    maintaining market access for our products.
        The Administration's strategy of competition for trade
    liberalization has also greatly affected our work. Last summer, the
    Doha Development Agenda talks got back on track. We now have a
    blueprint for completing a final agreement on agriculture that lays out
    strong principles for liberalizing trade. Putting details to this
    blueprint is not easy. There will be several critical negotiating
    sessions in 2005, with a goal to achieve consensus on as many areas as
    possible by July. We recognize that we have a lot of ground to cover in
    the negotiations, but we are determined to take advantage of this once-
    in-a-generation opportunity for fundamental trade reform.
        In addition to multilateral negotiations in the World Trade
    Organization, we are also negotiating several important regional and
    bilateral agreements. Last year alone, agreements were concluded with
    Australia, Morocco, Bahrain, five Central American countries and the
    Dominican Republic. We continue negotiations with Panama, Thailand,
    three Andean countries, the five members of the Southern African
    Customs Union, the United Arab Emirates, Oman, and the 33 countries
    that will be part of the Free Trade Area of the Americas.
        We are also working to incorporate the principles of the
    President's Management Agenda into our strategic and operational plans
    with the goal of making FAS more results oriented. We are reviewing how
    we manage our workforce, what we can do to make our programs more
    accessible electronically, and how we can improve our financial
    management and performance at all levels of the agency.
        Finally, fiscal realities have dictated that we conduct a top-to-
    bottom organizational review. The combination of rising expenses for
    our overseas offices as a result of the declining value of the dollar,
    increased Capital Security Cost Sharing assessments imposed by the
    Department of State (DOS), and the need to absorb rising salary costs
    has left us with a significant budget shortfall in fiscal year 2005.
        To address this shortfall, we requested and received authority from
    the Office of Personnel Management for early-outs and buy-outs to
    reduce staff levels in headquarters. With this action, we have been
    able to reduce headquarters civil service staff levels by 6 percent. We
    have also imposed a 50-percent reduction in travel and sharply reduced
    our promotional activities conducted by FAS overseas staff and other
    international programs.
        Thus, a combination of factors has created an opportunity to take a
    serious and extensive look at the work of our agency and how we can
    best meet the needs of our customers. We have consulted with Congress,
    our stakeholders, other government agencies, and our employees to set a
    new vision for the agency. We know that FAS needs to change to remain
    relevant in a dynamic global environment.
        As part of our ongoing assessment, we are charting a course for FAS
    for the next 5 years. If we are successful, we envision that in 2010
    FAS will be a leader in developing market priorities and strategies for
    our most important markets, both from a competitive perspective and
    from a market potential perspective.
        Given our resource constraints we need to define what the agency
    will look like. We know that the agency's most distinct asset continues
    to be our overseas presence. Our overseas staff provides invaluable
    service through their in-depth knowledge of the country, its
    government, the market for our products, and the competition. As
    government officials, we have the unique capability to gain access to
    foreign officials on behalf of American agriculture.
        But by 2010, FAS will be a smaller agency, sharply focused on
    market access and market intelligence. Our offices overseas will be
    smaller and may be in different locations. Even more than is the case
    now, offices will cover more than one country, and we will make better
    use of technology to improve our responsiveness and communications.
    Market access will be even more technical and scientific in nature than
    it is today, and market intelligence will be more targeted and forward
    looking.
        FAS will continue to be USDA's lead agency for agricultural trade
    negotiations. We will focus on non-tariff trade barriers and continue
    to monitor other countries' compliance with international agreements.
    To build on our market intelligence and development strengths, we will
    position our resources strategically to support U.S. trade interests.
    Our trade capacity building activities will be targeted not only to
    facilitating trade and economic development, but also to promoting
    agricultural and food security worldwide.
        In keeping with the President's Management Agenda, we are assessing
    our activities, both overseas and at headquarters, to determine which
    are inherently governmental and provide the maximum value to our
    customers. Our country-by-country review has a goal of prioritizing
    markets and activities and identifying where we can absorb reductions
    with the least impact. We are looking at market potential, market
    competition, the ease of doing business, the cost of each office, and
    appropriate staff levels. It is essential that we continue to work in
    areas where it is most difficult for our private sector to do business.
    We expect to announce the results of this review shortly. We are
    confident that the end result of our organizational review will be
    better, more effective service to U.S. constituents, our agricultural
    industry and producers.
    Budget Request
        Mr. Chairman, as I indicated earlier, FAS continues to experience
    significant fiscal pressures resulting from the declining value of the
    dollar abroad and rising staff costs.
        However, the levels proposed in the President's budget will allow
    FAS to maintain current service levels and move toward our 2010 vision
    without degradation of service provided to our customers.
        Our fiscal year 2006 budget proposes a funding level of $152.4
    million for FAS and 982 staff years. This is an increase of $11.2
    million above the fiscal year 2005 level and represents the funds
    needed to ensure the agency's continued ability to conduct its
    activities and provide services to U.S. agriculture.
        The budget proposes an increase of $8.8 million for support of FAS
    overseas offices. The FAS network of 78 overseas offices covering over
    130 countries is vulnerable to the vagaries of macro-economic events
    that are beyond the agency's control. The significantly weakened U.S.
    dollar and higher International Cooperative Administrative Support
    Services (ICASS) payments to DOS have caused base costs to increase
    sharply. Since 2002, the dollar has fallen 9 percent against currencies
    of our major markets.
        Specifically, this increase includes:
      --$5.4 million to maintain current services at the 78 FAS offices
            around the world, including $2.4 million for wage increases for
            locally employed staff; $900,000 for higher rents; and $900,000
            for increases in all other in-country expenses including
            security, repairs, travel, and supplies. Additionally, an
            increase of $1.2 million will be required to meet higher ICASS
            payments to DOS.
      --$2.7 million for the fiscal year 2006 Capital Security Cost Sharing
            Program assessment. In fiscal year 2005, DOS implemented a
            program through which all agencies with an overseas presence in
            U.S. diplomatic facilities will pay a proportionate share for
            accelerated construction of new secure, safe, and functional
            diplomatic facilities. These costs will be allocated annually
            based on the number of authorized personnel positions. This
            plan is designed to generate a total of $17.5 billion to fund
            150 new facilities over a 14-year period. The FAS assessment is
            estimated to increase annually in roughly $3 million increments
            until fiscal year 2009, at which time the annual assessed level
            will total an estimated $12 million. This level is assumed to
            remain constant at that point for the following 9 years.
      --$650,000 to support the FAS presence in the soon-to-be constructed
            embassy in Baghdad, Iraq, after an absence of nearly 20 years.
            FAS will have the lead on all USDA activities and projects in
            support of Iraq and its agricultural development. This will
            entail the entire range of market development, market access,
            and market intelligence tools available to FAS and its industry
            partners.
        The budget also includes an increase of $2.4 million to cover
    higher personnel compensation costs associated with the anticipated
    fiscal year 2006 pay raise. Pay cost increases are non-discretionary
    and must be funded. Absorption of these costs in fiscal year 2006 would
    primarily come from reductions in agency personnel levels that would
    significantly affect FAS's ability to contribute to USDA's strategic
    goal of enhancing economic opportunities for agricultural producers.

    Export Programs
        Mr. Chairman, the fiscal year 2006 budget proposes $6.1 billion for
    programs designed to promote U.S. agricultural exports, develop long-
    term markets overseas, and foster economic growth in developing
    countries.

    Export Credit Guarantee Programs
        The budget includes a projected overall program level of $4.4
    billion for export credit guarantees in fiscal year 2006.
        Under these programs, which are administered by FAS in conjunction
    with FSA, the Commodity Credit Corporation (CCC) provides payment
    guarantees for the commercial financing of U.S. agricultural exports.
    As in previous years, the budget estimates reflect actual levels of
    sales expected to be registered under the programs and include:
      --$3.4 billion for the GSM-102 program;
      --$5.0 million for the GSM-103 program;
      --$1.0 billion for Supplier Credit guarantees; and
      --$20.0 million for Facility Financing guarantees.

    Market Development Programs
        Funded by CCC, FAS administers a number of programs to promote the
    development, maintenance, and expansion of commercial export markets
    for U.S. agricultural commodities and products. For fiscal year 2006,
    the CCC estimates include a total of $173.0 million for the market
    development programs, $15 million below fiscal year 2005 levels and
    includes:
      --$125.0 million for the Market Access Program;
      --$34.5 million for the Foreign Market Development (Cooperator)
            Program;
      --$10.0 million for the Emerging Markets Program;
      --$2.5 million for the Quality Samples Program; and
      --$2.0 million for the Technical Assistance for Specialty Crops
            Program.

    International Food Assistance
        The fiscal year 2006 budget continues the worldwide leadership of
    the United States in providing international food aid. In this regard,
    the fiscal year 2006 President's budget includes $1.8 billion for U.S.
    foreign food aid programs, including $300 million requested in the
    Foreign Operations Appropriations Bill. Programs funded through the
    Department of Agriculture include:
      --$1.1 billion for Public Law 480 which is expected to support
            approximately 2.2 million metric tons of commodity assistance.
            For Title I, the budget supports a program level of $145.0
            million, which includes $80 million in new appropriations. The
            balance will be provided through unobligated carryover balances
            and projected Maritime Administration reimbursements. The total
            program level will support approximately 540,000 metric tons of
            commodity assistance based on current price projections. For
            Title II donations, the budget provides for a program level of
            $964 million, which is expected to support 1.7 million metric
            tons of commodity donations. This includes an appropriation
            request of $885 million and $79 million in projected Maritime
            Administration reimbursements. While the fiscal year 2006
            appropriation request has been reduced by $300 million from
            last year's request, an equivalent funding level has been
            included in the U.S. Agency for International Development's
            (USAID) disaster assistance account to support emergency food
            assistance activities. This change will allow food aid
            commodities to be purchased locally which will allow for a more
            flexible and timelier response to emergencies. Further, the
            resultant savings in ocean freight and distribution costs is
            expected to increase the total amount of commodities that can
            be procured.
      --$137.0 million for CCC-funded Food for Progress. Funding at the
            proposed level is expected to support 300,000 metric tons of
            commodity assistance.
      --$151.0 million for donations of CCC-owned nonfat dry milk under
            Section 416(b) authority. Under this authority, surplus
            commodities that are acquired by CCC in the normal course of
            its domestic support operations are available for donation
            through agreements with foreign governments, private voluntary
            organizations and cooperatives, and the World Food program. For
            fiscal year 2006, current CCC baseline estimates project a
            limited supply of surplus nonfat dry milk that could be made
            available for programming, and the budget assumes that 75,000
            metric tons will be programmed.
      --$106.0 million for the McGovern-Dole International Food for
            Education and Child Nutrition Program. This represents an
            increase of $15 million over the fiscal year 2005 current
            estimate and includes $100 million in new appropriations and an
            estimated $6 million in projected reimbursements from the
            Maritime Administration. Funding at this program level will
            assist an estimated 2.6 million women and children.

    Export Subsidy Programs
        FAS administers two export subsidy programs through which payments
    are made to exporters of U.S. agricultural commodities to enable them
    to be price competitive in overseas markets where competitor countries
    are subsidizing sales. The budget includes:
      --$28.0 million for the Export Enhancement Program (EEP). World
            supply and demand conditions have limited EEP programming in
            recent years, and as such, the fiscal year 2006 budget assumes
            a continuation of EEP at the fiscal year 2005 level. The 2002
            Farm Bill does include the maximum annual EEP program level of
            $478.0 million allowable under Uruguay Round commitments, which
            could be utilized should market conditions warrant.
      --$52.0 million for the Dairy Export Incentive Program (DEIP), $46.0
            million above the fiscal year 2005 estimate of $6.0 million.
            This estimate reflects the level of subsidy currently required
            to facilitate export sales consistent with projected United
            States and world market conditions and can change during the
            programming year as market conditions warrant.

    Trade Adjustment Assistance for Farmers
        Authorized by the Trade Act of 2002, the Trade Adjustment
    Assistance for Farmers program authorizes USDA to make payments up to
    $90.0 million annually to eligible producer groups when the current
    year's price of an eligible agricultural commodity is less than 80
    percent of the national average price for the 5 marketing years
    preceding the most recent marketing year, and the Secretary determines
    that imports have contributed importantly to the decline in price.
        This concludes my statement, Mr. Chairman. I will be glad to answer
    any questions.
                                     ______

       Prepared Statement of Ross J. Davidson, Jr., Administrator, Risk
                               Management Agency

        Mr. Chairman and members of the Subcommittee, I am pleased to
    present the fiscal year 2006 budget for the Risk Management Agency
    (RMA). The Federal Crop Insurance Program plays an important role in
    assisting farmers to manage financial risks associated with yield and
    revenue shortfalls due to bad weather or other natural disasters. RMA
    continues to evaluate and provide new products and to promote the
    adoption of crop insurance as a risk management tool so that the
    Government can further reduce the need for ad-hoc disaster payments to
    the agriculture community. In 2006, current projections are that the
    program is expected to provide producers with more than $41 billion in
    protection on approximately 220 million acres through about 1.2 million
    policies.
        The growth and effectiveness of the Crop Insurance Program is
    dependent on a reliable delivery system, insurance products that meet
    the needs of producers, investment in information technology to ensure
    the delivery system is timely, accurate and dependable, and adequate
    funding to support compliance and program integrity, product
    evaluation, maintenance and administration, and new product
    development.
        To meet Crop Insurance Program requirements in fiscal year 2006,
    RMA has requested a budget that will provide the necessary funding to
    continue the growth of the program and ensure its effectiveness to meet
    the agricultural community crop insurance requirements and assure
    fiscal responsibility in the application of taxpayer's dollars. RMA's
    total fiscal year 2006 budget request is $3.3 billion. The funding
    level proposed for the Federal Crop Insurance Corporation (FCIC) Fund
    is $3,162,979,000 and for the Administrative and Operating Expenses,
    the request is $87,806,000.

    FCIC Fund
        The fiscal year 2006 budget proposes that ``such sums as may be
    necessary'' be appropriated to the FCIC Fund. This ensures the program
    is fully funded to meet the contractual obligation to pay claims, to
    reimburse the private sector for expenses incurred in delivering
    insurance to farmers and ranchers, to provide premium subsidies to make
    crop insurance affordable, and to encourage the purchase of higher
    levels of protection. Of the total amount requested for fiscal year
    2006, 67 percent is slated for premium subsidies. The current estimate
    of funding requirements is based on USDA's latest projections of
    planted acreage and expected market prices. The budget request includes
    $2.2 billion for Premium Subsidy, $781.4 million for Delivery Expenses,
    $137.5 million for estimated excess losses based on an overall
    projected loss ratio of 1.075, and $78.1 million for Agricultural Risk
    Protection Act of 2000 (ARPA) activities which includes $3.6 million to
    continue funding of Program Integrity initiatives under a General
    Provision in the 2006 Budget. ARPA provided RMA with mandatory funding
    to implement data mining and data warehousing to improve compliance and
    integrity in the crop insurance program. We estimate, in the first year
    of operation, data mining helped prevent nearly $94 million in improper
    payments and helped recover approximately $35 million in improper
    indemnities. The authority to use mandatory funds for data mining
    expires in fiscal year 2005. Therefore, the 2006 Budget includes
    language to provide $3.6 million to continue data mining and data
    warehousing activities.
        To strengthen crop insurance, promote program expansion, and limit
    ad-hoc disaster payments, the 2006 Budget includes a proposal for
    legislation to take effect in 2007 that requires those that receive
    direct farm payments to purchase crop insurance. The proposal requires
    farmers growing program crops who receive farm program benefits to
    purchase insurance protection at a 50 percent, or higher additional
    coverage level, of their expected market value, or lose their farm
    program benefits. This change ensures a farmer's loss in a disaster
    will not be greater than 50 percent. This proposal will further reduce
    premium subsidies to crop insurance policyholders, as well as subsidies
    in total to the participating insurance companies. These changes will
    encourage greater personal responsibility of those who buy crop
    insurance to pay for their risk management tools and will encourage the
    companies to deliver crop insurance more efficiently. This Budget
    proposal is estimated to realize $140 million in savings to the crop
    insurance program beginning in 2007. The increased self-reliance
    encouraged by this proposal and the linkage of the availability of crop
    insurance to farm program payments are intended to enhance the
    operating efficiency of the program and reduce the need for ad-hoc
    disaster payments.
        This proposal is expected to be submitted along with the other
    mandatory proposals for farm programs that support the President's
    Budget.

    Administrative and Operating Expenses (A&O)
        RMA's fiscal year 2006 request of $87.8 million for Administrative
    and Operating Expenses represents an increase of about $16.3 million
    from fiscal year 2005. This budget supports an increase for information
    technology (IT) initiatives of $12.2 million.
        RMA's corporate IT systems need updating and other enhancements to
    take advantage of the latest technology and to ensure the IT component
    of the delivery system is reliable, accurate, and accessible. Billions
    of dollars in indemnity payments, premium subsidy, producer-paid
    premiums, and administrative reimbursement payments pass through this
    antiquated IT system each year. Therefore, I am duty-bound to continue
    to request increases in IT funding because the current IT
    infrastructure is long past its life cycle and is increasingly costly
    to run, cumbersome to maintain; and makes it difficult to ensure the
    security mandated by Federal law. The Agency's IT infrastructure
    supports the crop insurance program's business operations at the
    national and local levels, provides risk management products to
    producers nationwide and is the basis for validating, receiving and
    remitting reinsurance subsidy and other payments to private companies
    reinsured by the FCIC. RMA is using system and database designs
    originally developed in 1994. There have been few hardware and software
    upgrades since then, but the program has grown and evolved dramatically
    in the timeframe, and business process analysis and re-engineering of
    the entire business delivery system are needed to support current and
    future program growth. As stated in previous testimonies, without
    adequate funding of the IT requirements, the Agency cannot safely
    sustain additional IT changes required by new product development or
    changes in existing products. Future program expansion will increase
    the risk of system failure and possible inability to handle day-to-day
    processing of applications and indemnity payments.
        Also included in the 2006 Budget is $1.0 million to expand the
    monitoring and evaluation of reinsured companies. RMA is, again,
    requesting funds to establish a systematic process of monitoring,
    evaluating, and auditing, on an annual basis, the performance of the
    product delivery system. These funds will be used to support insurance
    company expense audits, performance management audits and reinsurance
    portfolio evaluations to ensure effective internal and management
    controls are in place and operating for each reinsured company's
    business operations.
        The 2006 Budget requests $1.8 million to support an increase of 17
    staff years. This will raise RMA's employment ceiling from 568 to 585.
    A requested increase of 15 staff years is included to support the
    increased workload for the Compliance function. The additional staff
    years will provide the Compliance function the necessary support to
    address outstanding OIG and GAO recommendations to improve oversight
    and internal controls over insurance providers. In response to several
    OIG audit reports, RMA needs to establish a systematic process of
    auditing insurance providers to detect and correct vulnerabilities to
    proactively prevent improper payment of indemnities. RMA's studies
    suggest that additional resources in this area would provide a minimum
    of $4 dollars in reduced fraud cost for every dollar spent. The
    additional staffing will provide the necessary oversight to ensure
    taxpayers' funds are expended as intended.
        In addition, 2 staff years are requested for the Office of
    Insurance Services to support good farming practice determinations and
    to support the process of evaluating claims resulting from questionable
    farming practices. ARPA requires RMA to establish a process to
    reconsider determinations of good farming practices. The Regional
    Offices of RMA's Insurance Services Division are in a unique position
    by virtue of their background in production agriculture, agronomy and
    related fields, and knowledge of local crops and growing conditions to
    effectively carry out the important function of managing the process by
    which good farming practices determinations are made. RMA data indicate
    assessments are infrequently made for uninsured causes of loss against
    a producer for failure to follow good farming practices. With approved
    insurance providers operating in an environment of risk sharing, there
    is a tremendous need for support and incentives for increased quality
    of loss adjustment, particularly in the good farming practices area to
    ensure that payments for losses are consistent with the requirements of
    Federal Crop Insurance Act. Again, it is expected the additional
    staffing in this area will be more than paid for by ensuring that loss
    payments are made in accordance with the requirement that good farming
    practices be used.
        Lastly, an increase of $1.3 million is requested for pay costs.
    These funds are necessary to maintain required staffing to carry out
    RMA's mission and mandated requirements.

                               PROGRAM MANAGEMENT

        Now, I would like to provide an update on some of our key
    initiatives and products:
      --FCIC Board Activities
      --Standard Reinsurance Agreement
      --Pilot Programs
      --Product Development and Non-Insurance Risk Management Tools
      --Education and Outreach Program
      --Agricultural Management Assistance
      --Comprehensive Information Management System
      --Program Integrity
      --Other Initiatives
        Under the direction of the FCIC Board of Directors (Board), RMA
    continues to promote an agenda to bring new and innovative insurance
    products to the agricultural community, to validate the utility of
    current insurance products, to ensure outreach to small and limited
    resource farmers, to promote equity in risk sharing, and to guard
    against waste, fraud and abuse within the program.
        Through the private sector delivery system in crop year 2004, RMA
    provided approximately $46.7 billion of protection to farmers, and
    expects indemnity payments for crop year losses of approximately $3.1
    billion. The participation rate for major program crops was
    approximately 83 percent. RMA continues to improve and update the terms
    and conditions of all crop insurance policies to better clarify and
    define insurance protection and the duties and responsibilities of the
    policyholder and insurance providers. The Board actions to accomplish
    program expansion have been somewhat restricted by budget constraints
    affecting available IT resources and additional staffing required to
    meet new administrative and program requirements brought on by ARPA.
    Given this constraint, within the funding appropriated for fiscal year
    2004, the Board considered 44 action items during nine (9) meetings.
    There were six (6) new program submissions and 19 program modifications
    to existing insurance products. For example, the Board authorized the
    expansion of the Adjusted Gross Revenue--Lite (AGR-Lite) plan of
    insurance to all counties in Alaska, Idaho, Oregon, Washington State
    and North Carolina beginning with the 2005 crop year. Also, the Board
    approved the implementation of the Silage Sorghum Pilot and the Sugar
    Beet Stage Removal Option Pilot.

    Standard Reinsurance Agreement (SRA)
        The new SRA has been put in place, effective for the 2005 crop
    year. Key changes included a lowering of the A&O expense reimbursement,
    which will be implemented over the 2005 and 2006 reinsurance years. In
    addition, RMA has tightened the monitoring of SRA holders with respect
    to financial solvency and is strengthening ties with state regulators
    and the National Association of Insurance Commissioners (NAIC).
        It should also be noted that, for reinsurance year 2005, RMA
    approved three new SRA holders, bringing the current number of
    reinsured companies to 16. Thus, 2005 has seen an increase in the
    insurance writing capacity of the Federal crop insurance program.

    Pilot Programs
        For crop year 2005, RMA has 36 pilot programs being offered. A list
    of those pilots programs is attached to my testimony (Exhibit 1). As
    these programs gain experience, RMA conducts evaluations to determine
    whether they may be converted to permanent programs and offered in
    counties where the crop is routinely grown. During 2004, RMA completed
    evaluations on seven (7) pilot programs including: cabbage, crambe,
    cultivated wild rice, mint, mustard, Group Risk Plan (GRP), rangeland
    and sweet potatoes. After consideration by the FCIC Board, cabbage,
    cultivated wild rice, mint and mustard pilots were approved for
    conversion to permanent programs. The Board directed RMA to revise the
    GRP, rangeland and sweet potato programs, which has been done, and both
    were approved as new pilot programs for the 2005 crop year. In
    addition, RMA currently is contracting for an evaluation of the
    Adjusted Gross Revenue pilot program.

    Product Development and Non-Insurance Risk Management Tools
        During fiscal year 2004, RMA awarded over $12 million in contracts
    to further program goals of expanding the number of crop insurance
    tools available to growers in the United States. Many of these
    contracts are directed at specialty crops which supports one of RMA's
    top priorities to develop effective risk management products for
    pasture, rangeland, and forage. In January 2004, RMA released a
    contract for research and development for pasture, rangeland, and
    forge, with the aim of serving the vital needs of livestock producers.
    RMA awarded four contracts to develop new approaches in various areas
    of the country to address this potential market.
        The contracts encourage use of new and innovative technology,
    including a satellite based vegetative index; a satellite-based remote
    sensing imagery that will describe the seasonal growth dynamics of
    vegetation; and the use of a seasonal growth constrained rainfall index
    based on a combination of a weighted warm-season/cool-season indexing
    periods and the National Oceanic and Atmospheric Administration
    rainfall data system. These programs are targeted for Board
    consideration in 2005 and 2006, and potential availability for the 2006
    and 2007 crop years.
        Also, RMA has several active contracts underway which are focused
    on providing new crop insurance programs for some of the most
    significant non-insured specialty crops. Some of these include a new
    program for Florida Fruit Trees; a Christmas tree program feasibility
    study; development for fresh vegetables including asparagus, broccoli,
    carrots, cauliflower, celery, garlic, artichoke, lettuce-head, lettuce-
    leaf, lettuce-romaine, and spinach; Hawaii Tropical Fruits and Trees
    development is currently under consideration by the FCIC Board;
    feasibility of a revenue maple syrup program; a study by USDA's
    Economic Research Service evaluating the unique risks of the organic
    industry; research to determine the potential for development of a risk
    management tool for producers of crops subject to quarantine
    restrictions by a state or Federal agency; and research into the
    feasibility of developing a crop insurance program for Small Value
    Crops with an annual value of less than $50 million.
        These are just a few of the product development initiatives
    underway to expand and improve the risk management tools for American
    agricultural producers.

    Education and Outreach Program
        For our educational efforts in 2004, a total of $4.5 million in
    cooperative agreements were established with state departments of
    agriculture, universities and non-profit organizations to benefit
    states that have been historically underserved in the Crop Insurance
    Program. Crop insurance education will be delivered to producers in
    Connecticut, Delaware, Maine, Pennsylvania, Rhode Island, Maryland,
    Massachusetts, Nevada, New Hampshire, New Jersey, New York, Utah,
    Vermont, West Virginia, and Wyoming. These cooperative agreements will
    expand available risk management information; promote risk management
    education opportunities, inform agribusiness leaders; increase emphasis
    on risk management; and deliver training on risk management to
    producers with emphasis on reaching small farms.
        Additional education efforts were dedicated to reaching producers
    of specialty crops. A total of 41 partnership agreements were
    established at a cost of $5.3 million in 2004. These agreements will
    provide outreach to specialty crop producers to broaden their risk
    management education.
        Also, outreach efforts were directed to providing risk management
    technical assistance to women, small and limited resource farmers, and
    ranchers. A total of 60 projects were funded in 2004 at a cost of $5.2
    million.

    Agricultural Management Assistance
        In 2004, RMA provided $4.2 million in financial assistance to
    producers purchasing spring buy-up crop insurance policies in 15
    targeted States. The primary goal of the program was to encourage
    producers to purchase higher levels of coverage, and to provide an
    incentive for new producers to insure. In 2004, RMA paid up to 15
    percent of producers' out-of-pocket premium costs to encourage
    increased participation.
        Overall, in the targeted States RMA has seen an increase in
    policies earning premium of about 7 percent. In addition, RMA estimates
    that the average coverage level elected by most targeted States is 70
    percent, in contrast to 65 percent, for those states without a
    financial assistance program.

    Comprehensive Information Management System
        RMA is actively working on a project to implement Section 10706 of
    the 2002 Farm Bill to assist with the development of a Comprehensive
    Information Management System (CIMS) which will simplify and improve
    the storage and access to data on programs administrated by RMA and the
    Farm Service Agency (FSA). This project will provide a management
    information system that allows RMA, FSA and other USDA entities and
    insurance providers to process, share and report on approved common
    information.
        The CIMS will be designed to: improve access by agricultural
    producers to RMA and FSA programs; improve and protect the integrity of
    the information collected; meet the needs of the agencies that require
    the data in the administration of their programs; improve the
    timeliness of the collection of the information; contribute to the
    elimination of duplication of information collection; lower the overall
    cost to the Department of Agriculture for information collection; and
    achieve such other goals as the Secretary considers appropriate for the
    Agriculture community.
        A contract has been issued for the system development;
    identification of business processes and data elements of RMA and FSA
    is in the final stage. The next phase involve the design and
    implementation the information system for storing, maintaining,
    accessing, and retrieving approved information by RMA, FSA, and USDA.
    The design will leverage and comply with USDA's enterprise architecture
    and common infrastructure.

    Program Integrity
        Risk Compliance managers have been concentrating on the mission-
    critical tasks of evaluating and improving new processes to prevent and
    deter waste, fraud, and abuse in the crop insurance program.
    Significant effort is dedicated to building and adapting, reporting and
    tracking feedback systems to complement and integrate the oversight
    mandates established by ARPA. During 2004, Risk Compliance initiated
    operation reviews of insurance providers to capture a program error
    rate and to assess reinsured company activities under the Standard
    Reinsurance Agreement. The Office of Management and Budget and the
    USDA, Office of Chief Financial Officer are in agreement that a
    quantifiable program error rate is a key measure in assessing program
    compliance/integrity.
        Additional efforts have been dedicated to integrating data mining
    projects; exploring avenues to expedite the increase in sanction
    requests; and continuing to improve the Compliance case management and
    tracking system. These areas of responsibility have created a challenge
    for Compliance to accomplish current activities along with new
    requirements mandated by ARPA without the benefit of additional
    resources. Therefore, the fiscal year 2006 Budget includes 15
    additional staff years for Risk Compliance to strengthen the front-end
    oversight of approved insurance providers and to address outstanding
    Office of Inspector General recommendations to improve oversight and
    internal controls over insurance providers. Also, included in this
    budget is a request for $1 million to establish a systematic process of
    auditing insurance providers to detect and correct program
    vulnerabilities to preclude the payment of improper indemnities.
        In addition, given the success of the data mining and data
    warehousing activities to date, a provision is included in the 2006
    Budget for $3.6 million to continue funding of data mining and
    warehousing activities. Under current ARPA legislation, funding
    provided to develop the data mining and warehousing systems expires in
    2005. The 2006 Budget includes a General Provision to authorize funding
    under the FCIC Fund to support annual maintenance costs and upgrades in
    fiscal year 2006. As previously stated, approximately $94 million in
    improper payments were determined and $35 million in improper
    indemnities were received with the assistance of data mining and data
    warehousing capabilities.

    Other Initiatives
        Some of the other initiatives RMA began or accomplished in 2004
    are: completion of the Basic Provisions; development of the Written
    Agreement Handbook; implementation of changes to Livestock Risk
    Protection for feeder cattle, fed cattle, and swine; and development of
    a handbook for Good Farming Practices.

                                   CONCLUSION

        RMA continues to make crop insurance protection useful to
    producers, research way to address multi-year losses, expand risk
    management education opportunities, provide outreach to limited
    resource farmers, stimulate development of insurance products and
    improve program integrity. Crop Insurance is a primary system of
    support to producers when natural disasters strike. This was made very
    evident when Florida experienced four hurricanes. In response to this
    situation, FCIC-approved insurance providers mobilized immediately to
    ensure timely payments of claims.
        I urge you to approve this budget as submitted to allow RMA to
    continue to improve a Crop Insurance Program that is actuarially sound,
    meets producers' risk management needs at a cost which is fair to
    taxpayers, affordable to farmers and sufficient for delivery of the
    program through the private sector as established by Congress.
        Mr. Chairman, this concludes my statement. I would be happy to
    respond to any questions.

                                      EXHIBIT 1.--FCIC: CROP YEAR 2005 PILOT CROPS
    ----------------------------------------------------------------------------------------------------------------
                             CROPS                                       PLAN
    ---------------------------------------------------------------------------------------          Comment
                            Name                 Code            Name            Code
    ----------------------------------------------------------------------------------------------------------------
        Alfalfa Seed                                0107             APH              90  Also identified as:
                                                                                           Forage seed
        All Other Citrus Trees                      0211             TDO              40  Florida
        Avocado                                     0019             ARC              46  California
        Avocado                                     0019             APH              90  Florida
        Avocado Trees                               0212             TDO              40  Florida
        Barley                                      0091              IP              42
        Cabbage                                     0072             APH              90
        Carambola Trees                             0213             TDO              40  Florida
        Cherry                                      0057              FD              51
        Chili Pepper                                0045              FD              51
        Clams                                       0116           AQDOL              43
        Corn                                        0041              IP              42
        Corn                                        0041             IIP              45
        Cotton                                      0021              IP              42
        Cultivated Wild Rice                        0055             APH              90
        Fresh Market Beans                          0105              DO              50
        Grain Sorghum                               0051              IP              42
        Grapefruit Trees                            0208             TDO              40  Florida
        GRP Rangeland                               0148             GRP              12  New crop code in 2005
        Lemon Trees                                 0209             TDO              40  Florida
        Lime Trees                                  0210             TDO              40  Florida
        Mango Trees                                 0214             TDO              40  Florida
        Mint                                        0074             APH              90
        Multiple Crops                    ..............             AGR              63  But not AGR-Lite
        Mustard                                     0069             APH              90
        Navel Oranges                               0215              FD              51  California
        Orange Trees                                0207             TDO              40  Florida
        Processing Cucumber                         0106              FD              51
        Raspberry and Blackberry                    0108              FD              51  Several other berries
                                                                                           are `types' in this
                                                                                           policy
        Silage Sorghum                              0059            IAPH              96
        Soybean                                     0081              IP              42
        Soybean                                     0081             IIP              45
        Strawberries                                0110              FD              51
        Sweet Potatoes                              0185             APH              90  New crop code in 2005
        Wheat                                       0011              IP              42
        Winter Squash                               0065              DO              50
    ----------------------------------------------------------------------------------------------------------------
        Notes:
        1. RMA will revise this list to reflect new or discontinued pilot programs.
        2. Crop policies originally approved via the 508(h) mechanism are not considered pilots. Thus, CRC, RA, and
          GRIP are not considered pilots.

                              AGRICULTURAL ECONOMY

        Senator Bennett. Sounds pretty good, Dr. Collins. Does that
    mean that the Federal Government can spend less money?
        Dr. Collins. Unfortunately, it does not, Mr. Chairman. Part
    of the reason it sounds pretty good is a very large increase in
    Government payments is built into this assessment of the farm
    economy.
        Last calendar year, we spent about $14 billion in direct
    payments to farmers. This calendar year, we expect about $24
    billion. So Government spending is up. That is helping the
    prosperity.
        Senator Bennett. Ten billion dollars?
        Dr. Collins. About $10 billion, yes, sir. Likewise, we see
    that in our estimates of the Commodity Credit Corporation
    budget, which you have. Last year, the CCC budget was about
    $10.5 billion. This fiscal year, the CCC budget will be about
    $24 billion. So that is up roughly $14 billion.
        And that simply reflects the fact that our farm programs
    generally are price sensitive. Counter cyclical payments,
    marketing assistance loans depend on price levels. Price levels
    are down from last year's fairly high levels, and much of the
    increase is in marketing assistance loan spending.
        I might add one final point to that----
        Senator Bennett. I won't take the time to get into that.
        Dr. Collins. The numbers I have just given you for the CCC
    are in the President's budget. I might say that since the
    President's budget was developed, price prospects do look
    better for American agriculture. And I think we are running on
    a track to spend less on marketing assistance loans and counter
    cyclical payments than we had projected several months ago.

                                     CAFTA

        Senator Bennett. Okay. Dr. Penn, CAFTA has stirred up a lot
    of passion. Do you want to make any comments about CAFTA and
    its benefits to U.S. agriculture? How would you address
    specifically the concerns raised by the sugar producers?
        Dr. Penn. Thank you, Mr. Chairman, Senator Kohl. It is a
    pleasure to be with you again this year.
        I appreciate the opportunity to say a couple of words about
    CAFTA because it is a trade agreement is very important in and
    of itself, and it is also very important for the long-term
    prosperity of U.S. agriculture. Should we fail to approve this
    agreement, it will cast a long shadow over our opportunities to
    expand market access through other trade agreements in the
    future.
        This is one of those rare trade agreements where virtually
    every sector of agriculture stands to benefit. In essence, this
    agreement is leveling the playing field. As has been pointed
    out over and over, our markets are already open to the Central
    American countries and the Dominican Republic. Ninety-nine
    percent of all of their food and agricultural products already
    enter our market duty free.
        So this agreement says that we are going to greatly reduce
    and eventually eliminate the tariffs on our products as they
    move into those markets. And, the benefits are widespread--
    across the grains, the oil seeds, the livestock sectors,
    virtually every segment of agriculture stands to benefit.
        Now, concern has been expressed by our friends in the sugar
    industry, and they have made allegations that including sugar
    in this agreement would threaten the operation of the domestic
    sugar program. And, we just simply disagree with that. We think
    that is not the case.
        We are, in this agreement, allowing a very small amount of
    additional sugar to enter the United States, 110,000 tons in
    the first year. That is about 1 percent of the total United
    States consumption of sugar. We consume something on the order
    of 10 million tons. That would let in 110,000 tons. And, that
    in no way jeopardizes the operation of the premium market that
    we have for our own growers in the United States.
        The world price of sugar today is well under 10 cents a
    pound. The market in the United States is anywhere from 18 to
    22 cents a pound. And admitting this additional sugar would not
    cause any decrease in the price, nor would it otherwise
    jeopardize the operation of the program.
        So we think the concerns by the sugar industry are
    overblown, that this is a good agreement for agriculture. It is
    a good agreement for our country because it does provide
    opportunities for economic growth and development in some
    fledgling democracies right here in our hemisphere. We think
    that that is very important for our national security.
        So we believe it is a good agreement overall, and it is one
    that I think you will see that most of the agriculture sectors
    support very broadly. Some 60 groups are actively supporting
    the passage of this agreement.

                             USDA PRESENCE IN IRAQ

        Senator Bennett. Okay. It is a very small item in the
    overall budget, but you have got $650,000 to establish a
    presence in Iraq. It has been 20 years since the USDA was in
    Iraq. What will the role be, just out of curiosity? I think
    that is an item that will attract some attention.
        Dr. Penn. As you know, the U.S. Government is establishing
    a new embassy in Baghdad. And given the current situation
    there, this will be the largest embassy that the United States
    has in the world, given the nature of the security situation
    and the economic situation.
        Senator Bennett. We keep getting reminded of that when we
    look at the number.
        Dr. Penn. Iraq was once a very attractive market for U.S.
    agriculture. In the late 1980s, before the earlier war in the
    Gulf region, we were exporting something approaching a billion
    dollars worth of food and agricultural products to Iraq. This
    included grains, oil seeds, poultry products, vegetable oils,
    dry beans.
        We are slowly regaining some of that market. We have
    exported something on the order of 350,000 tons of wheat since
    hostilities ended the second time. And just this week, we
    announced that we have had reported to us the sale of 65,000
    tons of rice. So we are very slowly making inroads into that
    market again, and we hope that those sales will continue.
        The money that you note specifically is to establish a
    presence for the Foreign Agricultural Service in this new
    embassy in Baghdad. Under the new rules by the State
    Department, all agencies that have a presence in the embassy
    have to pay part of the capital cost----
        Senator Bennett. I see.
        Dr. Penn [continuing]. Part of the operating cost, and this
    would support two or three Americans and the foreign nationals
    that round out the complement.

                            CONSERVATION ASSISTANCE

        Senator Bennett. I see.
        Secretary Rey, first, I want to thank you on behalf of the
    people of Utah for the work that you have done with respect to
    the flood recovery in Washington County. We are facing another
    round of that. The normal flow-off is about 66,000 acre feet,
    and there are 240,000 acre feet in storage that could come down
    in the next 2 weeks. So----
        Mr. Rey. Almost makes you wish for fire season.
        Senator Bennett. Yes. Well, unfortunately, we had a fire,
    which denuded the watershed just before we had all of the rain.
    So we are grateful. And we thank you also for your efforts on
    the threatened and endangered species issues that we have to
    deal with out in the West. And you have been responsive, and I
    want the record to show that.
        Now the President's budget requests a $37 million increase
    to help farmers and ranchers address regulatory burdens,
    primarily coming from EPA. And you and the NRCS has been in the
    position of being the main agency that confronts this. Should
    EPA bear some of these costs? Should we try to find a way to
    shift budget a little on this one?
        Mr. Rey. I think our joint recommendation--that is, both
    NRCS's and EPA's--would be that the NRCS staff has the
    technical capability and the better grassroots delivery system
    to assist farmers and ranchers to do this work. And whoever
    ends up bearing the cost of the work, the most effective way to
    deliver the services or the most cost-effective way to deliver
    the services is, I think, through NRCS's delivery system.

                                INVASIVE SPECIES

        Senator Bennett. Okay. Tell me about invasive species.
        Mr. Rey. The Administration's budget request includes a $10
    million increase to use specifically for invasive species work.
    The Western States are a focus of that work, although it is not
    going to be exclusively in the West. And there are a couple of
    key species, like star thistle and salt cedar, where the focus
    that has been developed in coordination with all of the other
    agencies in the Interagency Invasive Species Working Group have
    agreed to.
        Senator Bennett. Are we winning that fight?
        Mr. Rey. I think on some species we are, and others we are
    not. I think the investment that we are proposing to you for
    2006 will help materially on the species that we have selected
    for priority. But there are other concerns out there as well.

                             RESEARCH COORDINATION

        Senator Bennett. Okay. Dr. Jen--ARS, one of the most
    popular and attractive programs that USDA oversees. So you get
    to be the one everybody likes. They have got 22 national
    programs, some 1,200 research projects in this country and
    overseas. The research is related not only to USDA programs,
    although there are some that is exclusively there. But some to
    activities in the other parts of the Federal Government, such
    as food safety and nutrition and climate change and
    environmental programs.
        Tell us about what you are doing to make sure there is not
    duplication between what you do and other university research
    activities and research in the other Federal agencies.
        Dr. Jen. Mr. Chairman and Senator Kohl, thank you for the
    opportunity to be here.
        In terms of trying not to have duplication of research
    effort, we operate under the National Science and Technology
    Council, which has a committee of science, committee of
    technology, and interagency work groups that coordinate the
    various type of Federal research among the department. So we
    participate in most of those activities and discussions that
    promote interagency cooperation.
        More specifically, we cooperate with the National Science
    Foundation, NIH, and NASA, for example, to address various
    issues of common interest.
        Within USDA, we have program areas in CSREES and ARS that
    are planning together, so that the ARS research activity and
    the university grants from CSREES are complimentary.

                           RURAL HOUSING PREPAYMENTS

        Senator Bennett. Thank you.
        Secretary Gonzalez, I think you will probably hear from
    Senator Kohl about some of the rental assistance and activities
    in the rural areas. He has a great interest in that. So I will
    pass over it fairly quickly.
        But I want to focus on one aspect. The recent report to the
    administration on the condition of Section 515 housing
    indicates that most of the units are not in danger of
    prepayment, but they do need repair and renovation. And the
    total, according to the report, is $2.6 billion.
        Do you anticipate that any of the funds sought for vouchers
    will be used for future renovations of these projects? If not,
    why not?
        Mr. Gonzalez. Thank you, Chairman Bennett, and thank you,
    Senator Kohl.
        There are two new developments in our multi-family program
    from the time we met last year. First the courts have made a
    determination that the owners have a right to prepay.
    Fortunately, Rural Development took the initiative by
    initiating the comprehensive property assessment, which we have
    shared with the committee on both the House and the Senate
    side.
        Essentially what the study did was look inside the multi-
    family portfolio and specifically look at a sample of the
    17,000 properties that are out there, and determined that about
    10 percent of those properties could potentially prepay.
        In addition to that, we looked at market conditions and
    property conditions. We did look at capitalization requirements
    in the future. We looked at the propensity to prepay. But
    specifically what we are focused in on right now in the 2006
    budget is the $214 million, which is to establish a new tenant
    protection voucher for the tenants.
        If you take that 1,700 properties that could prepay, you
    are talking about 50,000 families that essentially could be
    displaced from the properties as a result of market increases
    in rent. And so, the voucher program is designed specifically
    to protect the tenant either in the existing property if the
    owner prepays or at another property that is in our portfolio.
        So the $214 million is designed specifically to meet what
    we estimate are one third of the 50,000 units, in 2006, that we
    expect to prepay. Those families potentially could be subject
    to market rent increases and, as a result, could be out on the
    street without housing.
        Senator Bennett. So you are not anticipating the money
    going for renovations?
        Mr. Gonzalez. No, sir.
        Senator Bennett. I see. Senator Kohl.

                           RENTAL ASSISTANCE PROGRAM

        Senator Kohl. Thank you, Senator Bennett.
        Mr. Gonzalez, I would like to talk a little bit more about
    the subject raised by Senator Bennett. I believe the landscape
    seems to be shifting here, and I am very troubled by what I
    believe I see happening.
        First, as you know, developers have gone to court and won
    the right to prepay loans and convert low-income rental housing
    to market prices, which will effectively force rural poor, the
    people who are barely getting by as it is, out into a market
    where their housing costs will go up. And now USDA comes
    forward with a voucher program.
        If we approve your voucher plan--and I don't think we
    will--USDA will, in effect, be giving a green light to those
    developers who want to hand tenants a voucher, tell them to
    find another place to live, and kick them out of their present
    housing. I understand that well enough. I don't intend to let
    that happen.
        In 2003, I requested a GAO report about your rental
    assistance program, which found lots of problems, and we have
    been working together to fix that. And now you are going to
    turn into an uncharted area, where the rural housing service
    has no experience. I have to tell you I don't think this
    committee has enough confidence at this time to start off in a
    new direction, especially one about which I am concerned as
    much as I am about this program.
        Furthermore, from what I have learned from you so far--and
    I have tried to get information about this without a great deal
    of success--it doesn't seem that you have much idea how this
    voucher program is going to work. It is not authorized. There
    is no detailed plan, and it looks like a $215 million carrot to
    shove low-income people into the street and let their homes go
    to more affluent families that can afford to pay market prices.
        What is more, it appears that this proposal would let these
    vouchers be used anywhere. A person in rural Wisconsin, for
    example, could be given one of these vouchers, move to New York
    City, which isn't exactly a rural area, and use this voucher,
    funded through USDA's rural development programs. At least I
    see nothing that proves otherwise.
        I always thought that USDA was there to help poor families
    in rural areas instead of working against them. So could you
    explain a little bit more what this program is, why it is being
    implemented, and what you are trying to do?
        Mr. Gonzalez. Yes, Senator. I will share with you the two
    new developments that I shared with Chairman Bennett. The
    courts have determined the owners have a right to prepay. The
    comprehensive property assessment did look inside the portfolio
    of the 17,000 properties to examine market conditions, property
    conditions, capitalization requirements for the future, and
    also the propensity to prepay.
        Earlier, GAO had come out with a report indicating that
    closer to 25 percent of those properties could prepay. Our
    number, based on a sample of 333 properties, is lower at 10
    percent. So you are looking at 1,700 properties versus the
    4,000 properties GAO estimated potentially could prepay. Our
    number is rather conservative in terms of that. GAO has agreed
    on our number.
        Our primary concern is protecting those tenants from being
    displaced by an increase in market rents. There is no program
    that has been established like this within Rural Development to
    protect tenants from and absorb that type of market rent
    increase.
        Regarding rental assistance we have brought a forecasting
    tool online at the agency to greatly improve the accuracy of
    our forecasting. Those numbers are a lot more reliable, a lot
    more accurate. I would be glad to demonstrate the tool to staff
    and to you, Senator, and to the committee.
        We do have a tool that is online now that improves the
    accuracy of the rental assistance forecasting.
        Senator Kohl. But I don't see you disagreeing with the
    assertion that these properties are going to be converted into
    market price rental properties and that, as a result, those
    tenants are going to be forced out. I mean, that is a statement
    of fact, isn't it?
        Mr. Gonzalez. Well, based on the study, 10 percent of those
    properties are commercially viable and at least 50,000 families
    could be subject to being displaced.
        Senator Kohl. Well, how is that a good thing?
        Mr. Gonzalez. It is not a good thing, but the voucher is
    designed specifically, to protect those tenants from being
    subject to that risk.
        Senator Kohl. So they get a voucher, and they have to go
    and find housing elsewhere?
        Mr. Gonzalez. The voucher can be used in that property that
    was prepaid, or it can be used in another property within our
    portfolio.
        Senator Kohl. What is the size of the voucher?
        Mr. Gonzalez. I believe I would have to get you the details
    on the size of the voucher. But I believe it is about $12,000
    to $13,000.
        Senator Kohl. Well, if you are not able to testify on the
    size of the voucher and its adequacy, then how could we discuss
    this program in light of these families that are going to be
    displaced and their ability or inability to find satisfactory
    housing?
        Mr. Gonzalez. Our primary focus is the accuracy of the
    study. We brought in an outside consulting group to look inside
    this portfolio. They determined that at least 10 percent is
    commercially viable and that could prepay, subjecting to 50,000
    families to being put out in the street. That is a concern for
    this agency, and it is a concern for this Administration to
    protect those tenants.

                     HOUSING REVITALIZATION BUDGET REQUEST

        Senator Kohl. Now I understand there is some kind of a
    consulting fee, $10 million in consulting fees that you are
    going to be spending. Please can explain to us what those fees
    are for, to sell what I regard as a bad idea. How do you intend
    to spend every penny of the $214 million that we are talking
    about?
        Mr. Gonzalez. Up to $10 million can be used to establish
    the Office for Revitalization and provide administrative
    support. That is up to $10 million. The balance of the $214
    million will be spent on vouchers to protect the tenants.
        Senator Kohl. And what is the $10 million going to be spent
    on?
        Mr. Gonzalez. To establish the Office of Revitalization for
    this multi-family portfolio and for administrative support.
        Senator Kohl. Well, as you can tell from my comments, we
    are going to need to talk about this program in much greater
    detail before the 2006 mark-up, and I will look forward to
    working with you on ways in which we can at least satisfy my
    office and Senator Bennett's that we are heading off into a
    direction which is satisfactory. And I look forward to working
    with you on it.
        Mr. Gonzalez. Thank you, Senator.

                                  MILK PRICES

        Senator Kohl. Dr. Collins, when the Congressional Budget
    Office prepared its January baseline, it assumed $13.90, as you
    know, as the average all-milk price for 2005. On that basis,
    CBO estimated that the MILC program would cost $606 million in
    fiscal year 2005. The administration came up with an estimate
    of about $500 million. More recent data leads me to believe
    that those numbers are overstated. In your testimony, you
    predict an all-milk price of $15 rather than the $13.90.
        We only have 5 months left in our fiscal year, and it seems
    very likely that the cost of milk will be much lower than
    either the CBO or OMB predictions. So what was the all-milk
    price assumption that resulted in the administration's January
    price estimate of $500 million for milk, and what market
    fundamentals have changed since that time?
        Dr. Collins. That is a very good question, Mr. Kohl. Those
    estimates were based on November supply and demand conditions.
    I cannot remember the exact milk price that was back in the
    November forecasts of the department. But I think you are
    accurate in suggesting that the market has gotten a little
    tighter since then, and milk price prospects look better.
        You indicated a CBO price forecast in a $13 per
    hundredweight range, and our forecast for 2005 is now up to $15
    per hundredweight, which would make it the third- or fourth-
    highest price in history. Unfortunately, when we score budget
    proposals, we score them off the President's budget, just as
    CBO scores budget proposals off its March baseline. We always
    pick a point in time and stick with that throughout the entire
    reconciliation process.
        So even though I think that markets look a little better
    than they did back in November of 2004, we will continue to
    score the MILC program extension off the President's February
    budget baseline.

                              VALUE-ADDED PROGRAMS

        Senator Kohl. All right. For anybody and all on the panel,
    in spite of the trend toward market dominance by a handful of
    companies, a growing number of small, independent farmers are
    turning to the historic role of farmers as business men and
    women who are finding value-added niche markets, producing
    specifically to those markets, and finding it is not so much
    the size of the operation as it is the quality of the
    operation.
        Does your department recognize that these opportunities for
    farmers exist? And if so, what are the farm credit, rural
    development, and research and extension agencies doing to
    support these niche developments and operations?
        Dr. Penn. I can offer the perspective of our program area,
    Senator Kohl, in the Farm Service Agency. As you know, we have
    a very extensive farm loan operation, and there is a portion of
    the loan funds that is set aside by statute for small and
    disadvantaged farmers, for beginning farmers, and for minority
    farmers.
        This is a program that is especially well suited to
    operations of the kind that you describe, those that have found
    a niche in the marketplace and realize that they can fill that
    niche without having to grow as large or operate like the
    commercial mainstream field crop or livestock operations. So
    those programs are almost ideally suited to the kinds of
    operations that you are describing.
        Mr. Gonzalez. Rural Development has for the last 3 years,
    as a result of the Farm Bill, a value-added producer grant
    program that essentially is creating new market opportunities
    for farmers and ranchers in terms of taking those raw
    commodities and adding value and, at the same time, increasing
    the bottom line, creating jobs, and helping diversify rural
    economies.

                       DIRECT MARKETING OF FARM PRODUCTS

        Senator Kohl. All right. Gentlemen, I know that marketing
    falls under jurisdiction of Agricultural Marketing Service that
    will be represented here tomorrow. But for small farmers,
    especially those seeking these niche markets, marketing can
    make all the difference in the world in terms of success and
    failure.
        Do you think direct marketing of farm products is a viable
    way to diversify rural investment? What are the keys to success
    in this style of marketing?
        Dr. Collins. All right, Senator Kohl, I would be happy to
    take a shot at that.

                              VALUE-ADDED PROGRAMS

        First of all, let me say on this whole question of value
    added in niche markets, the Department did send up a report on
    its value-added programs to the Congress. It was required in
    last year's appropriations bill, and we sent it up, I believe,
    in January of 2005. And it profiles across the Department all
    the different value-added programs we have.
        If my recollection is correct, we have roughly $350 million
    a year in value-added programs, and we view value-added
    marketing just as you described it, from the research programs
    right through to the marketing programs of the Agricultural
    Marketing Service or the programs in Mr. Gonzalez's area.
        Also as part of value added, we include our bio-energy and
    our bio-product work, which is substantial. It is not fully
    included in that $350 million, but our bio-energy work and bio-
    product work is running about $250 million, with Dr. Penn's
    area accounting for a big portion of that with the CCC bio-
    energy program.

                       DIRECT MARKETING OF FARM PRODUCTS

        Specifically related to direct marketing--by ``direct
    marketing,'' I think you mean farmers markets and things like
    that--certainly we have seen an explosion in growth of farmers
    markets over the past decade. And it has represented an
    excellent opportunity for producers to go directly to the
    consumer and get that additional value that might otherwise go
    to a middleman or to a processor.
        And what we are seeing with the producers is quite a range
    of products that are being offered directly to the consumer. At
    USDA, we have a farmers market once a week in one of our
    parking lots, and we can see firsthand. We get farmers from
    Virginia and Maryland and surrounding areas that come in and
    directly market to USDA and other Federal employees where we
    are.
        I think the number of farmers markets is now in the range
    of 3,000 across the United States, and we have seen a
    tremendous growth in that. So it is an opportunity,
    particularly for producers who can provide unique services to
    consumers.
        I know I have met with farmers who have come in to USDA
    who, for example, have programs where they bring classrooms to
    their farms. And that acquaints students and students' parents
    with what they have on their farms, and then they market
    directly to the community, and that becomes a marketing vehicle
    for them.
        So we are seeing a lot of ingenuity on the part of small
    and medium-size farmers to extract a higher value. If you have
    a small acreage, the only way you can get more income is to
    increase the margin. One way to increase the margin is to
    increase the price relative to the cost of production. The way
    you increase the price is by you, as the farmer, adding value.
    And that is what direct marketing can do.

                               SPECIALTY PRODUCTS

        Senator Kohl. That is great. In Wisconsin, dairy farmers
    are forming, as you know, cooperatives to develop specialty
    cheese products. And this committee has provided funding to
    help these cooperatives establish marketing policies.
        Aside from programs like the value-added agricultural
    product market development grants program of which I believe
    the President proposes to cancel $120 million in this next
    fiscal year, how can the department work with farm groups to
    promote specialty products and create new markets for these
    products? Tell me some of your own thoughts and experiences
    here.
        Dr. Collins. Well, one thing I would offer is the efforts
    that the Department has made to promote the consumption of
    fresh fruits and vegetables. We have done that in a variety of
    ways. For example, through the school lunch program, we have
    had pilot fresh fruit and vegetable programs to increase the
    consumption of that.
        You are going to hear from Under Secretary Bost tomorrow,
    and I think he could give you a range of activities that he has
    been involved in to try and promote the consumption of fresh
    fruits and vegetables. Again, going back to USDA as a firsthand
    experience, in our own cafeteria, we have replaced most of the
    vending machines that used to sell highly processed products,
    and we now have fruit and vegetable available in vending
    machines and fruit juice vending machines and so on.
        So I think that there is--through our food assistance
    programs, we are making a substantial effort to try and promote
    increased consumption of such specialty products.

                         FARM PRODUCT EXPORTS TO CHINA

        Senator Kohl. Good. I thank you. Senator Bennett?
        Senator Bennett. Dr. Collins, talk to us about China. That
    is a topic on everybody's mind. Sometimes they get demonized.
    You mentioned that in fiscal 2004, it was a $6 billion market
    for U.S. farm products. Where do you see that going? And
    specifically, what farm products do we export to China?
        Dr. Collins. Well, specifically, we export a wide range of
    products. The biggest ones probably are soybeans and cotton.
    China has built a huge vegetable oil processing capacity over
    the last decade. They are now the world's largest soybean
    importer. This year, we estimate that they will import about
    22.5 million tons of soybeans. We will----
        Senator Bennett. Are they attempting to grow any
    themselves?
        Mr. Collins. They do grow soybeans. Their production has
    been increasing, but at a slow rate and cannot nearly keep up
    with their consumption, which is going to vegetable oil
    consumption and going to improving the feed rations of their
    livestock.
        We expect that this year, we will set a record in soybean
    exports to China, probably in the neighborhood of 12 million
    tons, which is half of their total imports. And they account
    for one third of the world's imports of soybeans.
        In addition to that, another issue that you mentioned,
    China being demonized, part of that has been related to the
    huge overall trade deficit we have with China. It is our
    largest single-country trade deficit. A part of that also
    relates to the huge increase we are seeing in imported textiles
    and apparel from China since January 1, when the Uruguay Round
    Agreement on textiles was fully implemented.
        But that gives us another opportunity. China is an enormous
    consumer of cotton. This year, we think that they will import
    about 8 million bales of cotton. Over the next several years,
    we expect that that might grow to 10 to 12 million bales of
    cotton. They are our largest market for cotton, which is a
    high-value commodity, and so that represents a tremendous
    opportunity for our producers as well.
        Yes, we are losing our domestic cotton consumption. Our
    textile mill capacity is slowly going overseas. But we are
    replacing that with increased exports of cotton.
        I remember years ago, I didn't think we would ever see 10
    million bales of cotton exported, and this year, I think we are
    going to do about 14 million bales. So it has been tremendous
    for the cotton industry to be able to capture that growing
    market in China.
        China also this year is the world's largest importer of
    wheat. This is a commodity that they didn't generally import.
    In China, wheat has become a staple in the northern part of
    China. Rice is really the staple food in the southern part of
    China. And yet we have seen them become the world's largest
    importer of wheat, and we are supplying some of that.
        Rice, as I said, is considered a staple in the southern
    half of China. That is a commodity they are probably most
    sensitive about preserving self-sufficiency in, and they have
    been right on the threshold of becoming a sizable importer of
    rice. They have had difficulty expanding their rice acreage. I
    don't foresee them becoming a big rice importer. It is possible
    on the margin they could increase their imports some, but I
    think you are going to see domestic efforts in China to
    increase their rice production.
        So we have a broad range of commodities. We are providing
    some horticultural commodities to China as well. So there is
    quite a range of things that we are providing.
        Dr. Penn reminds me that number-one item, hides and skins
    to China. So they are a market on the livestock side as well.

                            TEXTILE EXPORTS AND JOBS

        Senator Bennett. Okay. My own observation in another life
    here with the Joint Economic Committee, I think the textile
    manufacturers that we are going to lose have already been lost.
    And interestingly, what I think is happening is that China is
    taking jobs away from the Dominican Republic and Mexico and
    other places where they had taken these factories from us. And
    now the Chinese are undercutting them.
        Dr. Collins. This is exactly what we are hearing from
    Caribbean area countries, for example. They fear the impact of
    China on their exports to the United States. They have had
    trade preferences with us in textiles. And now with the
    elimination of all quotas, those preferences disappear. Country
    of origin rules disappear, and they are very worried that China
    is going to displace their textiles in the United States
    market.
        From a cotton point of view, China accounts for about 15
    percent of our cotton textile and apparel imports. So it is not
    a huge player right now, but it is going to grow fairly
    sizably, I believe, over the next couple of years. I agree with
    your point that much of what potentially could be lost has
    already been lost. We lost the apparel industry a long time
    ago, the high labor cost industry.
        Senator Bennett. Yes.
        Mr. Collins. And we do have a solid core of textile
    companies that produce very high-quality, high-value,
    technically advanced product. I can remember early in my career
    visiting a textile plant, and you could see the parking lot was
    full of cars. You go to a textile plant today, and there are
    three cars in the parking lot. You know, it is highly
    automated, and it has been able to improve its efficiency.
        So we are going to have some market for U.S. textiles, but
    there is no question that the Chinese market share in our
    market will grow. And it will largely come at the expense of
    other countries around the world. And this is an issue for
    putting safeguards on Chinese textiles as well. Because when
    you do that, we might reduce the imports of China, but they
    might find their way into the United States through other
    countries.
        Senator Bennett. Yes. Well, you raise an interesting
    question. If China is a major importer of cotton, as they begin
    to take some of this work away from the Caribbean, are we going
    to see drop-off in our cotton sales in the Caribbean?
        Mr. Collins. That is the worry, that we will see some
    decline in our exports of cotton.
        Senator Bennett. What is the net number? Is China going to
    import more than the Caribbean loses, or are we just going to
    shift?
        Dr. Collins. I think right now we are expecting our exports
    will continue to grow, and that is because world consumption of
    cotton textiles will continue to grow. The size of the pie is
    going to get bigger.

                          CONSERVATION RESERVE PROGRAM

        Senator Bennett. I see. Well, that is good.
        Dr. Penn, let us talk about CRP, and there are tens of
    millions of acres under the Conservation Reserve Program that
    have contracts that are set to expire in the next few years.
    What is FSA doing to make re-enrollment a smooth kind of
    process? Do you see any kind of bureaucratic bottlenecks or
    problems as those expirations come along?
        Dr. Penn. Well, the situation is exactly as you note. I
    can't remember the exact numbers, but there is a relatively
    small amount of CRP acreage that expires in fiscal year 2006.
    But then I believe in 2007 and 2008, over 22 million acres
    begin to expire, and that is out of something on the order of
    34 to 35 million that are enrolled now.
        We have been thinking about this very seriously, noting
    that this is both a challenge and an opportunity. We have such
    a large amount of acreage coming out of the CRP and then
    needing to re-enroll or extend acreage to continue the 39.4
    million acre mandate that was included in the 2002 farm bill.
    The question becomes do we want to change the profile, the
    character, or the nature of the land that is to be re-enrolled
    into this program?
        We had a major conference last year in which a lot of these
    questions were raised. What is the objective of the CRP now in
    terms of its role in rural America, its role in protecting
    wildlife, its role in environmental enhancement? So there are a
    lot of objectives, and these continue to shift over time since
    the beginning of this program in 1985.
        There is to be another major conference later this year to
    further explore these questions, to give all of the
    stakeholders--the people who are concerned about soil erosion,
    water quality, wildlife habitat, and agricultural production--
    an opportunity to state what their views are with respect to
    how to effectively manage this program. We have also put a
    notice in the Federal Register in asking for comments on
    options that we could consider as we begin to re-enroll this
    large acreage.
        The President has made a commitment to keep the CRP fully
    enrolled as the statute allows, and the question then becomes:
    exactly how you want to manage the program, what are the
    objectives of the program, and where the land will come from.
    So we are exploring all of these questions that you raise as we
    get closer to the date when this large amount of acreage will
    expire.

                           PLANNING RESEARCH PROGRAMS

        Senator Bennett. All right. I applaud you for that.
    Whatever we can do to make the re-enrollment as smooth and
    seamless as possible. And that sounds like you are of the same
    mind.
        Now, Dr. Jen, you may be the one to ask this question to,
    or others. The budget calls for a number of increases in areas
    of research and then eliminates $175 million in projects
    requested by Congress, many of which are research projects. In
    some places, the budget proposes increases in cuts to the same
    subject.
        I will give you some examples. A $2 million increase in bio
    energy research is offset in part by cuts in bio mass and
    ethanol research. You have a $4.7 million increase in genomics
    while cutting livestock and fish genome mapping and soybean and
    cotton genetics. $15.3 million in food safety while cutting
    projects that deal with salmonella, Listeria, and E. coli. $1.5
    million increase for obesity and healthier lifestyle, but $6.9
    million in cuts for research in those same areas regarding
    child and elderly nutrition.
        Share with us how you establish or how you set your
    priorities and why you had the particular set of winners and
    losers that you had. Was it just that if it came from the
    department, you like it, and if it came from Congress, you
    don't?
        Dr. Jen. Absolutely not, Mr. Chairman.
        Senator Bennett. Oh, okay. I wanted to get that on the
    record.
        Dr. Jen. Yes. We probably should get on the record that the
    department supports a portfolio of all types of research
    programs. Sometimes when you see the shifting from one area to
    another, it is somewhat misleading. We set our research agenda
    mainly on what is most important for the Nation.
        Often, the title of the project, including other research
    that you say is cut is moved into a different program or within
    that program. So it is really not as clear cut as it appear.
    For example, for genomics or obesity, the total budget request
    for both these areas has increased in the President's 2006
    budget.
        Genomics research and obesity research are increased in the
    national research initiative. So the budget did not show very
    clear-cut increases in those areas. In terms of priority
    setting, we have a tremendous number of stakeholder listening
    sessions and interactions with industry, with university
    community and with Congress, congressional staff, and all the
    other stakeholders to set our priorities.
        Senator Bennett. You will not be particularly surprised if
    the committee adds some congressional earmarks, will you?
        Dr. Jen. No, sir.
        Senator Bennett. Okay. All right. I will leave that.
        Senator Kohl, do you have any additional questions?
        Senator Kohl. Thank you very much.

                                BUDGET DECREASES

        Mr. Gonzalez, this year, as before, the President proposes
    to cut direct loans and grants, which, as you know, target low-
    income communities, and increase guaranteed loan programs,
    which serve more moderate income communities. This proposal
    effectively cuts vital services to our country's poor citizens
    by reducing direct loans and grants for multi-family housing,
    water and waste, broadband grants, and other rural development
    programs.
        USDA justifies this shift through its budget by emphasizing
    lower interest rates and a resulting lower subsidy. On its
    face, this sounds like a good idea to keep costs down. But
    America's most needy rural communities are too poor and
    neglected to participate in guaranteed programs. Furthermore,
    the public policy underlying direct loans and grants is
    precisely to support the Nation's most vulnerable rural
    communities.
        Now with interest rates rising, will it not be more
    difficult for small rural communities to take on additional
    debt in lieu of grant funding? Did your proposal anticipate the
    possibility of higher interest rates? What effect does higher
    interest rates have on the ability to serve low-income families
    in the 502 guaranteed program?
        Mr. Gonzalez. Yes, Senator. I believe our direct program is
    down about $100 million. But our guaranteed program is up about
    $400 million. This demonstrates our commitment, the
    Administration's commitment to a home ownership society.
        We are qualifying more people from our direct program and
    also graduating people from our direct program into our
    guaranteed program in the case of single-family housing.
        In terms of our multi-family housing program, that number,
    in terms of direct loans, is down. We obviously are focusing
    right now on tenant protection. The other component on our
    guaranteed side is our 538 multi-family housing program has
    been doubled from $99 million to about $200 million. Combining
    that with tax credits, we feel we can still serve the low-
    income market.
        Those are just examples of areas that even though there
    have been some reductions on the direct side, we still are
    adequately servicing residents in rural areas with our
    guaranteed programs.

                   NUTRIENT MANAGEMENT LAB IN MARSHFIELD, WI

        Senator Kohl. All right. A question for Secretaries Jen and
    Rey. Along with volatile dairy prices, another major concern of
    dairy farmers is the cost of compliance with State and Federal
    environmental regulations. Two years ago, I helped bring
    together the ARS, NRCS, and the University of Wisconsin College
    of Agriculture and Life Sciences in a collaborative effort to
    meet this very challenge.
        As a result, this committee has provided funding to
    establish a nutrient management laboratory at Marshfield,
    Wisconsin. Part of the construction of this facility is
    complete, and I hope we can provide funding for the last
    construction phase this year.
        We have also encouraged the ARS Dairy Forage Laboratory and
    NRCS to work together as partners at the Marshfield facility to
    develop management practices and implement them at the farm
    level.
        Mr. Jen or Mr. Rey, can you provide an update on this
    partnership between these research and conservation agencies?
        Mr. Rey. We have just developed a cooperative agreement for
    fiscal year 2005, to develop the laboratory, and we can submit
    a copy of that for the subcommittee's hearing record. On the
    NRCS side, we will continue to provide resources to the effort
    out of our base 2005 budget, and we will spend at least a half
    a million dollars to support the continuation of the project
    this year.
        We will also provide staff support, with the aim of
    integrating animal diet and feed management technologies into
    overall conservation practices.
        Dr. Jen. In terms of the Dairy Forage Research Laboratory,
    we have completed feasibility studies for the renovation/
    reconstruction of a new facility through the 2004 budget. We
    forwarded the report to the Congress.
        Senator Kohl. Gentlemen, I understand that a draft
    memorandum of understanding between ARS, NRCS, and the
    Wisconsin College of Agriculture and Life Sciences has been
    forwarded to Washington. Has either agency taken further action
    on approval of this memorandum of understanding? And will you
    please notify me when such action is taken?
        Mr. Rey. After we complete the work, we will notify you and
    bring a copy up.
        Senator Kohl. I would appreciate that very much. I thank
    you very much.
        Senator Bennett, I have no further questions.

                   WATERSHED AND FLOOD PREVENTION OPERATIONS

        Senator Bennett. Okay. Secretary Rey, watershed and flood
    prevention operations zeroed out in the President's budget. You
    say in fiscal 2004, it provided nearly $1.5 billion in monetary
    benefits, created, enhanced, or restored 7 million acres of
    upland wildlife habitat, benefitted nearly 48 million people.
        Okay. I realize this is a program that gets heavily
    earmarked up here, and that does have an impact on NRCS's
    ability to make decisions. But why do you want to zero it out?
        Mr. Rey. I think calling this program heavily earmarked is
    a bit of an understatement. It ranged in the last couple of
    years between being 100 percent and more than 100 percent
    earmarked. In the latter case, through an arithmetical error
    that required us to distribute the earmarks on a discounted
    fashion.
        It is also a program that harkens back to the 1950s. A lot
    of watershed structures have been constructed during that
    period of time, and very little programmatic oversight has been
    provided to the program in perhaps the last 15 years. Running
    this program has become a considerable challenge to us. We
    don't always have the right staff with the right backgrounds
    and expertise in our State offices where the earmarked projects
    are provided.
        So we think this program has reached a point where stepping
    back and taking a broader programmatic look at it is long
    overdue. That is something we would like to work with the
    Congress about. But, you know, to continue to administer it in
    this fashion is perhaps not the best use of what is admittedly
    tight budgets in a very difficult budget environment.
        Senator Bennett. Will you be surprised if there are some
    earmarks in this year's----
        Mr. Rey. I would be surprised if there weren't.
        Senator Bennett. Okay.
        Mr. Rey. That having been said----
        Senator Bennett. Yes.
        Mr. Rey [continuing]. The point----
        Senator Bennett. Can we work together a little more I think
    is what you are saying.
        Mr. Rey. Right.
        Senator Bennett. So that the earmarks are tied more to a
    budget plan or management plan that you might have in mind. Is
    that what you----
        Mr. Rey. Yes, and a programmatic look at where these two
    programs should go in the future. I don't think that their past
    performance, in terms of the construction of structural
    watershed improvements, is necessarily where their future
    should go.
        Senator Bennett. All right. I think that kind of dialogue
    is useful, and we will keep that in mind as we go forward.
        Senator Kohl, you had one more question?
        Senator Kohl. I thank you very much, Senator Bennett.

                     TRANSFER TO THE DEPARTMENT OF COMMERCE

        Secretary Gonzalez, I see another part of the President's
    budget where you want to get rid of four Rural Development
    programs and send them over to the Department of Commerce. At
    Commerce, they will be lumped with 14 other programs from all
    over the Government, with one third less money than they now
    have. The Administration justifies this by saying the programs
    are duplicative, ineffective, and unaccountable.
        Secretary Gonzalez, I understand you have been working with
    these programs for a number of years. Do you think, for
    example, that the Rural Business Enterprise Grant Program under
    your management has been ineffective? Because, frankly, your
    own press releases on the successes of these programs, this
    particular program, leave quite a different impression.
        Mr. Gonzalez. Thank you, Senator Kohl.
        These programs obviously were ``PARTED'', were scored over
    the last year by OMB, and most of these four programs under
    Rural Development did not demonstrate results and, in some
    cases, were duplicative. I support the President's
    Strengthening America Communities Initiative in terms of
    consolidating the 18 programs administered by the five
    agencies. It makes a lot of sense, and it stands to benefit
    rural areas when you look at the larger pot of money that is
    being consolidated. Rural areas will have access to a
    substantial portion of a program level of $3.75 billion.
        We have been working with the Administration, the White
    House and Department of Commerce to ensure that rural areas do
    have greater access to a larger pool of money. And, we have
    established--at least Commerce has established an advisory
    committee, people working to flesh out the details to make sure
    rural areas are well served. We had been working closely on
    this initiative. I am confident and have been assured by the
    Administration that rural areas will have a greater access to a
    larger pool of funding--not just $75 million, but $3.75
    billion.
        Senator Kohl. Well, I will respond to that. I believe this
    is, to some considerable extent, a shell game. As I see it, you
    all think that while you are moving all these pieces around,
    hopefully, no one is going to see that they are being gutted,
    and their traditional constituencies are going to have to start
    fighting each other. It will be Rural Development against CDBG
    and on and on.
        Even if we let you merge these programs, a cut is a cut, no
    matter how deep, and someone is going to be a big loser. And as
    you know, these programs are quite important to poor rural
    communities. There seems to be a theme throughout the rural
    development budget that these type of communities are going to
    be singled out for continuing cuts. What is your response?
        Mr. Gonzalez. Sir, I can just assure you that we are,
    working with Commerce on this specific initiative, to ensure
    that rural areas are well served and they stand to benefit from
    this initiative. This is an opportunity for rural areas, as I
    see it. Rural Development being the advocate that it is, there
    is an opportunity here to provide the resources to rural areas.
        I have offered up and proposed to the Department of
    Commerce our delivery system. It is unmatched. When the
    question becomes what can Rural Development do in terms of its
    infrastructure and delivery system, we can help promote and
    deliver this initiative. We can help educate communities on
    this initiative and help communities, provide technical
    assistance to make sure they do have access to this larger pool
    of money.
        Senator Kohl. Well, if these programs are to be moved to
    Commerce, do you know for a fact that every single authorized
    activity at USDA will still be an authorized activity at
    Commerce? As you know, these are well-established programs at
    USDA, and how will you be able to know that they will continue
    to serve their traditional constituencies as they have in the
    past if, in fact, they are gone from your jurisdiction?
        Mr. Gonzalez. We are in the process of crafting legislation
    with Commerce and the Administration on this initiative. And we
    will be at the table with them to ensure that rural areas are
    addressed.

                         ADDITIONAL COMMITTEE QUESTIONS

        A template for urban isn't a template for rural
    communities, and that is why we are at the table in terms of
    making sure we address issues like business formation. If there
    is an educational aspect to it, like No Child Left Behind
    Initiative or broadband access, we are going to be there to
    make sure that the right criteria are being used for rural
    communities.
        Senator Kohl. I hope so.
        Thanks, Mr. Chairman.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                        Questions Submitted to Mark Rey

                Questions Submitted by Senator Robert F. Bennett

                     watershed surveys and planning program
        Question. The President's Budget has proposed $5,141,000 for the
    Watershed Surveys and Planning program. What will that level of funding
    allow NRCS to do?
        Answer. This level of funding will allow NRCS to continue to fund
    the highest-priority ongoing studies and plans in each of the States.
    It will allow for completion of approximately 20 watershed studies and
    plans.
        Question. Will new projects be initiated?
        Answer. Initiation of new plans and studies will, at most, occur on
    a limited basis. If new plans or studies are initiated, they will be
    selected based on a ranking and funding process that evaluates the
    plans and studies according to their support of the NRCS Strategic
    Plan.
        Question. Will existing projects be completed at this level of
    funding?
        Answer. Again, this level of funding will allow NRCS to continue to
    fund the highest-priority ongoing studies and plans in each of the
    States. It will allow for completion of approximately 20 watershed
    studies and plans. There are over 130 studies and plans that have
    already been initiated.
        Question. What level of funding would be required to complete all
    initiated work?
        Answer. Planning costs can vary widely, depending on the complexity
    of the plan or study. It would require over $45 million to complete all
    studies and plans which have already been initiated.
        Question. How many fiscal year 2005 watershed funding requests did
    NRCS receive for projects that were ready to be installed (local
    sponsors had obtained land rights, permits, etc. and NRCS was prepared
    with designs and ready for construction)?
        Answer. In fiscal year 2005, NRCS received 278 funding requests
    from project sponsors totaling $201 million on projects ready for
    construction.
        Question. Please provide the Committee with a list of all the
    watershed projects that have been planned and authorized for
    implementation, along with the dollar amount needed to provide the
    Federal technical and financial share of the costs.
        Answer. The attached provides the requested funding total of $1.9
    billion to complete the currently authorized watershed projects.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Requested
                     State                             Program             Watershed project name        funding
    ----------------------------------------------------------------------------------------------------------------
    Alabama................................  Public Law 566............  Pine Barren Creek.........       $2,000,000
    Alabama................................  Public Law 566............  Powell Creek..............          500,000
    Alabama................................  Public Law 566............  Big Nance Creek...........        2,000,000
    Alabama................................  Public Law 566............  Choccolocco Creek.........        3,765,000
    Alabama................................  Public Law 566............  Wilkerson Creek...........          312,000
    Alabama................................  Public Law 566............  Kelly-Preston Mill Creek..           20,000
    Alabama................................  Public Law 566............  Harrison Mill-Panther               200,000
                                                                          Creeks.
    Alabama................................  Public Law 566............  Camp Branch...............          300,000
    Alabama................................  Public Law 566............  Dry Creek.................          400,000
    Alabama................................  Public Law 566............  Pates Creek...............          180,000
    Alabama................................  Public Law 566............  Whitewater Creek..........          100,000
    Alabama................................  Public Law 566............  Short-Scarham Creeks......          212,000
    Alabama................................  Public Law 566............  Town Creek-Dekalb.........          185,000
    Alabama................................  Public Law 566............  South Sauty Creek.........          100,000
    Alabama................................  Public Law 566............  Northeast Yellow River....        1,000,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       11,274,000
                                                                                                    ================
    Alaska.................................  Public Law 566............  Delta Clearwater..........        5,951,600
                                                                                                    ================
    Arizona................................  Public Law 566............  Buckhorn-Mesa.............        2,560,100
    Arizona................................  Public Law 566............  Apache Junction-Gilbert...        1,792,000
    Arizona................................  Public Law 566............  Williams-Chandler.........        1,280,000
    Arizona................................  Public Law 566............  White Tank Mountains......        1,681,700
    Arizona................................  Public Law 566............  Eloy......................        2,630,409
    Arizona................................  Public Law 566............  New Magma.................        2,078,981
    Arizona................................  Public Law 566............  Hohokam...................        4,341,423
    Arizona................................  Public Law 566............  West Maricopa.............          755,044
    Arizona................................  Public Law 566............  Maricopa-Stanfield........        5,148,479
    Arizona................................  Public Law 566............  San Carlos Watershed......        5,819,964
                                                                                                    ----------------
          Total............................  ..........................  ..........................       28,088,100
                                                                                                    ================
    Arkansas...............................  Public Law 566............  Big Slough................       17,036,000
    Arkansas...............................  Public Law 566............  North Fork Of Ozan Creek..        1,211,000
    Arkansas...............................  Public Law 566............  Fourche Creek.............          841,000
    Arkansas...............................  Public Law 566............  South Fourche.............        3,627,000
    Arkansas...............................  Public Law 566............  Poinsett..................        2,919,000
    Arkansas...............................  Public Law 566............  Upper Petit Jean..........       12,017,000
    Arkansas...............................  Public Law 566............  Flat Rock Creek...........        1,779,000
    Arkansas...............................  Public Law 566............  Ozan Creeks...............        6,563,000
    Arkansas...............................  Public Law 566............  Little Red River..........          279,000
    Arkansas...............................  Public Law 566............  Gould Portion Of Grady-           1,400,000
                                                                          Gould.
    Arkansas...............................  Public Law 566............  Buffalo River Tributaries.        2,634,000
    Arkansas...............................  Public Law 566............  Departee Creek............        2,060,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       52,366,000
                                                                                                    ================
    California.............................  Public Law 566............  Central Sonoma............        3,700,000
    California.............................  Public Law 566............  Marsh-Kellogg Creek.......        3,750,000
    California.............................  Public Law 566............  Beardsley.................           50,000
    California.............................  Public Law 566............  Lower Llagas Creek........        2,550,000
    California.............................  Public Law 566............  Upper Llagas Creek........          150,000
    California.............................  Public Law 566............  Carpinteria Valley........        1,000,000
    California.............................  Public Law 566............  Lower Silver Creek........       16,300,000
    California.............................  Public Law 566............  Upper Stony Creek.........          125,000
    California.............................  Public Law 566............  Indian Creek..............           50,000
    California.............................  Public Law 566............  Elkhorn Slough............          960,000
    California.............................  Public Law 566............  Mccoy Wash................        6,800,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       35,435,000
                                                                                                    ================
    Colorado...............................  Public Law 566............  Wolf Creek-Highlands......           20,000
    Colorado...............................  Public Law 566............  Trinidad Lake North.......          240,000
    Colorado...............................  Public Law 566............  Limestone-Graveyard Creeks          340,000
    Colorado...............................  Public Law 566............  Highline Breaks...........        1,560,000
    Colorado...............................  Public Law 566............  Holbrook Lake Ditch.......        1,440,000
    Colorado...............................  Public Law 566............  Six Mile-St. Charles              2,640,000
                                                                          Watershed.
                                                                                                    ----------------
          Total............................  ..........................  ..........................        6,240,000
                                                                                                    ================
    Connecticut............................  Public Law 566............  South Branch Park River...           75,000
    Connecticut............................  Public Law 566............  Norwalk River.............       11,567,800
    Connecticut............................  Public Law 566............  Mill-Horse Brook..........        6,760,000
    Connecticut............................  Public Law 566............  Yantic River..............        4,526,200
                                                                                                    ----------------
          Total............................  ..........................  ..........................       22,929,000
                                                                                                    ================
    Delaware...............................  Public Law 566............  Upper Nanticoke River.....           25,000
                                                                                                    ================
    Florida................................  Public Law 566............  N. East Middle Suwannee             309,680
                                                                          River.
    Florida................................  Public Law 566............  S. West Middle Suwannee             309,680
                                                                          River.
    Florida................................  Public Law 566............  N. West Middle Suwannee             309,680
                                                                          River.
    Florida................................  Public Law 566............  S. East Middle Suwannee             309,680
                                                                          River.
                                                                                                    ----------------
          Total............................  ..........................  ..........................        1,238,720
                                                                                                    ================
    Georgia................................  Public Law 566............  Tobesofkee Creek..........        1,985,424
    Georgia................................  Public Law 566............  Lower Little Tallapoosa             350,562
                                                                          River.
    Georgia................................  Public Law 566............  Piscola Creek.............          822,794
    Georgia................................  Public Law 566............  Five Points Area..........          982,517
    Georgia................................  Public Law 566............  South Chickamauga Creek...        1,068,475
                                                                                                    ----------------
          Total............................  ..........................  ..........................        5,209,772
                                                                                                    ================
    Hawaii.................................  Public Law 566............  Wailuku-Alenaio...........        2,000,000
    Hawaii.................................  Public Law 566............  Waimanalo.................        1,750,000
    Hawaii.................................  Public Law 566............  Waimea-Paauilo............        9,232,000
    Hawaii.................................  Public Law 566............  Lahaina...................        7,500,000
    Hawaii.................................  Public Law 566............  Upcountry Maui............        5,500,000
    Hawaii.................................  Public Law 566............  Lower Hamakua Ditch.......        4,500,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       30,482,000
                                                                                                    ================
    Idaho..................................  Public Law 566............  Tammany Creek.............        3,673,495
    Idaho..................................  Public Law 566............  Mission-Lapwai Creek......        3,676,044
    Idaho..................................  Public Law 566............  Bedrock Creek.............          432,550
    Idaho..................................  Public Law 566............  Scott's Pond..............        4,804,166
                                                                                                    ----------------
          Total............................  ..........................  ..........................       12,586,255
                                                                                                    ================
    Illinois...............................  Public Law 566............  Little Calumet River......       52,400,000
    Illinois...............................  Public Law 566............  Lower Des Plaines                30,300,000
                                                                          Tributaries.
    Illinois...............................  Public Law 566............  Lake Bloomington..........        3,880,000
    Illinois...............................  Public Law 566............  Lake Carlinville..........          825,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       87,405,000
                                                                                                    ================
    Indiana................................  Public Law 566............  Muddy Fork Of Silver Creek        2,279,000
    Indiana................................  Public Law 566............  Mariah Creek..............          168,650
    Indiana................................  Public Law 566............  Pigeon Creek..............          160,590
    Indiana................................  Public Law 566............  Honey Creek...............        5,400,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        8,008,240
                                                                                                    ================
    Iowa...................................  Public Law 566............  Little Paint Creek........          700,000
    Iowa...................................  Public Law 566............  Bear Creek................        3,300,500
    Iowa...................................  Public Law 566............  East Fork Of Big Creek....          200,000
    Iowa...................................  Public Law 566............  West Fork Of Big Creek....        2,300,000
    Iowa...................................  Public Law 566............  Upper Locust Creek........        2,900,000
    Iowa...................................  Public Law 566............  East Fork Of The Grand           14,800,000
                                                                          River.
    Iowa...................................  Public Law 566............  Mill-Picayune Creek.......        3,300,000
    Iowa...................................  Public Law 566............  Turkey Creek..............        3,700,000
    Iowa...................................  Public Law 566............  Mosquito Of Harrison......        2,800,000
    Iowa...................................  Public Law 566............  Waubonsie Creek...........          250,000
    Iowa...................................  Public Law 566............  Simon Run.................          640,000
    Iowa...................................  Public Law 566............  Troublesome Creek.........        4,000,000
    Iowa...................................  Public Law 566............  Twelve Mile Creek.........        1,050,000
    Iowa...................................  Public Law 566............  Little River..............          500,000
    Iowa...................................  Public Law 566............  A&T Long Branch...........          500,000
    Iowa...................................  Public Law 566............  Long Branch...............          500,000
    Iowa...................................  Public Law 566............  Soap Creek................        5,500,000
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................       47,440,500
                                                                                                    ================
    Iowa...................................  Public Law 534............  Ltl. Sioux--Barber Hollow.          150,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--Big Coon Creek          300,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--West Wolf               150,000
                                                                          Creek.
    Iowa...................................  Public Law 534............  Ltl. Sioux--Westside......          450,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--Bitter Creek..        1,050,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--Crawford Ck...          150,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--Leech Hollow..          300,000
    Iowa...................................  Public Law 534............  Ltl. Sioux--Little Whiskey          450,000
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................        3,000,000
                                                                                                    ================
          Iowa Total.......................  ..........................  ..........................       50,440,500
                                                                                                    ================
    Kansas.................................  Public Law 566............  North Black Vermillion....        6,901,200
    Kansas.................................  Public Law 566............  Upper Black Vermillion....        1,925,000
    Kansas.................................  Public Law 566............  Lower Elk River...........          843,000
    Kansas.................................  Public Law 566............  Lyons Creek...............        1,274,800
    Kansas.................................  Public Law 566............  West Sector Whitewater              540,000
                                                                          River.
    Kansas.................................  Public Law 566............  East Sector Whitewater              990,000
                                                                          River.
    Kansas.................................  Public Law 566............  North Sector Upper Walnut.        1,156,250
    Kansas.................................  Public Law 566............  Wet Walnut No. 2..........        1,035,375
    Kansas.................................  Public Law 566............  Wet Walnut No. 3..........        2,910,000
    Kansas.................................  Public Law 566............  Grasshopper-Coal Creek....        3,097,900
    Kansas.................................  Public Law 566............  Diamond Creek.............        5,400,000
    Kansas.................................  Public Law 566............  Middle Creek (Morris).....          881,250
    Kansas.................................  Public Law 566............  Elk Creek.................        9,652,500
    Kansas.................................  Public Law 566............  South Fork................          978,000
    Kansas.................................  Public Law 566............  North-Middle Forks Wolf...        4,758,750
    Kansas.................................  Public Law 566............  South Fork Wolf...........        2,567,000
    Kansas.................................  Public Law 566............  Squaw Creek Lower Wolf....        9,230,400
    Kansas.................................  Public Law 566............  Doyle Creek...............        2,430,000
    Kansas.................................  Public Law 566............  Upper Delaware And               12,460,000
                                                                          Tributaries.
                                                                                                    ----------------
          Total............................  ..........................  ..........................       69,031,425
                                                                                                    ================
    Kentucky...............................  Public Law 566............  Obion Creek...............        4,000,000
    Kentucky...............................  Public Law 566............  Big Muddy Creek...........          750,000
    Kentucky...............................  Public Law 566............  Upper Tradewater River....           10,000
    Kentucky...............................  Public Law 566............  West Fork Of Mayfield             1,200,000
                                                                          Creek.
    Kentucky...............................  Public Law 566............  Red Lick Creek............          900,000
    Kentucky...............................  Public Law 566............  Banklick Creek............        4,000,000
    Kentucky...............................  Public Law 566............  North Fork Nolin River....          900,000
    Kentucky...............................  Public Law 566............  Pigeon Roost Creek........        1,120,000
    Kentucky...............................  Public Law 566............  Highland Creek............        1,324,000
    Kentucky...............................  Public Law 566............  Brashear's Creek..........          620,000
    Kentucky...............................  Public Law 566............  Boone Fork................        5,720,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       20,544,000
                                                                                                    ================
    Louisiana..............................  Public Law 566............  Cypress-Black Bayou.......        2,000,000
    Louisiana..............................  Public Law 566............  Middle Tangipahoa.........           10,000
    Louisiana..............................  Public Law 566............  Central Richland..........        1,500,000
    Louisiana..............................  Public Law 566............  Bayou Bourbeux............          200,000
    Louisiana..............................  Public Law 566............  Bayou Duralde-Lower               5,000,000
                                                                          Nezpique.
                                                                                                    ----------------
          Total............................  ..........................  ..........................        8,710,000
                                                                                                    ================
    Maine..................................  Public Law 566............  Kenduskeag Stream.........        1,000,000
    Maine..................................  Public Law 566............  Meduxnekeag River.........           50,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        1,050,000
                                                                                                    ================
    Maryland...............................  Public Law 566............  Linganore Creek...........          100,000
    Maryland...............................  Public Law 566............  Dry Run...................          350,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................          450,000
                                                                                                    ================
    Massachusetts..........................  Public Law 566............  Baiting Brook.............          475,300
    Massachusetts..........................  Public Law 566............  Clam River................  ...............
                                                                                                    ----------------
          Total............................  ..........................  ..........................          475,300
                                                                                                    ================
    Michigan...............................  Public Law 566............  Elk River.................           50,000
    Michigan...............................  Public Law 566............  South Branch Kawkawlin               60,000
                                                                          River.
    Michigan...............................  Public Law 566............  Mud Creek.................          150,000
    Michigan...............................  Public Law 566............  Swan Creek................          450,000
    Michigan...............................  Public Law 566............  Stony Creek...............        1,165,375
                                                                                                    ----------------
          Total............................  ..........................  ..........................        1,875,375
                                                                                                    ================
    Minnesota..............................  Public Law 566............  Kanaranzi-Little Rock.....          780,000
    Minnesota..............................  Public Law 566............  Whitewater River..........        1,197,400
    Minnesota..............................  Public Law 566............  Snake River...............          600,000
    Minnesota..............................  Public Law 566............  Bear Creed................          240,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        2,817,400
                                                                                                    ================
    Mississippi............................  Public Law 566............  Chiwapa Creek.............          561,900
    Mississippi............................  Public Law 566............  Town Creek................        7,000,000
    Mississippi............................  Public Law 566............  Tuscumbia River...........        1,622,500
    Mississippi............................  Public Law 566............  Tallahaga Creek...........        2,100,000
    Mississippi............................  Public Law 566............  South Delta...............        1,588,000
    Mississippi............................  Public Law 566............  Long Beach................        4,375,000
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................       17,247,400
                                                                                                    ================
    Mississippi............................  Public Law 534............  Ltl. Talla--Cane Creek....        1,062,500
    Mississippi............................  Public Law 534............  Ltl. Talla--Cypress & Puss        5,160,000
                                                                          Cuss.
    Mississippi............................  Public Law 534............  Ltl. Talla--Upper                 1,250,000
                                                                          Tallahatchie.
    Mississippi............................  Public Law 534............  Ltl. Talla--Ayers Cree....        2,600,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Duncan-Cane           2,125,000
                                                                          Creeks.
    Mississippi............................  Public Law 534............  Ltl. Talla--Greasy Creek..          750,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Hell Creek....          875,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Locks Creek...          250,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Lower Tippah         15,210,000
                                                                          River.
    Mississippi............................  Public Law 534............  Ltl. Talla--Ltl. Spring-            625,000
                                                                          Ochewalla Creeks.
    Mississippi............................  Public Law 534............  Ltl. Talla--Mill Creek....        3,746,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Mud Creek.....          375,000
    Mississippi............................  Public Law 534............  Ltl. Talla--North Tippah          2,431,000
                                                                          Creek.
    Mississippi............................  Public Law 534............  Ltl. Talla--Oaklimeter           11,263,000
                                                                          Creek.
    Mississippi............................  Public Law 534............  Ltl. Talla--Okonatie Creek          250,000
    Mississippi............................  Public Law 534............  Ltl. Talla--Upper Tippah          6,625,000
                                                                          River.
    Mississippi............................  Public Law 534............  Yazoo--Abiaca Creek.......       10,553,750
    Mississippi............................  Public Law 534............  Yazoo--Askalmore Creek....        2,594,000
    Mississippi............................  Public Law 534............  Yazoo--Batupan Bogue......        1,250,000
    Mississippi............................  Public Law 534............  Yazoo--Big Sand Creek.....        7,678,700
    Mississippi............................  Public Law 534............  Yazoo--Black Creek........        5,000,000
    Mississippi............................  Public Law 534............  Yazoo--Black Creek (Delta)        7,500,000
    Mississippi............................  Public Law 534............  Yazoo--Buntyn Creek.......          910,000
    Mississippi............................  Public Law 534............  Yazoo--Burney Branch......        5,260,000
    Mississippi............................  Public Law 534............  Yazoo--Bynum Creek........        1,208,000
    Mississippi............................  Public Law 534............  Yazoo--Cane-Mussacuna Cks.        1,591,000
    Mississippi............................  Public Law 534............  Yazoo--Coldwater River....       10,740,000
    Mississippi............................  Public Law 534............  Yazoo--Cypress Creek......        3,012,500
    Mississippi............................  Public Law 534............  Yazoo--Davis Splinter             1,935,000
                                                                          Creek.
    Mississippi............................  Public Law 534............  Yazoo--Eden Creek.........           63,000
    Mississippi............................  Public Law 534............  Yazoo--Fighting Bayou.....          531,300
    Mississippi............................  Public Law 534............  Yazoo--Hickahala Creek....        1,188,000
    Mississippi............................  Public Law 534............  Yazoo--Hoffa Creek........        3,412,500
    Mississippi............................  Public Law 534............  Yazoo--Hotophia Creek.....          500,000
    Mississippi............................  Public Law 534............  Yazoo--Hurricane-Wolf             5,324,000
                                                                          Creek.
    Mississippi............................  Public Law 534............  Yazoo--Indian Creek-Bobo          1,250,000
                                                                          Bayou.
    Mississippi............................  Public Law 534............  Yazoo--Johnson And Fair           1,720,000
                                                                          Cks.
    Mississippi............................  Public Law 534............  Yazoo--Riverdale Creek....          695,000
    Mississippi............................  Public Law 534............  Yazoo--Senatobia Creek....          510,000
    Mississippi............................  Public Law 534............  Yazoo--Short Fork Creek...        3,940,000
    Mississippi............................  Public Law 534............  Yazoo--Skuna River........        5,818,800
    Mississippi............................  Public Law 534............  Yazoo--Strayhorn Creek....        6,375,000
    Mississippi............................  Public Law 534............  Yazoo--Sledge Bayou.......           25,000
    Mississippi............................  Public Law 534............  Yazoo--Tillatoba Creek....       19,885,000
    Mississippi............................  Public Law 534............  Yazoo--Toposhaw...........        3,125,000
    Mississippi............................  Public Law 534............  Yazoo--Upper Skuna River..        6,820,000
    Mississippi............................  Public Law 534............  Yazoo--Yalobusha River....          625,000
    Mississippi............................  Public Law 534............  Yazoo--Northern Drainage          1,000,000
                                                                          District.
    Mississippi............................  Public Law 534............  Yazoo--North Tillatoha-           1,875,000
                                                                          Hunter.
    Mississippi............................  Public Law 534............  Yazoo--Long Creek.........        1,250,000
    Mississippi............................  Public Law 534............  Yazoo--Otoucalofa Creek...        2,806,000
    Mississippi............................  Public Law 534............  Yazoo--Pelucia Creek......        4,535,000
    Mississippi............................  Public Law 534............  Yazoo--Perry Creek........        2,231,000
    Mississippi............................  Public Law 534............  Yazoo--Persimmon Creek I..        5,000,000
    Mississippi............................  Public Law 534............  Yazoo--Pigeon Roost Creek.       12,578,700
    Mississippi............................  Public Law 534............  Yazoo--Piney Creek........       16,250,000
    Mississippi............................  Public Law 534............  Yazoo--Potacocawa Creek...        1,837,500
    Mississippi............................  Public Law 534............  Yazoo--Arkabutla Creek....        3,512,300
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................      228,513,550
                                                                                                    ================
          Mississippi Total................  ..........................  ..........................      245,760,950
                                                                                                    ================
    Missouri...............................  Public Law 566............  East Fork Of Big Creek....        2,400,000
    Missouri...............................  Public Law 566............  Upper Little Black........          750,000
    Missouri...............................  Public Law 566............  Lower Little Black........        4,500,000
    Missouri...............................  Public Law 566............  Mozingo Creek.............           70,000
    Missouri...............................  Public Law 566............  Troublesome Creek.........        5,200,000
    Missouri...............................  Public Law 566............  Grassy Creek..............        2,900,000
    Missouri...............................  Public Law 566............  Big Creek-Hurricane Creek.       16,100,000
    Missouri...............................  Public Law 566............  West Fork Of Big Creek....       17,400,000
    Missouri...............................  Public Law 566............  East Locust Creek.........        5,000,000
    Missouri...............................  Public Law 566............  Upper Locust Creek........       26,400,000
    Missouri...............................  Public Law 566............  Town Branch...............        2,090,000
    Missouri...............................  Public Law 566............  East Yellow Creek.........       10,000,000
    Missouri...............................  Public Law 566............  Moniteau Creek............        3,120,000
    Missouri...............................  Public Law 566............  Marthasville Town Branch..          750,000
    Missouri...............................  Public Law 566............  Hickory Creek.............        3,000,000
    Missouri...............................  Public Law 566............  East Fork Of The Grand            2,600,000
                                                                          River.
                                                                                                    ----------------
          Missouri Total...................  ..........................  ..........................      102,280,000
                                                                                                    ================
    Montana................................  Public Law 566............  Lower Birch Creek.........        3,279,000
    Montana................................  Public Law 566............  Mill Creek................          175,000
    Montana................................  Public Law 566............  Buffalo Rapids............        8,806,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       12,260,000
                                                                                                    ================
    Nebraska...............................  Public Law 566............  Gering Valley.............          767,000
    Nebraska...............................  Public Law 566............  Papillion Creek...........        2,665,300
    Nebraska...............................  Public Law 566............  Aowa Creek................            6,700
    Nebraska...............................  Public Law 566............  Tekamah-Mud Creek.........            6,700
    Nebraska...............................  Public Law 566............  Middle Fork Maple Creek...            6,700
    Nebraska...............................  Public Law 566............  Bone Creek................            6,700
    Nebraska...............................  Public Law 566............  Stevens-Callahan (Camp                6,700
                                                                          Creek).
    Nebraska...............................  Public Law 566............  Balls Branch..............            6,700
    Nebraska...............................  Public Law 566............  Swan Creek................            6,700
    Nebraska...............................  Public Law 566............  Wolf-Wildcat Creek........            6,700
    Nebraska...............................  Public Law 566............  East-West-Dry Maple Creeks           10,000
    Nebraska...............................  Public Law 566............  Middle Big Nemaha.........           40,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        3,535,900
                                                                                                    ================
    New Mexico.............................  Public Law 566............  Prop Canyon & Tributaries.          740,000
    New Mexico.............................  Public Law 566............  T Or C Williamsburg               7,189,500
                                                                          Arroyos.
    New Mexico.............................  Public Law 566............  Cottonwood-Walnut Creek...       19,125,000
    New Mexico.............................  Public Law 566............  Zuni Pueblo...............       16,487,500
    New Mexico.............................  Public Law 566............  Espanola-Rio Chama........       33,920,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       77,462,000
                                                                                                    ================
    New York...............................  Public Law 566............  Mill Brook................        2,050,000
    New York...............................  Public Law 566............  Nyc Ws (Ashokan)..........           96,100
    New York...............................  Public Law 566............  Nyc Ws (Upper                     1,189,522
                                                                          Cannonsville).
    New York...............................  Public Law 566............  Nyc Ws (Lower                     1,204,339
                                                                          Cannonsville).
    New York...............................  Public Law 566............  Nyc Ws (Pepacton).........          642,748
    New York...............................  Public Law 566............  Nyc Ws (Neversink)........           44,339
    New York...............................  Public Law 566............  Nyc Ws (Rondout)..........           66,452
    New York...............................  Public Law 566............  Nyc Ws (Schoharie)........          362,009
                                                                                                    ----------------
          Total............................  ..........................  ..........................        5,655,509
                                                                                                    ================
    North Carolina.........................  Public Law 566............  Deep Creek (Yadkin).......        6,000,000
    North Carolina.........................  Public Law 566............  Crabtree Creek............        2,000,000
    North Carolina.........................  Public Law 566............  Swan Quarter..............        5,280,000
    North Carolina.........................  Public Law 566............  Meadow Branch.............          787,830
    North Carolina.........................  Public Law 566............  Upper French Broad River..          617,840
    North Carolina.........................  Public Law 566............  Newfound & Sandymush Creek        1,989,168
                                                                                                    ----------------
          Total............................  ..........................  ..........................       16,674,838
                                                                                                    ================
    North Dakota...........................  Public Law 566............  Square Butte Creek........        7,400,000
    North Dakota...........................  Public Law 566............  Upper Turtle River........          470,000
    North Dakota...........................  Public Law 566............  Taylor....................           40,000
    North Dakota...........................  Public Law 566............  Belfield..................        4,650,000
    North Dakota...........................  Public Law 566............  Colfax....................        1,573,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       14,133,000
                                                                                                    ================
    Ohio...................................  Public Law 566............  Rush Creek................        1,185,000
    Ohio...................................  Public Law 566............  Short Creek...............        6,275,000
    Ohio...................................  Public Law 566............  North Hocking River.......        1,872,000
    Ohio...................................  Public Law 566............  South Fork Licking River..        6,820,000
    Ohio...................................  Public Law 566............  Wills Creek...............          657,000
    Ohio...................................  Public Law 566............  Four Mile Creek...........        3,915,000
    Ohio...................................  Public Law 566............  Upper Blanchard River.....        1,050,000
    Ohio...................................  Public Law 566............  Lower Stillwater River....          120,000
    Ohio...................................  Public Law 566............  Upper Stillwater River....          120,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       22,014,000
                                                                                                    ================
    Oklahoma...............................  Public Law 566............  Sandy Creek...............        1,330,000
    Oklahoma...............................  Public Law 566............  Leader-Middle Clear Boggy         6,650,000
                                                                          Creek.
    Oklahoma...............................  Public Law 566............  Upper Black Bear Creek....        2,660,000
    Oklahoma...............................  Public Law 566............  Upper Red Rock Creek......        8,645,000
    Oklahoma...............................  Public Law 566............  Upper Blue River..........       35,910,000
    Oklahoma...............................  Public Law 566............  Tri-County Turkey Creek...        1,330,000
    Oklahoma...............................  Public Law 566............  Stillwater Creek..........       11,970,000
    Oklahoma...............................  Public Law 566............  Lower Clear Boggy Creek...        7,315,000
    Oklahoma...............................  Public Law 566............  Salt-Camp Creek...........        9,310,000
    Oklahoma...............................  Public Law 566............  Upper Bayou...............        8,645,000
    Oklahoma...............................  Public Law 566............  Lower Bayou...............        2,660,000
    Oklahoma...............................  Public Law 566............  Upper Elk Creek...........        8,645,000
    Oklahoma...............................  Public Law 566............  Cotton-Coon-Mission Creek.        4,655,000
    Oklahoma...............................  Public Law 566............  Jack Creek................        1,330,000
    Oklahoma...............................  Public Law 566............  Lower Black Bear Creek....        4,655,000
    Oklahoma...............................  Public Law 566............  Lower Red Rock Creek......       12,635,000
    Oklahoma...............................  Public Law 566............  Okfuskee Tributaries......        3,325,000
    Oklahoma...............................  Public Law 566............  Brushy-Peaceable Creek....       18,620,000
    Oklahoma...............................  Public Law 566............  Lost-Duck Creeks..........        2,660,000
    Oklahoma...............................  Public Law 566............  Cow Creek.................        7,980,000
    Oklahoma...............................  Public Law 566............  Upper Muddy Boggy Creek...        7,980,000
    Oklahoma...............................  Public Law 566............  Kickapoo Nations..........        9,975,000
    Oklahoma...............................  Public Law 566............  Robinson Creek............        3,990,000
    Oklahoma...............................  Public Law 566............  Hoyle Creek...............          665,000
    Oklahoma...............................  Public Law 566............  Turkey Creek..............        6,650,000
    Oklahoma...............................  Public Law 566............  Cambell Creek.............        1,995,000
    Oklahoma...............................  Public Law 566............  Deer Creek................        1,540,000
    Oklahoma...............................  Public Law 566............  Dry Creek.................        8,645,000
    Oklahoma...............................  Public Law 566............  Lugert-Altus..............        2,520,000
    Oklahoma...............................  Public Law 566............  Little Beaver Creek.......        7,980,000
    Oklahoma...............................  Public Law 566............  Wild Horse Creek..........        1,610,000
    Oklahoma...............................  Public Law 566............  Middle Deep Red Run Creek.        5,985,000
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................      220,465,000
                                                                                                    ================
    Oklahoma...............................  Public Law 534............  Washita--Bitter Creek.....        1,330,000
    Oklahoma...............................  Public Law 534............  Washita--Bear Creek.......          665,000
    Oklahoma...............................  Public Law 534............  Washita--Tonkawa Ck-              4,788,000
                                                                          Delaware Cks.
    Oklahoma...............................  Public Law 534............  Washita--Rush Creek.......          665,000
    Oklahoma...............................  Public Law 534............  Washita--Sugar Creek......          665,000
    Oklahoma...............................  Public Law 534............  Washita--Spring Creek.....        2,394,000
    Oklahoma...............................  Public Law 534............  Washita--Wildhorse Ck (Up           665,000
                                                                          & Lwr).
    Oklahoma...............................  Public Law 534............  Washita--Ionine Creek.....        3,325,000
    Oklahoma...............................  Public Law 534............  Washita--Little Washita...          665,000
    Oklahoma...............................  Public Law 534............  Washita--Maysville                1,995,000
                                                                          Laterals.
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................       17,157,000
                                                                                                    ================
          Oklahoma Total...................  ..........................  ..........................      237,622,000
                                                                                                    ================
    Oregon.................................  Public Law 566............  Lower Tillamook Bay.......        6,388,796
    Oregon.................................  Public Law 566............  McKenzie Canyon Irrigation        2,325,000
                                                                          Project.
                                                                                                    ----------------
          Total............................  ..........................  ..........................        8,713,796
                                                                                                    ================
    Pennsylvania...........................  Public Law 566............  Brandywine Creek..........        1,541,000
    Pennsylvania...........................  Public Law 566............  Little Shenango River.....        1,172,500
    Pennsylvania...........................  Public Law 566............  Neshaminy Creek...........        9,160,000
    Pennsylvania...........................  Public Law 566............  Cross Creek...............        2,496,000
    Pennsylvania...........................  Public Law 566............  Yellow Creek..............           60,000
    Pennsylvania...........................  Public Law 566............  Oven Run..................          230,000
    Pennsylvania...........................  Public Law 566............  Monastery Run.............          475,000
    Pennsylvania...........................  Public Law 566............  Red-White Clay Creeks.....        2,122,000
    Pennsylvania...........................  Public Law 566............  Glenwhite Run.............          290,000
    Pennsylvania...........................  Public Law 566............  Tulpehocken Creek.........        2,840,000
    Pennsylvania...........................  Public Law 566............  Little Toby Creek.........          587,000
    Pennsylvania...........................  Public Law 566............  Mill Creek (Clarion/              3,465,000
                                                                          Jefferson).
    Pennsylvania...........................  Public Law 566............  Indian Creek..............        2,960,000
    Pennsylvania...........................  Public Law 566............  Wheeling Creek............          150,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................       27,548,500
                                                                                                    ================
    South Carolina.........................  Public Law 566............  Thompson-Westfield Creek..            2,000
    South Carolina.........................  Public Law 566............  North Fork Edisto.........            5,000
    South Carolina.........................  Public Law 566............  Pickens-Anderson..........            4,000
    South Carolina.........................  Public Law 566............  South Edisto..............           11,000
    South Carolina.........................  Public Law 566............  Holly Hill................        1,000,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        1,022,000
                                                                                                    ================
    South Dakota...........................  Public Law 566............  Lower Little Mn River-Big            50,000
                                                                          Stone Lake.
    Tennessee..............................  Public Law 566............  Reelfoot-Indian Creek.....        4,021,317
    Tennessee..............................  Public Law 566............  Cane Creek................        8,371,486
    Tennessee..............................  Public Law 566............  Hurricane Creek...........        2,008,193
    Tennessee..............................  Public Law 566............  Mcnairy-Cypress Creek.....        4,282,632
    Tennessee..............................  Public Law 566............  North Fork-Forked Deer            6,615,153
                                                                          River.
    Tennessee..............................  Public Law 566............  Sulphur Fork Creek........          307,236
    Tennessee..............................  Public Law 566............  Big Limestone Creek.......          543,478
    Tennessee..............................  Public Law 566............  Lick Creek (1995).........          684,501
    Tennessee..............................  Public Law 566............  Bear Creek (Scott)........        1,635,494
    Tennessee..............................  Public Law 566............  Hickory Creek.............        2,669,595
    Tennessee..............................  Public Law 566............  East Prong Little Pigeon          2,120,945
                                                                          River.
                                                                                                    ----------------
          Total............................  ..........................  ..........................       33,260,030
                                                                                                    ================
    Texas..................................  Public Law 566............  Caney Creek...............        5,400,000
    Texas..................................  Public Law 566............  Salado Creek..............           45,000
    Texas..................................  Public Law 566............  Pine Creek................        2,400,000
    Texas..................................  Public Law 566............  Attoyac Bayou.............        1,681,000
    Texas..................................  Public Law 566............  Donahoe Creek.............        3,600,000
    Texas..................................  Public Law 566............  Choctaw Creek.............       24,000,000
    Texas..................................  Public Law 566............  Aquilla-Hackberry Creek...        3,600,000
    Texas..................................  Public Law 566............  Ecleto Creek..............        9,600,000
    Texas..................................  Public Law 566............  Leona River...............        3,600,000
    Texas..................................  Public Law 566............  Paluxy River..............       14,400,000
    Texas..................................  Public Law 566............  Red Deer Creek............       19,200,000
    Texas..................................  Public Law 566............  Elm Creek (Cen-Tex).......       33,600,000
    Texas..................................  Public Law 566............  Elm Creek (1250)..........        9,600,000
    Texas..................................  Public Law 566............  Los Olmos Creek...........       12,000,000
    Texas..................................  Public Law 566............  Big Creek(Tri-County).....       27,600,000
    Texas..................................  Public Law 566............  Upper North Bosque River..           90,000
    Texas..................................  Public Law 566............  Bexar-Medina-Atascosa               475,000
                                                                          Counties Water
                                                                          Conservation.
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................      170,891,000
                                                                                                    ================
    Texas..................................  Public Law 534............  Trinity--Pilot Grove......       32,400,000
    Texas..................................  Public Law 534............  Trinity--Richland Creek...       36,000,000
    Texas..................................  Public Law 534............  Trinity--Salt Creek &             6,000,000
                                                                          Laterals.
    Texas..................................  Public Law 534............  Trinity--Village & Walker        13,200,000
                                                                          Creeks.
    Texas..................................  Public Law 534............  Trinity--Cedar Creek......       54,000,000
    Texas..................................  Public Law 534............  Trinity--Chambers Creek...       42,355,000
    Texas..................................  Public Law 534............  Trinity--Denton Creek.....        1,800,000
    Texas..................................  Public Law 534............  Trinity--East Fork Above          9,600,000
                                                                          Lavon.
    Texas..................................  Public Law 534............  Trinity--Hickory Creek....        7,200,000
    Texas..................................  Public Law 534............  Trinity--Little Elm &             8,400,000
                                                                          Laterals.
    Texas..................................  Public Law 534............  Trinity--Lower E. Fork            1,200,000
                                                                          Laterals.
    Texas..................................  Public Law 534............  Trinity--Elm Fork.........        1,715,000
    Texas..................................  Public Law 534............  Trinity--Big Sandy Creek..       48,000,000
    Texas..................................  Public Law 534............  Mdl Colorado--Upper Pecan         3,600,000
                                                                          Bayou.
    Texas..................................  Public Law 534............  Mdl Colorado--Southwest           1,800,000
                                                                          Laterals.
    Texas..................................  Public Law 534............  Mdl Colorado--Northwest           1,800,000
                                                                          Laterals.
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................      269,070,000
                                                                                                    ================
          Texas Total......................  ..........................  ..........................      439,961,000
                                                                                                    ================
    Utah...................................  Public Law 566............  Ferron....................          384,500
    Utah...................................  Public Law 566............  Muddy Creek-Orderville....            3,000
    Utah...................................  Public Law 566............  Tri-Valley................            3,360
                                                                                                    ----------------
          Total............................  ..........................  ..........................          390,860
                                                                                                    ================
    Vermont................................  Public Law 566............  Black River...............          563,000
    Vermont................................  Public Law 566............  Lemon Fair River..........          534,000
    Vermont................................  Public Law 566............  Lower Winooski River......          500,000
    Vermont................................  Public Law 566............  Barton And Clyde Rivers...        1,820,000
    Vermont................................  Public Law 566............  Lower Lake Champlain......        1,100,000
    Vermont................................  Public Law 566............  Lower Lamoille River......        1,500,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        6,017,000
                                                                                                    ================
    Virginia...............................  Public Law 566............  Bush River................           10,000
    Virginia...............................  Public Law 566............  Cedar Run.................       22,313,939
    Virginia...............................  Public Law 566............  Copper Creek..............           75,000
    Virginia...............................  Public Law 566............  Cripple Creek.............          150,000
    Virginia...............................  Public Law 566............  Hays Creek................          150,000
    Virginia...............................  Public Law 566............  Watkins Branch............        4,083,622
    Virginia...............................  Public Law 566............  Three Creek...............          250,000
    Virginia...............................  Public Law 566............  Sandy Creek...............          100,000
    Virginia...............................  Public Law 566............  Lick Creek................        7,479,384
    Virginia...............................  Public Law 566............  Ararat River..............       17,757,182
    Virginia...............................  Public Law 566............  Chestnut Creek............          800,000
    Virginia...............................  Public Law 566............  Little Reed Island Creek..          800,000
    Virginia...............................  Public Law 566............  Buena Vista...............        7,975,146
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................       61,944,273
                                                                                                    ================
    Virginia...............................  Public Law 534............  Potomac--South River......        2,140,196
    Virginia...............................  Public Law 534............  Potomac--Linville Creek...          200,000
    Virginia...............................  Public Law 534............  Potomac--Lower North River       14,296,437
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................       16,636,633
                                                                                                    ================
          Virginia Total...................  ..........................  ..........................       78,580,906
                                                                                                    ================
    Washington.............................  Public Law 566............  East Side Green River.....        1,900,000
    Washington.............................  Public Law 566............  Omak Creek................        1,000,000
                                                                                                    ----------------
          Total............................  ..........................  ..........................        2,900,000
                                                                                                    ================
    West Virginia..........................  Public Law 566............  Elk Two Mile Creek........        8,956,000
    West Virginia..........................  Public Law 566............  Mill Creek................        5,432,000
    West Virginia..........................  Public Law 566............  Upper Deckers Creek.......        3,000,000
    West Virginia..........................  Public Law 566............  Little Whitestick-                1,000,000
                                                                          Cranberry Creeks.
    West Virginia..........................  Public Law 566............  Upper Tygarts.............        3,000,000
                                                                                                    ----------------
          Public Law 566 Total.............  ..........................  ..........................       21,388,000
                                                                                                    ================
    West Virginia..........................  Public Law 534............  Potomac--Lost River.......       29,866,000
    West Virginia..........................  Public Law 534............  Potomac--Lunice Creek.....        9,069,000
    West Virginia..........................  Public Law 534............  Potomac--Patterson Creek..        2,898,000
    West Virginia..........................  Public Law 534............  Potomac--New Creek-Whites         2,821,000
                                                                          Run.
    West Virginia..........................  Public Law 534............  Potomac--No. & So. Mill           8,170,000
                                                                          Creek.
    West Virginia..........................  Public Law 534............  Potomac--South Fork River.        1,752,000
                                                                                                    ----------------
          Public Law 534 Total.............  ..........................  ..........................       54,576,000
                                                                                                    ================
          West Virginia Total..............  ..........................  ..........................       75,964,000
                                                                                                    ================
    Wyoming................................  Public Law 566............  Allison Draw..............        2,084,000
    Wyoming................................  Public Law 566............  Lingle Fort Laramie.......        5,436,955
                                                                                                    ----------------
          Total............................  ..........................  ..........................        7,520,955
                                                                                                    ================
    Pacific Basin..........................  Public Law 566............  Kagman....................        6,000,000
    Pacific Basin..........................  Public Law 566............  Aui.......................           13,000
                                                                                                    ----------------
          Pacific Basin Total..............  ..........................  ..........................        6,013,000
                                                                                                    ================
          National Total...................  ..........................  ..........................    1,887,972,931
    ----------------------------------------------------------------------------------------------------------------

        Question. What is the number of watershed projects that are planned
    and authorized for implementation but cannot proceed because the
    Federal funding share is not available? How are you working at reducing
    the list of projects awaiting the Federal share of funding? What is the
    total dollar amount of unfunded Federal commitment in authorized,
    unfinished watershed projects?
        Answer. There are 442 authorized watershed projects that have
    requested $1.9 billion. NRCS assists sponsors on an annual basis to
    evaluate the status of project implementation and determine the amount
    of funds needed to construct the conservation measures described in all
    authorized watershed projects. In fiscal year 2005, 92 watershed
    projects received fiscal year 2005 funds.
        Question. How much did NRCS request during the fiscal year 2006
    budget preparation?
        Answer. NRCS' materials used in developing the fiscal year 2006
    President's Budget are considered ``pre-decisional'' materials and,
    therefore, remain a matter of internal record.
        Question. How much did USDA request during the fiscal year 2006
    budget preparation?
        Answer. USDA's budget materials used in developing the fiscal year
    2006 President's Budget are considered ``pre-decisional'' materials
    and, therefore, remain a matter of internal record.

                    TECHNICAL AND FINANCIAL ASSISTANCE FUNDS

        Question. If the Administration's budget is enacted, NRCS will have
    not technical or financial assistance funds on October 1, 2005. What is
    your plan to terminate/shut-down on all of the contractual obligations?
        Answer. NRCS has about 2,000 contracts and agreements with sponsors
    and landowners to install project measures.
        NRCS would not have funds available in fiscal year 2006 to provide
    technical services for construction inspection or contract management.
    These contracts can be terminated for the convenience of the Government
    under the contract terms. Terminating those contracts could result in
    the need to restore the site to pre-construction conditions. The
    termination costs plus the restoration effort may actually cost more
    than the completion of the project. In addition, it might take several
    months for the restoration effort to be completed for very large
    projects in which case the restoration work may actually impact on the
    next fiscal year with attendant needs for technical assistance funds
    and perhaps additional financial assistance funds to properly close out
    the projects. The true impact for many of the larger contracts will
    need to be determined on a case by case basis.
        Long Term Contracts.--The Government does not have the unilateral
    right to terminate these land treatment agreements with individual
    landowners in accordance with the terms of the agreement. If NRCS does
    not have technical assistance funds to properly administer the
    agreements, we may have to make payments under the agreements for
    practices completed by the participants. If watershed funds are not
    available for NRCS technical assistance, other funds would need to be
    reprogrammed to administer the agreements and continue to make payments
    for completed practices until the existing agreements are completed.
        According to statute, the Secretary may terminate any agreements
    with a landowner by mutual agreement if the Secretary determines that
    such termination would be in the public interest. However, many
    landowners may not mutually agree to terminate the agreements.
        Question. What are the human safety risks, risks to the environment
    and infrastructure if you halt construction on a half-constructed or
    half rehabilitated dam or flood mitigation measure?
        Answer. Human safety risks due to partial flood retention and more
    probable dam failure, and environmental damage risks due to erosion and
    sedimentation, will vary with the particular site situation and the
    degree on completion. A partially completed dam is clearly a higher
    risk to the public and the environment than a completed one.
        Question. What is the Administration's plan to deal with projects
    that are partially complete or dams that are half constructed on
    September 30, 2005?
        Answer. Dams that are partially completed when construction
    activities are terminated can either be completed by others, modified
    to protect the general public and the partially completed work, or
    decommissioned and the area stabilized. Many embankment dams are
    constructed over a period of several years; other dams have
    construction interrupted by contractor default. NRCS has also
    constructed many dams in planned phases with separate contracts for
    each phase. Engineering solutions unique to each particular site will
    be needed to mitigate long term risks to the Federal investment and the
    general public. Unaddressed long term risks will likely be mitigated by
    most State Dam Safety Agencies at the dam owner's expense.
        Question. How many current contractual obligations do you have?
    What is the monetary value associated with these obligations?
        Answer. NRCS has about 2,000 contracts and agreements to install
    conservation measures, including floodwater retarding structures and
    Long Term Agreements with sponsors and landowners. These contracts and
    agreements total about $167 million of obligated, yet undisbursed,
    funds.
        Question. What is the Administration's dollar estimate of claims,
    attorney's fees, and litigation costs for addressing all of the
    contractual obligations you propose to terminate?
        Answer. The termination costs, including claims, attorney's fees,
    and litigation costs, plus the cost to restore sites to original
    condition have not been determined. These costs will need to be
    determined on a case by case basis.
        Question. What guidance are you providing to your sponsors (local
    communities) who are anticipating Federal cost-share dollars and are
    proceeding with land rights acquisition, engineering, design, and
    Federal/State permits?
        Answer. We have not provided any guidance to project sponsors.
        Question. How much funding is needed to complete the on-going
    watershed rehabilitation projects that have been initiated with prior
    year appropriations?
        Answer. The unfunded Federal commitment for projects authorized and
    currently underway is $30 million.
        Question. How many USDA assisted watershed dams have already
    reached the end of their design life?
        Answer. By the end of fiscal year 2005, 457 dams will have reached
    the end of their design life.
        Question. With the Administration's fiscal year 2006 budget
    including a significant reduction in funding for watershed
    rehabilitation, it seems like very few of the risks to loss of life and
    property associated with these dams will be able to be addressed; is
    that correct?
        Answer. We project that of the currently authorized project work
    that includes 68 dams, rehabilitation work could likely proceed on 7
    dams.
        Question. What are the anticipated rehabilitation needs for aging
    watershed dams in the next 5 years?
        Answer. In the next 5 years, 1,808 dams will reach the end of their
    design life. By fiscal year 2009, $565 million (current dollars) is
    required to rehabilitate these dams. The owners of these facilities
    should also seek State and local government, as well as private,
    sources of funding for their rehabilitation needs.
        Question. At the rate of the administrations request for funding
    for watershed rehabilitation, how long will it take to address: (1) the
    on-going rehabilitation projects? (2) The existing known rehabilitation
    needs?
        Answer. With funding at $15 million per year, it would take
    approximately 5 years to address ongoing projects. It would take
    approximately 37 years to address the existing known rehabilitation
    needs at this level of funding.
        Question. How can the agency meet these critical public safety
    needs with the Administration's budget proposal?
        Answer. At the proposed funding level, watershed rehabilitation
    needs and requests will be prioritized to address needs with the
    greatest potential for loss of life.
        Question. If funding was available, what is a realistic estimate of
    the actual rehabilitation work that NRCS and local project sponsors can
    accomplish in fiscal year 2006? How about the next 5 years?
        Answer. The funding levels stipulated in statute are consistent
    with the watershed rehabilitation needs to protect life and property.
        Question. Is there an opportunity for communities to provide new
    benefits, such as adding municipal water supply, recreation, and
    wetland and wildlife enhancements when these dams are rehabilitated? Is
    decommissioning (removal of dams) a viable alternative to consider for
    rehabilitation of watershed dams?
        Answer. Yes, local communities and project sponsors can add
    additional purposes or beneficiaries to existing dams.
        Question. How will appropriated funds be allocated to specific
    watershed rehabilitation projects?
        Answer. The statute directed USDA to assist sponsors with
    rehabilitation of their aging dams and required establishment of a
    priority ranking system. The priority ranking process has been
    invaluable to provide a consistent method for evaluation of dams and
    allocation of funds.
        All viable applications received from project sponsors are ranked.
    The priority ranking system includes the following major components:
    Potential for failure of the dam; Consequences of failure of the dam--
    based on existing conditions and design features of the dam; Input from
    State Dam Safety Agency; Rapid implementation--to assure unsafe dams
    are rehabilitated as quickly as possible. Highest priorities are
    assigned to those dams with the greatest rehabilitation needs with the
    potential for loss of life or significant environmental damage, should
    the dam fail.
        Question. Does NRCS have the technical capacity needed to assist
    project sponsors with all of their requests for Federal assistance in
    watershed rehabilitation?
        Answer. While NRCS technical capacity in the area of planning,
    design, and construction of water resource projects has decreased
    significantly over the past several years the statute does not require
    all technical assistance to come from NRCS. NRCS may elect to use
    private technical sources to provide assistance in planning, design,
    and construction oversight. Also, project sponsors may elect to
    complete project planning and design using their own staff or the
    hiring consultants to complete this work that would then be reviewed
    and concurred on by NRCS.
        Question. In fiscal year 2005, how many requests and how much money
    was requested for rehabilitation assistance?
        Answer. In fiscal year 2005, local communities requested 123
    projects in 21 States totaling $43 million.
        Question. How many projects were funded in fiscal year 2005? How
    many projects were not funded?
        Answer. The fiscal year 2005 appropriations provided for 87
    projects in 21 States. 36 requests for watershed rehabilitation
    projects were not funded.
        Question. How much did each State receive for watershed
    rehabilitation in fiscal year 2005?
        [The information follows:]

                    FISCAL YEAR 2005 WATERSHED REHABILITATION
    ------------------------------------------------------------------------
                              State                                Total
    ------------------------------------------------------------------------
    Alabama.................................................        $170,000
    Alaska..................................................  ..............
    Arizona.................................................       3,797,000
    Arkansas................................................         431,000
    California..............................................          25,000
    Colorado................................................         195,000
    Connecticut.............................................  ..............
    Delaware................................................  ..............
    Florida.................................................  ..............
    Georgia.................................................       2,800,000
    Hawaii..................................................  ..............
    Idaho...................................................  ..............
    Illinois................................................          40,000
    Indiana.................................................         100,000
    Iowa....................................................         122,000
    Kansas..................................................         140,000
    Kentucky................................................         430,000
    Louisiana...............................................          25,000
    Maine...................................................          30,000
    Maryland................................................  ..............
    Massachusetts...........................................         115,000
    Michigan................................................          10,000
    Minnesota...............................................          40,000
    Mississippi.............................................       1,360,000
    Missouri................................................         300,000
    Montana.................................................         225,000
    Nebraska................................................       1,122,000
    Nevada..................................................  ..............
    New Hampshire...........................................         110,000
    New Jersey..............................................          45,000
    New Mexico..............................................         662,000
    New York................................................         295,000
    North Carolina..........................................  ..............
    North Dakota............................................         611,000
    Ohio....................................................         170,000
    Oklahoma................................................       5,470,000
    Oregon..................................................  ..............
    Pennsylvania............................................          90,000
    Rhode Island............................................  ..............
    South Carolina..........................................         102,000
    South Dakota............................................          20,000
    Tennessee...............................................          14,000
    Texas...................................................       5,035,000
    Utah....................................................         159,000
    Vermont.................................................  ..............
    Virginia................................................         610,000
    Washington..............................................  ..............
    West Virginia...........................................         190,000
    Wisconsin...............................................         181,000
    Wyoming.................................................         105,000
    Pacific Basin...........................................  ..............
    Puerto Rico.............................................          30,000
                                                             ---------------
          State Totals......................................      25,376,000
    ------------------------------------------------------------------------

                                     ______

                    Questions Submitted by Senator Herb Kohl

                             DUTIES OF AGENCY STAFF

        Question. We are receiving reports that the Department is altering
    the traditional agency assignments of certain field office staff. As we
    understand it, where the CRP and EQIP programs are concerned, the Farm
    Service Agency historically has assisted landowners with sign-up and
    financial matters, while the NRCS has assisted with technical
    assistance for these programs. Apparently, this is in line with long
    standing expertise of these respective agencies. Information is now
    coming forward that managers at the Department level are directing
    agency staff to handle matters contrary to this historical pattern with
    possible negative consequences. Please explain to the committee what is
    taking place in this regard.
        Answer. In a jointly signed memorandum dated July 19, 2004, Farm
    Service Agency (FSA) Administrator James Little and Natural Resources
    Conservation Service (NRCS) Chief Bruce Knight announced the migration
    of Environmental Quality Incentives Program (EQIP) administrative
    responsibilities from FSA to NRCS. There are many reasons for this
    change, but the overall result will be a streamlining of services to
    participants and more efficient use of Government resources.
    Duplication of efforts, which were necessary when both agencies were
    involved in EQIP, has been eliminated. Effective October 1, 2004, NRCS
    is the point-of-contact for all administrative and technical services
    provided through EQIP.
        Although NRCS is recommending streamlining CRP to reduce the
    administrative activities that are now required of NRCS, NRCS and FSA
    have issued a ``workload agreement letter'' which basically states that
    NRCS will provide CRP technical assistance for both the General CRP
    Sign Up and the Continuous CRP.
        In addition, TSPs have traditionally been hired either by the
    landowner or by NRCS. TSPs have been available to conduct technical
    assistance for CRP since fiscal year 2003.
        NRCS at the State level can determine that they will contract out
    the CRP technical assistance for conservation planning or conservation
    application. NRCS may also decide that they will contract out different
    phases of planning or application (conducting status reviews, practice
    design or certification, etc.)
        Question. What exact directives are being issued, and with what
    degree of formality or permanence?
        Answer. Jointly signed national directives from the Administrator
    and Chief were issued to all FSA and NRCS employees on July 19, and
    December 21, 2004. These directives supported an orderly transition to
    new EQIP administrative procedures. A jointly signed letter was also
    mailed to all active EQIP participants during August of 2004. The
    permanent transfer of all contract files and related administrative
    records occurred during October and financial reconciliation tasks were
    finished during December. Since assuming administrative
    responsibilities, NRCS has made over 32,000 EQIP payments totaling
    about $175 million.
        For fiscal year 2005, NRCS and FSA are operating under a ``Workload
    Agreement'' which delineates the responsibility of CCC, FSA, and NRCS
    with respect to CRP technical assistance, based on the 1986 Memorandum
    of Understanding (MOU) establishing a cooperative working relationship
    among the agencies involved in carrying out the CRP.
        Question. What cost reimbursement arrangements are involved?
        Answer. Since passage of the 2002 Farm Bill, NRCS has reimbursed
    FSA annually for administrative services related to handling EQIP
    applications and contracts. During fiscal year 2004, over $13 million
    was transferred to FSA for this purpose. In 2005, NRCS has retained
    these funds to enhance its administrative capability to support EQIP.
    Much of this investment has been in software development, training, and
    some additional administrative specialists to process payment
    applications. No EQIP reimbursable agreements are planned with FSA this
    year.
        Utilizing the CRP agreement, NRCS will provide technical assistance
    both directly or through NRCS approved Technical Service Providers and
    assure all technical work done will meet NRCS technical requirements.
    NRCS will also submit to FSA billings for direct charge from NRCS time
    and accounting system information for full reimbursement of actual cost
    of technical assistance provided by NRCS. These costs are based on NRCS
    Cost of Programs Model.
        Question. What complaints or inefficiencies are you aware of, and
    what remedial steps will you take?
        Answer. The transfer of more than 160,000 EQIP contracts has
    neither been easy nor without some controversy. The migration and
    reconciliation process took 5 months to complete. About 20 percent of
    the participant payments were delayed beyond 30 days as NRCS
    implemented new business processes for EQIP. We have given priority to
    software support and training activities that enabled NRCS to eliminate
    this problem. By the end of fiscal year 2005, NRCS expects to implement
    additional streamlining activities to achieve more administrative and
    technical efficiency.
        In fiscal year 2007, 16.1 million acres of CRP land will expire and
    will be available for planting to an agricultural commodity. This would
    increase the soil erosion rate on cropland, and it would also place a
    strain on the delivery of CRP technical assistance by NRCS at a time
    when USDA's workforce is declining. FSA has requested comments on how
    USDA should handle the expiration of the 16.1 million acres of CRP in
    fiscal year 2007 and beyond.
        NRCS is recommending streamlining CRP to reduce the administrative
    activities that are now required of NRCS, e.g., land ownership changes,
    obtaining landowner signatures on conservation plans, plan revision for
    non-technical reasons, re-planning and certifying food plots every year
    for the life of the contract, when the food plot seeding and/or
    planting are the same year after year.

                     RESOURCE CONSERVATION AND DEVELOPMENT

        Question. The President's budget includes substantial cuts in the
    RC&D program and these cuts are arbitrarily based on the period of time
    the associated districts have been authorized. Have you found that the
    period of time a district has been authorized has any relation to the
    effectiveness and success of the district?
        Answer. We have found a variety of capacity situations in regards
    to the length of time a RC&D Area has been designated. The President's
    budget is not proposing to eliminate any RC&D councils. After more than
    20 years of receiving technical assistance in the form of a full-time
    coordinator and administrative support, the proposal reflects the
    belief that these councils should have the capacity to supplant Federal
    funds. The National Association of RC&D Councils recently provided
    information showing that 24 percent of the councils have 2-5 employees
    and 4 percent have 6 or more employees. Asking high-performing councils
    to address these needs themselves should be feasible, and expecting
    low-performing councils to improve their performance or risk being
    terminated from assistance should also be reasonable.
        Question. Should funding decisions be based on the most effective
    use of Federal funds or arbitrary decisions?
        Answer. We concur that funding decisions should be based on the
    most effective use of Federal funds and believe that the President's
    budget proposal reflects that decision.
        Question. If effective districts will lose Federal funds under your
    proposal, what assurances do you have that State, local or other funds
    will replace them?
        Answer. We are confident that high-performing councils will
    demonstrate local leadership abilities to leverage funds from other
    sources to supplant the incubator funds they have received from NRCS in
    the past. This confidence is based on information they have provided in
    the past regarding the high level of leveraged funds they are able to
    achieve, an average of 5 to 1 dollar of RC&D appropriated funds for the
    past 3 years, and the variety of funding sources they utilize in
    carrying out their area plans each year.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                         CONSERVATION SECURITY PROGRAM

        Question. Participation in the first CSP sign-up was much lower
    than NRCS expected, but the agency spent $40 million in 18 watersheds.
    This year expenditures are capped at $202 million, some of which will
    cover last year's contracts. With the sign-up in 220 watersheds this
    year, there will be much less money per watershed for new contracts
    this year.
        The President's budget proposes capping CSP at $274 million next
    year. If CSP is capped at $274 million, how much money will be
    available for new contracts in fiscal year 2006?
        Answer. With CSP capped at $274 million for 2006, NRCS expects to
    have $110 million available for new contracts. The President's budget
    provides for $273.9 million in available funding for CSP in 2006. Of
    that amount, $123.2 is needed to fund prior year financial assistance
    obligations. In addition, $41.4 million is used for technical
    assistance by NRCS.
        Question. I am concerned that the Conservation Security Program is
    being eroded by restrictive rules and limited funds. If we follow the
    President's budget recommendation, next year there will be less money
    available for new contracts. If we continue decreasing the money
    available for new contracts, then producers will not have the
    opportunity to enroll in CSP once every 8 years, it will be more like
    once in a lifetime.
        We designed a program that was intended to be attractive to
    producers and that would generate significant and lasting conservation
    benefits from widespread participation.
        I would like your commitment that USDA will help achieve the
    original program objectives. Will you give me that assurance?
        Answer. USDA is firmly committed to a CSP program that rewards
    producers for their stewardship, promotes improved environmental
    performance, and responsibly stays within the available funding
    limitations.
        NRCS is working hard to ensure development of the program in a
    manner that is both farmer-friendly and responsive to the conservation
    needs of the Nation. The watershed-based implementation is being used
    to operate CSP and stay within the available budget. In 2004, CSP was
    offered to producers in 18 selected watersheds and resulted in about
    2,200 contracts with the $41 million of available funding. Currently,
    sign-up for fiscal year 2005 CSP enrollment is well underway in 220
    selected watersheds that reach all 50 States and the Caribbean. There
    are 2,119 watersheds nationwide at the eight-digit hydrologic unit code
    (HUC) level.
        USDA is committed to the vision of CSP as a nationwide conservation
    program. Other watersheds will be selected each year until landowners
    in every watershed have had a chance to participate.
                                     ______

                   Questions Submitted to Gilbert G. Gonzalez

                Questions Submitted by Senator Robert F. Bennett

                            RURAL RENTAL ASSISTANCE

        Question. The budget requests $650 million for rural rental
    assistance.
        How will those funds be allocated?
        Answer. [The information follows:]

                       FISCAL YEAR 2006 RENTAL ASSISTANCE
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Renewals................................................    $639,126,000
    Debt Forgiveness........................................       5,900,000
    Farm Labor Housing New Construction.....................       5,000,000
    ------------------------------------------------------------------------

        Question. Will rental assistance be available for new construction
    and substantial rehabilitation for farm labor housing projects?
        Answer. Five million dollars will be available for Farm Labor
    Housing new construction.
        Question. Will that amount be adequate for all farm labor units
    expecting to receive financing?
        Answer. The amount is consistent with what has been provided in
    recent years to support equivalent Farm Labor Housing New Construction
    funding levels. Farm Labor Housing rental assistance costs
    approximately $10,500 per unit; so this level will fund just under 500
    units which should be sufficient to support the requested funding
    levels for the program.

                         GUARANTEED MULTIFAMILY HOUSING

        Question. The budget includes an increase for Section 538
    guaranteed loans for rural rental housing.
        What is the average income for families living in Section 538
    developments and how does that compare to Section 515 developments?
        Answer. The average income for families living in section 538
    developments varies from project to project; however, section 538
    projects have approximately 55 percent of the units rented to families
    with very low income and approximately 40 percent are rented to low-
    income families. The average income for families living in section 515
    developments vary by project as well; however, approximately 95 percent
    of section 515 units are rented to very low-income families and
    approximately 4 percent are rented to low-income families.
        Question. What is the average size of the communities in which
    Section 538 developments are located?
        Answer. The average size of the communities in which section 538
    developments are located is approximately 8,790 people. The program can
    assist communities up to 20,000 in population.
        Question. What is the record of Section 538 developments in serving
    low income households and more remote rural communities?
        Answer. More than 90 percent of the units are rented to either very
    low- or low-income families. One of the driving forces before renting
    to very low- or low-income families is the tax credit requirements on
    these projects. Eighty percent of section 538 properties are financed
    with tax credit equities, which means that between 40 to 60 percent of
    the units must serve families making less than 60 percent of median
    income.
        Section 538 is solely a guarantee program.
        Question. What subsidy sources are available to make Section 538
    units affordable for low income families?
        Answer. The law governing the program requires that at least 20
    percent of the loans made each year receive an interest credit subsidy,
    which is a buy down from the lender's note rate to the Applicable
    Federal Rate. So that this subsidy may reach the neediest of projects,
    scoring and selection criteria are published each year in a Notice of
    Funds Availability (NOFA), and the project must score a minimum number
    of points, set in the NOFA, to receive interest credit. Because the law
    sets a threshold for how many loans must receive interest credit, but
    does set a limit on how many loans may receive it, the program's
    subsidy rate has been calculated on the program's historic average of
    interest credit subsidy granted. Each year, since program inception,
    approximately 50 percent of the loans have received interest credit.
        Rental Assistance is not available for section 538 projects;
    however, other subsidies are permitted in these projects. HUD vouchers
    are permitted, and State funded rental assistance is also permitted.
    More than 80 percent of the section 538 projects have tax credit
    equities, which adds an additional source of funding for the
    construction. The tax credit agencies require large percentages of
    units to be rented to families making less than 60 percent of area
    median income.
        Question. Does RHS have any information on the availability of such
    sources and the likelihood that Section 538 projects will secure such
    subsidies?
        Answer. Currently, about 50 percent of section 538 properties
    received an interest rate buy down, called interest credit. In order to
    ``stretch'' its interest credit and provide assistance to more
    projects, while keeping the subsidy rate under control, the agency
    currently limits the amount that any one property can receive to $1.5
    million.
        Additionally, 5-10 percent of the section 538 tenants have HUD
    section 8 vouchers. As mentioned above, more than 80 percent of the
    section 538 projects have applied for tax credits and received them.
    These tax credits generate funds used in the construction of these
    projects. As a condition of using tax credits, many of the units in
    these projects are rented to very low-income families at affordable
    rents without rent subsidies.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                           RURAL DEVELOPMENT PROGRAMS

        Question. The President's budget request eliminates four rural
    economic development programs at USDA which are targeted to low-income
    small rural communities and replaces these and 14 others into a smaller
    substitute grant program the legislation for which has not even been
    drafted. The Administration justifies this change by describing many of
    these programs as duplicative, ineffective, and unaccountable with
    results not demonstrated. Nevertheless, recent press releases cite the
    successes and benefits the Bush administration has brought to rural
    America through these very same programs the Administration seeks to
    eliminate.
        The entire proposal appears to have been developed and driven by
    OMB with little or no input from the various affected Federal agencies.
        What studies were conducted by either USDA or the Department of
    Commerce to determine the impact this transfer will have on America's
    rural communities? Isn't this just a shell game to reduce and/or
    eliminate many of these programs and have their traditional
    constituencies fighting over less funding? If this new smaller
    substitute grant program was to be created in the Department of
    Commerce, does the Department know for a fact what eligible activities
    that are currently authorized under the four rural development programs
    would be eligible under this new program? What transfer of staff from
    USDA to the Department of Commerce is contemplated?
        Answer. The President's proposed Strengthening America's
    Communities Initiative is designed to streamline a number of Federal
    programs that provide assistance to communities and will include
    eligibility criteria that will ensure funds are directed to those
    communities most in need of development assistance. While Rural
    Development has not conducted any studies regarding this initiative, we
    feel confident that rural communities will fare well when these
    criteria are used, as the proposal includes broad purposes that will
    allow rural communities to obtain funds for purposes currently being
    met through the Rural Development programs included in the President's
    proposal. USDA Rural Development has offered our expertise, assistance,
    and experience in program delivery in rural areas through our 800 local
    offices. We will continue to work with the Department of Commerce on
    the technical details of the delivery of this program, particularly as
    it affects rural areas. The Administration will craft the legislation
    as a part of a collaborative effort with Congress and stakeholder
    groups. A Secretarial Advisory Committee has been created at the
    Department of Commerce to help address some of the most complex issues,
    including eligibility of rural communities. The legislation that is
    ultimately submitted will be the result of an open dialogue with
    stakeholders and members of Congress. The impact of this initiative on
    Rural Development staff will be minimal, and no staff will be
    transferred to the Department of Commerce.

                RD GENERAL REDUCTIONS IN DIRECT LOANS AND GRANTS

        Question. It seems that Rural America, as presented in this case
    and generally across the entire budget request for the Department of
    Agriculture, is the loser once again. These are well established
    programs at USDA, serving the poorest rural communities and I have no
    intention of allowing this proposal to move forward until the
    Department can provide detailed answers prior to the Committee's Mark-
    up in the very near future. In fact, I request receipt of these answers
    this month to adequately prepare to draft a workable bill and not leave
    out our poor communities.
        This year, as before, the President proposes to cut direct loans
    and grants (which target low-income communities), and increase
    guaranteed loan programs (that serve more moderate-income communities).
    This proposal effectively cuts vital services to America's poorest
    citizens by reducing direct loans and grants for multifamily housing,
    water and waste, broadband grants, and other rural development
    programs. USDA justifies this shift throughout its budget by
    emphasizing a lower interest rate environment, and the lower subsidy
    and program costs that would result. On its face, this sounds good to
    keep costs down. But, America's most needy rural communities are too
    poor and neglected to participate in guaranteed programs. Furthermore,
    the public policy underlying direct loans and grants is precisely to
    support the Nation's most vulnerable rural communities.
        What impact studies did the Department undertake prior to proposing
    this shift? If none, why not? If studied, what results? When can the
    Committee receive the results? What steps is the Department prepared to
    take to protect the needy communities and individuals who will not be
    able to participate in or benefit from guaranteed programs, and will no
    longer have direct loans and grants available?
        Answer. The Administration remains steadfast in its commitment to
    rural America, including the neediest communities, and Rural
    Development's $12.8 billion program budget request reflects that
    commitment. This program level will be achieved with $1.775 billion in
    budget authority. Budget authority supporting grants plus direct loans
    accounts for 94.5 percent of the program total. Budget authority for
    guaranteed loans accounts for only 5.5 percent of the program request.
    It is also noted that guaranteed loans do, in fact, benefit the very-
    low income rural population directly by providing housing and jobs, and
    indirectly by providing infrastructure and essential community
    facilities. Furthermore, in this continuing low interest rate
    environment, individuals and communities are better able to bear some
    debt, which allows scarce resources to be stretched further and allows
    more communities and very-low income residents to benefit.

              RD TAX EXEMPT FINANCING FOR LOAN GUARANTEE PROGRAMS

        Question. USDA provides loan guarantees for essential community
    projects under the Rural Development Loan Guarantee program. Struggling
    rural communities are critically dependent on these loan guarantees to
    meet environmental standards for water and waste water in a cost
    effective manner. When it comes to financing public investments for
    these issues, rural communities are forced by existing regulation to
    choose between USDA loan guarantees or tax exempt financing. Financing
    costs would likely decrease if communities could combine tax exempt
    financing with Federal guarantees.
        Does USDA utilize the full program level available for loan
    guarantees of this nature?
        Answer. No, we are not able to utilize the full guaranteed water
    and environment program funds available. In the last 3 fiscal years,
    $75 million has been authorized in each year. However, only 6 loans for
    $2.3 million were made in fiscal year 2002; 4 loans for $3.6 million in
    fiscal year 2003; and 2 loans for $41.2 million in fiscal year 2004.
    That is an average of four loans per year for $16 million. In the past
    3 fiscal years, only 21 percent of the guaranteed authority was used.
    The vast majority of applicants for loans for water and waste disposal
    projects are from municipal or tax exempt entities. Even though this
    money is available for loan guarantees, RD is not able to use it to
    address the current backlog program in the water and waste disposal
    program.
        Question. Explain how a provision in the tax code allowing rural
    communities to combine tax exempt financing with loan guarantees would
    increase rural community utilization of these guarantees?
        Answer. Changing the tax code to allow tax exempt financing with an
    agency guarantee would allow public bodies to borrow funds from
    commercial lenders at an interest rate comparable with the agency's
    direct market rate loans. In fiscal year 2004, $291 million in loans
    were made to 278 public body borrowers at the agency's market rate
    interest rate. That represents over 30 percent of the agency's fiscal
    year 2004 lending total. Over one third, 100 public body borrowers in
    2004, did not receive grant funds and borrowed $134 million in market
    rate loans. Most of these borrowers could obtain financing from private
    lenders at a cost comparable to direct loans if they could receive both
    a tax exemption and a guarantee on the financing.

                              RD BUSINESS PROGRAMS

        Question. The Business and Industry Guaranteed program has received
    a substantial increase in the Department's budget request for 2006.
        Are you still pursuing other fees through Congress to reduce the
    subsidy costs for this program, and if so, what is the Administration's
    formal position?
        Answer. The Administration is currently assessing its options
    including consideration for assessing an annual fee for reducing the
    subsidy costs of the program. It is the Administration's goal to find
    ways of reducing the cost of the program in order to assure that
    adequate funding is provided to accommodate the demand of this program
    in fiscal year 2006 and beyond.

                              RHS NEW CONSTRUCTION

        Question. The President's 2006 budget estimates indicate no rental
    assistance for new construction for multi-family rental and farm labor
    housing programs. In 2004, GAO reviewed this program, which is the
    largest line item account in the Rural Development Mission area. Upon
    GAO's finding of gross mismanagement of this program, the committee
    changed the term of the contracts to capture over inflated contracts.
        Is it true that you have now changed this position to allow rental
    assistance for new construction in the farm labor housing program?
        Answer. The fiscal year 2006 budget has $5 million in rental
    assistance for Farm Labor Housing new construction.
        [The information follows:]

                       FISCAL YEAR 2006 RENTAL ASSISTANCE
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Renewals................................................    $639,126,000
    Debt Forgiveness........................................       5,900,000
    Farm Labor Housing New Construction.....................       5,000,000
    ------------------------------------------------------------------------

        Question. What led to this change?
        Answer. Fiscal year 2006 budget had all 521 assistance listed on a
    single line item as if for renewal only. The intention to provide $5
    million in assistance for 514/516 was erroneously omitted in the
    accompanying notes. It was the Administration's intent that support for
    farm labor housing new construction be included and was part of the
    $650 million requested.
        Question. Does this indicate that you over-compensated for
    renewals?
        Answer. No, the chart did not reflect the intention of the
    Administration, and the note in the budget should have said ``including
    $5 million of funding for RA for Farm Labor Housing'' instead of ``does
    not include''. The RA on the chart erroneously appeared as if it was
    only for renewal use. It was overlooked in the review process, and
    corrected later. We apologize for this error and appreciate the
    opportunity to clarify.
        Question. Why is the Administration allowing new construction for
    the 514/516 program and not the 515 program when they are very similar
    in program activities and structure?
        Answer. The Department has studied the 515 program and now has
    definitive knowledge of the need to focus on revitalization of existing
    portfolio. The 514/516 program, though similar, has not benefited from
    the same level of study yet. It would be premature to assume the same
    approach is needed in both programs. Further review may indicate what
    specific directional changes should be made in this program.
        Question. Considering that the very low-income elderly compose
    almost half of the population making use of the 515 program, is it not
    of vital interest to meet those needs?
        Answer. Currently approximately 57 percent of the units in the 515
    programs are rented to elderly tenants. The Administration believes
    that protection of these tenants through availability of new tools such
    as vouchers, and emphasis on revitalizing the portfolio is the best way
    to serve the rural elderly population with the limited resources
    available.

                          RHS EQUAL ACCESS TO HOUSING

        Question. ``Equal access to housing is especially important in
    rural America. RHS is continuing to show the way in making decent
    affordable housing available to low- and moderate-income rural people
    regardless of color, disability, gender or belief.''
        The above comments by former Rural Housing Service (RHS)
    Administrator Art Garcia were made on April 26, 2002. I am not sure,
    however, how faithful RHS remains to these ideas today.
        In 2001, Rural Development issued a Request for Proposal (RFP)
    (solicitation #RP-31ME-1-1001) to conduct fair housing paired testing.
    The RFP stated that the testing was to be: ``. . . on a nationwide
    basis in Rural Development's Rural Rental Housing Section 515 and
    Section 538 complexes that were financed by USDA.''
        Apparently, the testing was to determine whether discrimination
    occurs in rental housing supported by RHS. Although the RFP was issued
    nearly 4 years ago, we have heard no mention of the results.
        Where are the testing results?
        Answer. The study has been reviewed with RHS officials, and
    training for Headquarters staff is scheduled by the Fair Housing
    Alliance for May 24th and 25th regarding the findings. The recent
    policy meeting held in Portland, Oregon, introduced the existence of
    the study to the field and a session on accessibility and fair housing
    was offered as a mandatory part of the training track for Multi-Family
    Housing staff and architects. Additionally, discussions have been held
    with Council for Affordable and Rural Housing and National Affordable
    Housing Management Association groups about training of resident
    managers to be more aware of their responsibilities, which was the
    primary focus of the study. Both groups are currently offering such
    training to industry managers.
        Question. Why has there been no discussion of the findings?
        Answer. The findings are being reviewed and policy formulated to
    address the findings. The official training by the Fair Housing
    Alliance is scheduled for May 24th and 25th.
        Question. Did the tests find any violations? How many? In what
    areas of the country were the tests conducted?
        Answer. The tests found violations, but frequency of violations
    were found at a rate of one third that normally found in similar HUD
    reviews. The study conducted tests in a geographically dispersed
    manner, not focusing on any one part of the United States.
        Question. What corrective actions has the Department taken to
    remedy any discriminatory practices?
        Answer. While individual property by property results are not
    provided in the study, the contractor has agreed to deliver to RHS a
    list of any specific properties where violations were serious enough to
    need immediate attention. These cases will be individually evaluated
    and corrective action initiated by Rural Development State Offices.
                             rhs rental assistance
        Question. In the President's budget request for Section 521 Rental
    Assistance:
        Does the total rental assistance number include transferred rental
    assistance for projects that prepay?
        Answer. The budget request does not include transferred rental
    assistance for projects that prepay because we do not know at this time
    which projects will prepay or what the balance of those rental
    assistance contracts will be when the borrower actually prepays his
    mortgage. The President's budget request of $650 million is for renewal
    of contracts expected to exhaust funds in fiscal year 2006 renewals
    ($639 million), rental assistance for Farm Labor Housing new
    construction ($5 million) and preservation (debt forgiveness) ($5.9
    million).
        Question. If so, what is the number?
        Answer. The budget request does not include transferred rental
    assistance.
        Question. How many projects (and the associated rental assistance
    for projects that prepay) do you anticipate will prepay in fiscal year
    2006?
        Answer. Unless litigation or legislation lifts restrictions
    currently in place, we anticipate that approximately 100 properties
    will prepay, based upon past trends. We cannot estimate the balance of
    these rental assistance contracts.

                        RHS SINGLE FAMILY RURAL HOUSING

        Question. What is the status of the Rural Home Loan Partnership in
    the Section 502 direct loan program?
        Answer. The agency continues to participate in the Rural Home Loan
    Partnership (RHLP) for fiscal year 2005. The partnership provides
    significant benefits for the agency and its partners as well as our
    customers by bringing our mutual resources together to assist low- and
    very low-income rural residents in becoming successful homeowners.
        Question. Do you plan to continue this partnership effort?
        Answer. Yes. Our customers benefit from the homeowner education and
    affordable housing products that many of our RHLP partners provide. We
    look forward to working with our partners to make this initiative even
    more mutually beneficial.
        Question. What is the cost to the government of this partnership
    effort compared with what the cost would be if the Department provided
    the entire loan through the 502 direct loan program?
        Answer. Rural Development has not performed a specific cost-benefit
    analysis. The RHLP is a unique partnership involving a local nonprofit,
    local lender and Rural Development all working together to build a
    better rural community. The nonprofit organization provides credit
    counseling, homeownership education, and other affordable housing
    products. The local lender is able to participate in helping lower
    income families within their community to achieve homeownership. Rural
    Development benefits by helping more families to become successful
    homeowners.

                            RHS MULTI-FAMILY HOUSING

        Question. In the Administration's new voucher program, what are the
    annual cost, number and term for these vouchers?
        Answer. While the legislative language currently being developed
    through the Department will determine the final form of these vouchers,
    we currently anticipate through the budgeting process that the rental
    assistance assisted tenants will be provided a 5-year term and cost
    approximately $13,000-$14,000 per voucher. Our calculations assumed
    that Non RA assisted tenants would be covered for a shorter term, so
    those vouchers would be less expensive. The 2006 Budget estimate is
    based upon issuing 15,000-17,000 vouchers, which would cover about one-
    third of the total expected in the prepayment estimation of the
    Comprehensive Property Assessment (CPA). The CPA estimated the primary
    need for vouchers would be in years 2006-2009.
        Question. Who will administer this program, for example HUD Public
    Housing Authorities?
        Answer. We could use a delivery strategy similar to that used by
    HUD, which includes public housing authorities as part of the process.
        Question. If an entity outside of USDA administers this program,
    what type of administrative agreement are you exploring and what is the
    cost?
        Answer. A delivery network similar to HUD could be operated under
    an interagency agreement.
        Question. Provide a detailed breakdown of the $214 million voucher
    funding request. For example, will consulting costs be included and for
    what amount?
        Answer. Of the $214 million requested during fiscal year 2006 for a
    Rural Development voucher program, $204 million would go for the cost
    of vouchers and $10 million would go for administrative expenses,
    including contracts for industry experts.
        Question. Will these vouchers be project-based or tied to an
    individual?
        Answer. The vouchers are to be tenant based.
        Question. Will they be portable and allowed to transfer outside of
    the community? Can they be transferred to any community in the United
    States? If so, how will you control the costs?
        Answer. Details of the voucher program are still being developed.
    They will include portability since it is understood that tenants
    prefer to have choices.
        Question. Can they be transferred to major urban communities? If
    so, how will you avoid confusion or conflicts with the HUD voucher
    program?
        Answer. While they could be transferred to another geographical
    area, the cost is determined by the market conditions in the area where
    prepayment occurred. Therefore, moving to a very high cost of living
    area from somewhere less expensive might not provide enough financial
    assistance to fill the gap for the tenant between their income and the
    urban rent.
        Question. For several years the Administration has indicated that
    they would move back to a low-income production program after a
    comprehensive review was completed. When will this take place?
        Answer. For fiscal year 2006, the production program will continue,
    but will largely take the form of the section 538 program. The use of
    tax credit equity, other subsidy, and interest credit have allowed this
    program to serve low- and very low-income tenants. While not the same
    as the section 515 program, it serves similar sized communities, and a
    large number of low- and very low-income residents.
        Question. How will the 538 program be an effective tool to
    rehabilitate the 515 portfolio? Please explain the process for how this
    will work? Would these transactions require the 9 percent tax credits
    in order to succeed?
        Answer. We are exploring how the section 538 program may be used to
    rehabilitate existing section 515 projects. For example; the section
    538 guarantee can be used for acquisition of the section 515 project if
    coupled with extensive rehabilitation of $6,500 or more per unit. The
    legislation and regulations permit the use of section 538 guarantees on
    projects when they are acquired and repaired. The current regulations
    require that the repairs be substantial, at least $6,500 per unit to
    qualify for use with section 515 project acquisition. The economics of
    each project would be different; however, the 9 percent tax credits
    would not always be necessary for these projects to succeed. The longer
    40-year amortization of the section 538 loan, plus the program's
    interest credit buy down to the Applicable Federal Rate (AFR), should
    help the project to succeed. Some regulation and handbook changes will
    be needed to make the program more effective in partnership with
    section 515 financing already in place on properties in need of
    rehabilitation, and for stay-in owners. We intend to work on these
    changes in 2006.
        Question. How will you overcome potential barriers to the success
    of your proposal, such as state ceilings on the 9 percent tax credits
    and program competition?
        Answer. In 2004 approximately 80 percent (35 out of 44) of the
    projects awarded funds in section 538 had tax credits in the deals.
    Similar leveraging occurred with section 515, but with mostly lower
    valued 4 percent credits. While tax credits are added financial
    benefits to project owners, these tax credits are not indicative of the
    success or failure of a project. The projects have competed very well
    for 9 percent credits.
        The 538 program is currently prohibited from providing assistance
    for projects with section 521 rental assistance and/or HUD section 8.
        Question. Does this mean your proposal to use the 538 program to
    rehabilitate the 515 program will be limited only to projects that have
    no rental subsidy, and therefore, not reaching the very-low income
    projects?
        Answer. While the section 538 projects are not eligible for new
    rental assistance, many projects do have HUD section 8 vouchers. As we
    explore how a section 538 loan can be used with a section 515 project
    rehabilitation, the section 515 project may have existing rental
    assistance. Therefore it is possible that some rehabilitated section
    515 projects with section 538 loans may have rental assistance. We will
    need to explore possible regulation or handbook changes to be able to
    successfully couple the two programs in a revitalization scenario, but
    believe this is clearly the right direction.
        Question. Will you use the 538 program to essentially refinance the
    515 projects?
        Answer. The section 538 program is a new construction program and a
    mechanism to rehabilitate section 515 projects. In addition, to section
    515 repair and rehabilitation authority in 2005 of $53 million, and
    $8.8 million in section 533 (Housing Preservation Grants), applicants
    who desire to purchase section 515 projects and repair them may apply
    for section 538 funds. Because of rental assistance and other
    considerations, refinancing is not always in the best interest of the
    borrower or tenants. We do not expect to see wholesale use of section
    538 for refinancing under current circumstances.
        Question. If so, how will this affect the low and very low-income
    residents and the project rent structure?
        Answer. Full refinancing is not anticipated as a likely scenario.
        Question. What can you realistically accomplish with the 538
    program with the 9 percent tax credit for the rehabilitation of the 515
    program in fiscal year 2006?
        Answer. The Multifamily Revitalization Initiative anticipates that
    revitalization will occur over an 8-10 year schedule, with the majority
    of major renovations occurring after 2008. Rehabilitation funding with
    the section 538 program will be developed as an option in the meantime.
        Question. What percentage of 538 loans approved to date have
    received a 9 percent tax credit?
        Answer. Approximately 80 percent of the section 538 projects have
    received 9 percent tax credits.
        Question. Do you believe the 515 and 538 programs serve the same
    income groups?
        Answer. While the section 515 projects have a higher percentage of
    very low-income tenants, they also use rental assistance. The section
    538 projects have very low-income tenants also, just not to the same
    percentage of tenants as the section 515 projects. A primary reason for
    this is that the section 538 projects are prohibited from having rental
    assistance; therefore, the section 538 projects in order to survive
    must attract low-income tenants as well. Additionally, because many
    section 538 projects have tax credits, those tax credits require that a
    high percent of the units be rented to very low-income tenants, thus
    requiring the owners to address the housing needs of the very low
    income families.
        Question. Please provide a side-by-side comparison of some
    hypothetical 538 and 515 projects residing in the same communities
    serving the same very-low-income residents. In doing so, provide the
    rent structure, required reserve accounts, management and operational
    expenses, and all Federal, State and other subsidies and/or grant money
    including tax credits.
        Answer. These are two properties that were developed at the same
    time on a 4 acre tract in Arkansas. Driveways and property entrances
    are shared. Both were constructed in 2003. The rent is higher in the
    section 515 project prior to application of rental assistance, and this
    is primarily a factor of 9 percent tax credits providing equity in the
    section 538 product.
        [The information follows:]
        Section 538 property (Lowell); 40-unit complex garden; style units
    24-1BR, 16-2BR.
        Bank Loan 7.69 percent, 40 year; section 538 quarantee with Int.;
    Credit Rate 5.19 percent; 9 percent LIHTC funds 40 year; and rate 5.19
    percent.
        Section 515 property (Robinson); 24-unit 2 story with elevator; 24-
    1BR with community room & 2 project rooms.
        RD loan 1 percent 50 year amort/30yr bal.; HOME Loan, 1 percent, 50
    year amort/20 year bal.; Loan from applicant 1 percent 50 year amort
    LIHTc (4 Percent).
        Rent Structure $331-1BR, $437-2BR--$440/unit 1-BR (All with R/A)
    $218/unit Average R/A.

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

    ------------------------------------------------------------------------
    Debt Service....................  $54,460 annually..  $35,857 annually
    Reserve Require.................  8,000.............  16,346 annually
    Operating Exp...................  9/unit/month......  16/unit/month
    Utilities.......................  19/unit/month.....  36/unit/month
    Admin...........................  44/unit/month.....  59/unit/month
    Taxes & Ins.....................  31/unit/month \1\.  11/unit/month \1\
                                     ---------------------------------------
          Total Exp.................  103/unit/month....  121/unit/month
                                     ---------------------------------------
    Construction Costs..............  2,752,028.........  1,908,000
    Cost per unit...................  68,800............  79,500
    ------------------------------------------------------------------------
    \1\ Taxes based on land only.

                   RCBS RURAL COOPERATIVE DEVELOPMENT GRANTS

        Question. The Rural Cooperative Development Grants program has
    proven to be very effective in funding co-op development centers that
    provide critical technical assistance to co-ops that are revitalizing
    rural communities across the Nation.
        Given the fact that this program has leveraged millions of dollars
    for rural cooperative development, created hundreds of new jobs and new
    businesses from health care to meat processing plans, has been an
    effective use of Federal money, and is providing grants to far fewer
    centers than are seeking funding, why does the Administration propose a
    17 percent program cut from $6 million to $5 million? Is it not correct
    that the Department is providing grants to far fewer centers than the
    number of centers that seek funding? What steps can USDA take to ensure
    the unique structural and economic advantages of member-owned and
    controlled cooperatives will continue to be supported by USDA and its
    programs? The Administration has reviewed the programs and services
    provided by Cooperative Services at the Rural Business Cooperative
    Services agency. What are the results of the review? Please provide any
    documentation for these results.
        Answer. The $5 million proposal is consistent with the
    Administration's 2005 budget request. While we agree that the program
    has been successful in developing new business enterprises and creating
    jobs in rural America, the success of the program is intricately tied
    to the success of the individual centers themselves. Since this is a
    competitive grant program, a truly successful center leverages Rural
    Development funding with funding from a variety of other sources and
    must be able to sustain itself during years when it does not
    successfully compete in this program. Several of the centers funded in
    the past were not able to remain viable when funding for even a single
    year was lost. Therefore, we believe that the $5 million appropriation
    requested provides sufficient leveraging and encourages centers to seek
    alternative funding sources that will only serve to enhance their
    continued sustainability.
        In 2003, the Rural Community Development Grants program received 44
    applications requesting $12.7 million. Twenty-one applications were
    funded for a total of $6.3 million. In 2004, 54 applications requested
    $13.7 million. Twenty-four applications were funded for a total of $6.5
    million.
        Rural Development offers many loan and grant programs for which
    cooperatives are eligible. Examples include the Business and Industry
    Guaranteed Loan program, the rural Electric and Telecommunications
    programs, the Broadband Loan program, the Community Connect Broadband
    program, the Distance Learning and Telemedicine program, and the Value-
    Added Producer Grant program. Cooperatives are also eligible to receive
    technical assistance from recipients of Rural Development programs such
    as the Rural Cooperative Development Program and the Rural Business
    Enterprise Grant Program. Rural Development staff is also available in
    the national office and in state offices to provide technical
    assistance such as conducting feasibility studies, developing business
    plans, and providing education to groups wishing to form cooperatives
    as well as existing cooperatives. Finally, the Cooperative Services
    program area of Rural Development conducts research into cooperative
    issues and publishes its findings, which are available to the public
    free of charge.
        The Administration contracted for an outside program review of
    Cooperative Services. The review was to identify improvements or
    changes in the Cooperative Services programs to better assist today's
    rural cooperatives, opportunities for leveraging the present CS
    programs and capacity to support a broader range of cooperative
    strategies and approaches to building economic vitality in rural areas,
    and new ways of generating capital for cooperative organizations. Rural
    Development just received the independent contractor's report and the
    recommendations and conclusions are under initial review and analysis.

                           RUS GUARANTEED UNDEWRITING

        Question. The Farm Security and Rural Investment Act of 2002
    included a new program--Guarantees for Bonds and Notes Issued for Rural
    Electrification or Telephone Purposes--to provide private sector
    funding for the Department's Rural Economic Development Loan and Grant
    (REDLG) program.
        The REDLG program provides zero-interest loans and grants for
    projects such as business expansion and start-up, community facilities,
    schools and hospitals, emergency vehicles and essential community
    infrastructure projects in some of the most rural communities in
    America. According to USDA statistics, in Wisconsin alone, REDLG has
    invested over $13 million in 60 projects while leveraging an additional
    $63 million in private capital and creating nearly 2,000 jobs.
        At the direction of this Committee, the Department issued a final
    regulation for this REDLG enhancement in October of 2004--nearly 2 and
    a half years after the program was signed into law by the President.
    While this is a step in the right direction, it did not happen in time
    for USDA to utilize the $1 billion program level that this Committee
    provided in the fiscal year 2004 bill. This was the second year in a
    row that USDA failed to utilize the program authority provided by
    Congress.
        Apparently, USDA still has not provided a single guarantee to date
    under this new program. Due to this lack of implementation, no private
    funding has flowed into REDLG activities. This represents a substantial
    loss of investment in rural communities over the past 2 years.
        Funds for rural development activities are becoming increasingly
    scarce.
        In view of current budget constraints, why has USDA not moved in a
    more expeditious manner to implement a program that actually provides
    private funding for Federal rural development efforts--at no cost to
    the taxpayers?
        Answer. There is approximately $100 million in the Rural Economic
    Development Loan and Grant (REDLG) program account presently to fund
    these economic and community projects. This section of the Farm Bill of
    2002 is a very complex financial transaction and it has taken longer
    than anticipated to implement. The main reason has been due to our
    desire to protect the interest of the taxpayers while simultaneously
    ensuring that the maximum amount of funds will be available for the
    REDLG program. The Rural Utilities Service, the Federal Financing Bank
    and a potential borrower have been negotiating the details of a
    guarantee under this program. Last year only $4 million was used from
    the REDLG account.
        Question. It is very important to this Committee that this program
    not only be implemented, but that implementation occurs in an
    expeditious manner to ensure that the fiscal year 2005 program levels
    are not lost in the same manner as occurred with the fiscal year 2004
    and fiscal year 2003 appropriations.
        Is it the intention of this Administration to follow the law as set
    forth in the 2002 Farm Bill?
        Answer. Yes, it is the intention of this Administration to follow
    the law as set forth in the 2002 Farm Bill.
        Question. Does USDA expect to utilize the funds that were
    appropriated by the Committee in the fiscal year 2005 bill?
        Answer. USDA expects to utilize the funds that were appropriated in
    fiscal year 2005.
        Question. When exactly can we expect this program to be fully
    implemented?
        Answer. The details have been agreed to and implementation is
    expected to begin in June 2005.

                    RURAL UTILITIES SERVICE BROADBAND LOANS

        Question. Rural Development and the Rural Utility Service suggest
    that the broadband loan program is best utilized for ``residential
    service.'' Congress, nevertheless, views this program not only as a
    means to provide residential service, but as a tool for economic
    development, stating in Senate Report 107-117, ``The availability of
    this [broadband] service is crucial for both economic development and
    to provide a service that a growing number of Americans are starting to
    view as essential.''
        Are you approving broadband loans outside residential services to
    include economic development activity?
        Answer. When a broadband loan is approved it covers the entire
    proposed service territory including all residents and businesses in
    that service territory. We strongly encourage that the broadband
    service be made available to everyone in the area recognizing that any
    economic development in the proposed service territory can actually
    increase the feasibility of the project and create new customers for
    the business plan. We see broadband as a tremendous economic growth
    tool for rural America that can create new jobs in today's economy.
        Broadband loans are limited by the following requirement: ``RUS
    will not make a broadband loan under this part to provide broadband
    service in an area receiving local exchange telephone service from an
    RUS telecommunications borrower to any other entity other than the
    incumbent telecommunications borrower. . . .''
        Question. While I realize your concern about creating competition
    between potential RUS loan recipients serving one area, can you see a
    situation where you have a current broadband borrower that does not
    want to expand and provide service for business purposes in their
    current service area while another entity wants to provide this service
    using a separate customer base, a separate business objective, and a
    separate economic objective?
        Answer. If a company is currently borrowing funds from RUS and has
    no plans to provide broadband service in a specific area, then RUS will
    consider making a loan to another entity to provide the broadband
    service. Although RUS has not approved a loan of this nature to date,
    we are constantly fielding questions about going into an existing
    borrower's service territory. We request that a short explanation of
    the proposal be prepared for our consideration before an application is
    prepared. With the goal to get broadband everywhere, it is highly
    likely that RUS will eventually approve loans for the same area to
    different entities. Entity ``A'' may only be providing voice service
    and the loan to Entity ``B'' could be to provide the broadband service.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                     RENEWABLE ENERGY OF THE 2002 FARM BILL

        Question. My first question about Section 9006, Renewable Energy
    Projects and Energy Efficiency Improvements, concerns the timing of the
    fiscal year 2005 program implementation. On March 28, 2005, the
    Department announced the availability of $11.4 million in grants under
    the Section 9006 program, with an application deadline of June 28. The
    Department reserved the balance of the Section 9006 funding for a not-
    yet-announced loan guarantee program. The Department committed to
    releasing the loan guarantee rules later this spring. According to the
    Department, any funds for loan guarantees not used by August 31, 2005,
    will be made available for grants.
        I am concerned that the Department, having reserved 50 percent of
    the nearly $23 million in funding for an as-yet-announced loan
    guarantee program, will not have sufficient time to make the unused
    loan guarantee money available for grants this year. Last year's
    grants-only program was well-oversubscribed, and I expect the program
    to be even more popular this year.
        Will you commit to me that the Department will make all of the
    unused loan guarantee money available for additional grants this year,
    and obligate those additional grants by September 30, 2005? Otherwise,
    the Department risks leaving millions of dollars of unused money on the
    table that could have gone for worthwhile projects in Iowa and around
    the country.
        Answer. The agency anticipates publishing a final rule for the
    section 9006 program in late June or early July of 2005. The rule will
    implement the guaranteed loan program authorized by the 2002 Farm Bill.
        The agency plans to provide both grants and loan guarantees during
    fiscal year 2005. In order for the public to be able to take advantage
    of guaranteed loans in 2005, it was necessary to announce the
    availability of the set aside funds in the March 28, 2005, grant
    program Notice of Funds Availability (NOFA).
        USDA will evaluate all grant applications received by the deadline
    published in the NOFA. Grants will be awarded to all qualified
    applicants, or until the initial phase of funding is exhausted,
    whichever occurs first. Guaranteed loan applications received by the
    deadline for that part of the section 9006 program will be evaluated
    and guarantees will be provided for all qualified applicants, or until
    funds are exhausted, whichever occurs first. As the NOFA indicates, any
    guaranteed loan funds not obligated by August 31, 2005, will be pooled
    and made available to fund any remaining qualified grant applications.
        We fully expect to complete loan and grant awards to qualified
    applicants by September 30, 2005.
        My second question involves the scope of the final rules for the
    Section 9006 program. Section 9006 requires the Department to offer
    grants, loan guarantees, and direct loans to eligible applicants.
    Unlike loan guarantees, direct loans are a dedicated source of capital
    for clean energy projects, and they are less cumbersome for applicants
    to obtain. Direct loans also are often more attractive for smaller but
    equally deserving clean energy projects, since banks are unlikely to
    issue loan guarantees for these small projects.
        Question. Considering the clear statutory requirement for direct
    loans, and their multiple benefits, will the Department include a
    direct loan component in the final section 9006 program rules that you
    have said will be issued later this summer? If not, why not?
        Answer. The final rule must be within the scope of the proposed
    rule that USDA published last year, which did not contain detailed
    provisions for a direct loan program. Moreover, the Notice of Funding
    Availability (NOFA) that USDA published earlier this year does not
    provide for direct loans in fiscal year 2005. However, if USDA
    determines that funds are available for direct loans in future years,
    it can implement a direct loan program by including such provisions in
    a future NOFA or by issuing regulations.

                       RURAL BUSINESS COOPERATIVE SERVICE

        Question. It is my understanding that an advisory committee was
    formed with outside experts to make recommendations on the mission of
    the Rural Business Cooperative Service and specifically regarding
    cooperative models and activities. I am concerned whether this advisory
    committee operated in an open fashion in order to allow interested
    groups and individuals to participate or even to have knowledge of any
    proposed changes to existing cooperative models and activities.
        Under what authority was the advisory committee constituted? Were
    these meetings advertised in a public manner in accordance with the
    Federal Advisory Committee Act? What were the findings, conclusions and
    recommendations of the advisory committee? Are the advisory committee's
    findings, conclusions and recommendations contained in a document? Is
    that document public? Please promptly provide the document to the
    committee. Who at the Department initiated and administered this
    advisory committee process, and who were the actual members of this
    advisory committee? What is the current status of the advisory
    committee?
        Answer. Rural Development contracted for an outside program review
    of Cooperative Services. An advisory committee was not formed. The
    review was to identify improvements or changes in the Cooperative
    Services programs to better assist today's rural cooperatives,
    opportunities for leveraging the present Cooperative Services programs
    and capacity to support a broader range of cooperative strategies and
    approaches to building economic vitality in rural areas, and new ways
    of generating capital for cooperative organizations. Rural Development
    just received the independent contractor's report and the
    recommendations and conclusions are under initial review and analysis.
                                     ______

                      Questions Submitted to Joseph J. Jen

                Questions Submitted by Senator Robert F. Bennett

                           BASIC SCIENTIFIC RESEARCH

        Question. What do you believe the appropriate role of USDA is in
    supporting basic scientific research at the land grant colleges and
    universities?
        Answer. USDA, through CSREES, is now and should support land-grant
    university efforts in all aspects of research relevant to the
    advancement of the food and agricultural sciences. New knowledge and
    the technological advancements to which it contributes will always be
    necessary to maintain an economically viable and environmentally sound
    food and fiber industry for the United States.
        Question. Do you believe that basic scientific research will be
    able to receive funding through competitive awards?
        Answer. The highly productive basic scientific enterprise that has
    developed in the United States in the years following World War II has
    been built on sound systems of competitive awards by agencies of the
    United States government. The USDA/CSREES, through its competitively
    awarded grants programs such as the National Research Initiative, has
    been the major supporter of basic scientific research in fields
    relevant to food and agriculture. The success of this program and its
    promise for the future are the reasons for its strong support by
    Congress, the Administration, and the scientific community.

                                 FORMULA FUNDS

        Question. The land grant colleges and universities are not
    supportive of the proposed cuts to the formula funds.
      --Other than preferring more competitively awarded research, what
            does USDA believe is wrong with the current funding mechanisms?
        Answer. The commitment to improving the overall quality of Federal
    research led to the fiscal year 2006 budget redirection of funds from
    formula research programs to competitive programs. Moving from formula-
    based to competitive funding changes only the mechanism by which
    science is supported, not the goals or objectives of the work. The
    emphasis on competitive programs in the President's budget is
    consistent with views held beyond the Administration. Within the last
    few years Congress has directed USDA to support studies looking at its
    research programs. The reports from these studies recommend increasing
    the relative, as well as absolute, level of funding to support
    competitive research. In addition, the State Agricultural Experiment
    Station Competitive Grants Program proposed in the President's budget
    will provide a source of funding for functions currently supported by
    formula funds.

                               MISCONDUCT POLICY

        Question. In a recent report, the USDA Inspector General says that
    the Cooperative State Research, Education, and Extension Service does
    not have a Federal Research Misconduct Policy, which is required of
    Federal agencies, and that the Agricultural Research Service has such a
    policy but it is not in compliance with Federal standards.
        What are your plans to bring the agency in compliance?
        Answer. The Office of the Undersecretary for Research, Education,
    and Economics will serve as the centralized body for research
    misconduct on behalf of the Department. By June 30, 2005 a Federal
    Register notice will be published announcing the mission area's
    research misconduct role and accepting the Office of Science and
    Technology Policy (OSTP) definition of research misconduct as the USDA
    definition. The Cooperative State Research, Education, and Extension
    Service (CSREES) will take the lead on preparation and publication of
    the Federal Register notice. Each USDA agency will be required to
    develop policies and procedures compliant with the OSTP Federal
    Research Misconduct Guidelines, or if more appropriate, to execute a
    Memorandum of Understanding with another Departmental agency to act on
    their behalf with respect to research misconduct. Agency policies are
    to be completed no later than 9 months following publication of the
    Federal Register notice noted above. CSREES will refine and document
    its research misconduct policy. This will be reviewed by the Office of
    General Counsel for OSTP compliance and subsequently published in the
    Federal Register and on the agency's website.
        The Agricultural Research Service is working with Department
    officials to bring its Federal Research Misconduct Policy into
    compliance.

                     STATE AGRICULTURAL EXPERIMENT STATION

        Question. How will the proposed State Agricultural Experiment
    Station competitive grants program work?
        Answer. A CSREES working group of national program leaders has been
    charged with the task of developing a preliminary design for the new
    competitive grants program for the State Agricultural Experiment
    Stations (SAES). Our initial planning for the SAES program emphasizes
    broad national issues which are manifested in a wide range of regional
    and local research problems, including regional pest management,
    marketing and other farm management and local economic issues;
    ecosystem management; and new uses and products. Grants may also
    emphasize multi-institutional planning and coordination to take
    advantage of system-wide capacity in areas such as plant and animal
    disease and international markets, and sustaining capacity to assure
    rapid response to problems in agrosecurity and food safety.
        Question. How will the funding be allocated?
        Answer. Funding for the SAES program will be competitively awarded.
        Question. Who will review the grant submissions?
        Answer. Proposals will be reviewed by ad-hoc reviewers (reviewers
    who do not meet in a formal panel setting) and/or peer panel reviewers.
        Question. Who will make the award decisions?
        Answer. The ad-hoc reviewers and/or peer panel reviewers will
    consist of experts in the food and agricultural sciences who will
    recommend to CSREES projects for award based upon established
    evaluation criteria.
                                     ______

                   Question Submitted by Senator Conrad Burns

                           HATCH ACT/MCINTIRE-STENNIS

        Question. In Montana, our colleges and universities are engaged in
    important and high-quality research that yields significant benefits
    for Montana agriculture. Yet the President's budget proposes to slash
    Hatch Act and McIntire-Stennis funding. I appreciate the desire to
    shift funds into competitive grants, but our universities rely on this
    funding to sustain long-term research programs.
      --Competitive grants are important, but shouldn't they be part of a
            balanced portfolio of Federal investment in agriculture and
            forestry research?
        Answer. Moving from formula-based to competitive funding changes
    only the mechanism by which science is supported, not the goals or
    objectives of the work. Competitive programs can be designed to build
    and sustain research capacity; assure that research contributes to
    teaching and extension programs; link strengths and unique expertise
    across institutions; and address local and regional issues which
    collectively secure the national agricultural system. In addition, with
    full indirect cost recovery as part of competitive funding,
    institutions can maintain and continuously improve the infrastructure
    needed to support modern science, as well as support specialized
    undergraduate, graduate, and postgraduate training in the agricultural
    sciences. Also, the State Agricultural Experiment Station Competitive
    Grants Program proposed in the President's budget will provide a source
    of funding for functions currently supported by formula funds.
                                     ______

                   Questions Submitted by Senator Larry Craig

        Question. The U.S. dry edible bean industry has been working with
    NASS to establish parameters so that a national dry bean stocks report
    can be implemented.
        Please describe how such a survey and reporting would be
    accomplished, including the details of the parameters of such
    reporting.
        Answer. The survey would be a census of all off-farm dry bean
    storage facilities in eighteen States. Approximately 3,200 storage
    facilities would be contacted during each survey period. The survey
    would be conducted in June and December. Reporting would be by mail,
    phone, and electronic data reporting. The initial survey would also
    include personal interviews to help answer any questions the respondent
    might have about the program.
        Question. What do you estimate the initial cost to establish, and
    the ongoing annual costs for, a national dry bean stocks report to be,
    assuming the parameters you outline in the response to the above
    question?
        Answer. NASS' cost estimate for the first year is $650,000. The
    projected cost for subsequent years is $550,000 per year.
        Question. Will USDA make establishing a national dry bean stocks
    report a priority and include its cost in the fiscal year 2007 budget
    request to the Congress?
        Answer. A proposal for instituting a national dry bean stocks
    report will be seriously evaluated by USDA during the budget process
    when establishing priorities among the many emerging needs requested of
    the Department.
        Question. If Congress provides sufficient funding to establish a
    national dry beans stocks report in the fiscal year 2006 USDA
    appropriation, when would NASS be able to start such reporting?
        Answer. NASS would be able to start reporting in June 2006. The
    following report would come out in January 2007.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                       ECONOMIC RESEARCH SERVICE REPORTS

        Question. Dr. Jen, I would like to compliment you and the employees
    of the Economic Research Service for the good work they do. From their
    Amber Waves magazine to other shorter reports that ERS publishes, this
    Agency provides very helpful and timely information in its
    publications.
        How are ERS publications made available, and how does USDA work to
    make sure the general public is aware of their existence?
        Answer. ERS develops and disseminates a broad range of economic,
    social scientific, and statistical information to the public. The
    agency publishes economic information and research results on the web
    and in a variety of agency-published research reports, market analyses
    and outlook reports, articles published in ERS periodicals and articles
    published in professional journals. Our research is available to the
    public in print (which may require a small fee) and online (without
    charge).
        ERS distributes this information through an array of academic,
    policy-, and public-oriented outlets. All ERS publications (including
    Amber Waves) are distributed to (and by) the Government Printing Office
    (GPO), the National Technical Information Center (NTIS), GPO Depository
    Libraries, and the 1890 Land Grant Universities. Commodity Outlook
    reports are also distributed to Cornell University's Mann Library
    (USDA's economics and statistics system). Many publications are
    provided to university Agricultural Economics departments, the Social
    Science Research Network (SSRN), and other targeted distributions.
        The ERS website (www.ers.usda.gov) provides instant access to ERS
    publications, economic and statistical indicators, and datasets. In
    fact, ERS' website includes an increasingly comprehensive body of
    materials, covering the equivalent of 6,000 200-page books covering:
      --Five research emphasis areas that reflect the agency's strategic
            goals and research program
      --Over 90 briefing rooms offering in-depth syntheses of ERS research
            on important economic issues
      --Twenty-two key topic areas populated with data, publications, and
            other products
      --Access to around 9,000 datasets and a range of data products
            available in different formats, including online databases,
            spreadsheets, and interactive web files and mapping
            applications
      --Over 1,400 publications, including commodity outlook newsletters
      --An ``About ERS'' section pointing to subject specialists, job
            listings, and other services
      --A newsroom containing concise overviews of key issues, research
            findings, and analysis
      --Amber Waves magazine, including web-exclusive feature articles,
            covering the economics of food, farming, natural resources, and
            rural America
      --A calendar of upcoming releases
      --A subscription-based electronic notification service that supplies
            e-mail alerts on newly released or updated products, covering
            50 different topic areas and going to 22,000 subscribers.
        In February of 2005, the website attracted over 320,000 visitors,
    and over the past 4 years site usage has increased 324 percent.
        When new research publications and products become available, we
    send e-mail notices, postcard notices, report summaries, and sometimes
    printed copies of new reports to customers who have expressed interest
    in specific ERS topics by registering via the Internet from a
    designated page on our website. About 22,000 ERS customers have signed
    up for e-mail notifications and about 2,500 have signed up for printed
    material. The overlap between the two lists is about 300.
        Oral briefings, written staff analyses, and congressionally
    mandated studies are delivered directly to executive branch
    policymakers and program administrators. We keep the media and
    Congressional staff informed of new ERS material via our monthly media
    newsletter, DatelinERS, which is a monthly two-page newsletter
    (available in both printed and electronic format) announcing recently
    released ERS publications, data products, and other web resources. We
    also keep our website homepage and newsroom up-to-date, featuring the
    latest research and analysis available. We help educate the media about
    what's available on our website each time they call us for information.
    They, in turn, write stories that the general public reads.
        We also exhibit at various conferences throughout the year,
    educating the researchers, industry professionals, and the general
    public about what we do. We bring publications and demonstrate the
    website at these events.

                                ARS TERMINATIONS

        Question. The President's budget proposes to eliminate more than
    $200 million in ARS research activities that Congress has determined to
    be of high priority. These proposed terminations include work that has
    been ongoing for 4 or 5 years.
        How does USDA expect Federal employee morale to remain high given
    these proposals?
        Answer. Research managers have to confront morale issue on a daily
    basis and from a variety of sources. While proposals to not continue
    funding for these projects have a negative impact on the employees
    affected, ARS must retain the flexibility to proposed reallocations of
    its resources to meet new challenges that affect the Nation.
        Question. What effect is it having on recruitment?
        Answer. We have advised all potential research candidates of the
    proposed terminations.

                CSREES CUTS IN FORMULA FUNDED RESEARCH PROGRAMS

        Question. The President's budget proposes to cut in half or
    eliminate formula-based funding to land grant universities across the
    country for research related to general agriculture, forestry, and
    animal health. These funds have helped to develop, and continue to
    maintain, a strong cooperative relationship between USDA and the states
    to share in research challenges and outcomes. Such drastic cuts are
    very troubling and shake the foundation of that once-strong
    partnership.
        I strongly support competitive research, such as the National
    Research Initiative, but it is important to note that the formula-based
    funds help state universities, such as the University of Wisconsin,
    respond rapidly to sudden problems.
        A few years ago, the soybean aphid was discovered in Wisconsin, and
    was beginning to spread to neighboring states. Within 6 weeks, the
    University of Wisconsin, using formula-based Hatch Act funds, was able
    to set up a multi-state working group that was able to research the
    problem, determine methods of control, and get information to local
    farmers on what they could do to protect against losses. If those
    researchers had only competitive or special research grants for
    problems like this, the ability to respond rapidly would be lost. And
    that is just one example. Over the past few weeks, there have been
    reports of an invasive pest that has appeared in the Mid South that
    affects rice production. States in that region were able to respond
    with formula funds in much the same way we were able to deal with the
    soybean aphid. Soybean rust will be another example. To drastically cut
    or eliminate these funds is an indication the President does not
    realize the importance of these funds.
      --How do you propose to work with state research institutions on
            problems that arise suddenly if you have greatly reduced or
            eliminated the source of Federal funds they could use for that
            purpose?
        Answer. The fiscal year 2006 budget proposes the new $75 million
    State Agricultural Experiment Stations Competitive Grants Program
    focused on regional, state and local research needs. Our initial
    planning for this program emphasizes broad national issues which are
    manifest in a wide range of regional and local research problems.
    Grants also may emphasize multi-institutional planning and coordination
    to take advantage of system-wide capacity in areas such as plant and
    animal diseases and international markets, and sustaining capacity to
    assure rapid response to problems in agrosecurity such as soybean rust.
    This program will provide a source of funding for functions currently
    supported by formula funds.
        Question. If you shift Federal resources from formula-based funds
    to competitive-based programs, how do you intend to help research
    institutions that still need to build their capabilities in order to
    fairly compete for Federal funding?
        Answer. Moving from formula-based to competitive funding changes
    only the mechanism by which science is supported, not the goals or
    objectives of the work. Competitive programs can be designed to build
    and sustain research capacity; assure that research contributes to
    teaching and extension programs; link strengths and unique or limited
    expertise across institutions; and address local and regional issues
    which collectively secure the national agricultural system. In
    addition, with full indirect cost recovery as part of competitive
    funding, institutions can maintain and continuously improve the
    infrastructure needed to support modern science, as well as support
    specialized undergraduate, graduate, and postgraduate training in the
    agricultural sciences.
        Question. Won't there be definite winners and losers in your plan?
        Answer. As in all plans that change the way in which funds are
    distributed, there will be winners and losers. Smaller institutions
    including those located in the territories will be impacted by the cut
    in formulas. Institutions who are currently eligible to receive
    McIntire-Stennis and Animal Health and Disease Research formula funds
    but who are not land grant institutions, will not be eligible to
    compete for funds under the new State Agricultural Experiment Stations
    Competitive Grants program. It is assumed that institutions who in the
    past have been successful in competing for competitive funds will
    continue to do so in the future. While the amount of formula funds
    available to institutions in fiscal year 2006 will be reduced or
    eliminated, it will ultimately be up to each institution to determine
    how to allocate funds available from Federal and non-Federal sources to
    continue research projects or support personnel.

                      CLASSICAL PLANT AND ANIMAL BREEDING

        Question. Dr. Jen, the Senate fiscal year 2005 report included
    language under CSREES encouraging the Department, especially in the
    establishment of priorities within the National Research Initiative, to
    give consideration to research needs related to classical plant and
    animal breeding.
        What, if any, steps have the Department taken in response to this
    language? Have any changes been made in the NRI priority process to
    reflect these concerns?
        Answer. For classical plant breeding, the NRI will be offering
    funding opportunities for research, education, and training in a number
    of plant programs for fiscal year 2006. In the current NRI plant
    programs, support is provided for the development of techniques and
    tools, such as marker-assisted selection and quantitative trait locus
    analysis, which can be used in plant breeding. In the current NRI
    animal programs, support is provided for research in areas such as
    genetic or breed comparisons, identification of genetic markers,
    including quantitative trait loci and economic trait loci, marker-
    assisted selection, and chromosome identification, which can be used in
    classical animal breeding.
        The NRI sets program priorities based on input from stakeholder
    groups which include commodity groups, producers, the scientific
    community (including scientific societies) and other interested
    parties. The National Program Leaders have continuing, ongoing
    interactions and discussions with stakeholders through workshops and
    conferences, written input and reports from stakeholders, as well as
    input via telephone and e-mail. Stakeholder input is vital to setting
    the priorities and directions of the NRI programs.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                  PRESIDENT'S FISCAL YEAR 2006 BUDGET PROPOSAL

        Question. The President's fiscal year 2006 budget proposes to move
    the competitive, integrated grants programs (Water Quality, Food
    Safety, several IPM-related programs, Methyl Bromide, and Organic
    Transitions) currently managed under Section 406 of the 1998
    Agriculture Research, Extension and Education Reform Act (AREERA) to
    the National Research Initiative.
        Does this proposal indicate a shift in research, education and
    extension priorities? If so, why are the priorities changing and which
    current Section 406 programs will see increases or decreases under the
    new proposal. If not, what are the specific, detailed plans for
    integrating the existing 406 programs within the NRI?
        Answer. With the consolidation of programs, CSREES does not plan to
    redirect priorities--all emphasis areas will remain in the portfolio of
    programs. The primary purpose for moving integrated program activities
    to the National Research Initiative Competitive Grants Program (NRI)
    and to the new state Agricultural Experiment Stations Competitive
    Grants Program (SAES) is to streamline the presentation of the budget,
    thus reducing the appearance of redundant programs.
        Question. Will each current 406 program be a separate NRI national
    program? Will their funding allocation be increased, decreased or
    remain the same compared to fiscal year 2005 Section 406 levels? Does
    the agency expect that participation of Extension in the integrated
    programs will increase, decrease, or remain unchanged if this proposal
    were to be approved?
        Answer. The fiscal year 2006 Budget proposes that Section 406
    activities will be funded at $41.9 million, but the grants will be
    administered through the NRI or the new SAES competitive grants
    program. This will allow greater flexibility and responsiveness to
    changing needs in these targeted areas. In addition, the fiscal year
    2006 Budget also proposes an increase from 20 percent to 30 percent of
    funds that may be used to support competitive integrated research,
    education, and extension programs.
        Question. With respect to the Organic Transitions program, would
    the proposal retain a specific organic national program within the NRI;
    and would the farm bill's Organic Farming REE program, currently
    jointly administered with Organic Transitions, be administered
    separately?
        Answer. In fiscal year 2006, it is proposed that research programs
    focused on activities such as organic transition could be supported not
    only with NRI funds but also in the new SAES program. As we move
    forward in planning for both the NRI and the new SAES competitive
    grants program, we will insure coordination with the Organic
    Agriculture Research and Education Initiative to maximize the
    effectiveness of the funds available for award.
        Question. Finally, please provide a detailed accounting of the
    number and type of stakeholder groups who were involved in the
    development of the proposal to transfer these programs from Section 406
    to the NRI, including specific meeting dates and participants.
        Answer. While we are prohibited from sharing budget details with
    outside groups during the budget development process prior to release
    of the President's budget proposal, we have and will continue to
    consult widely with universities, stakeholders, and customers to insure
    that CSREES research dollars are utilized in the most effective and
    efficient way to address critical research issues. In the last 6 weeks,
    the CSREES Administrator has met with over 1,000 direct clients and
    customers across the country to discuss the fiscal year 2006 budget and
    gain input from customers and stakeholders as we continue program
    planning. In addition, an agency team is developing a proposal for the
    proposed SAES program which will be available for public comment.
                                     ______

                        Questions Submitted to J.B. Penn

                Questions Submitted by Senator Robert F. Bennett

                   FOREIGN AGRICULTURAL SERVICE (FAS) REVIEW

        Question. I understand FAS is currently undertaking an
    organizational review. What is the status of that review?
        Answer. FAS has made progress in its organizational review and is
    continuing to re-examine the agency's core mission, goals, and
    resources. Input from the private sector has re-affirmed support for
    FAS' network of overseas offices, specifically to resolve market access
    issues and provide market intelligence for U.S. agricultural producers
    and industry. Internal groups are currently reviewing crosscutting
    strategies and tactics, particularly in the context of FAS' market
    access mission. Ongoing discussions regarding both FAS' mission and
    budget concerns have resulted in some shifts in overseas resources such
    as downsizing in Europe along with limited expansion plans to cover
    developing markets.
        Question. When will final recommendations be released?
        Answer. Internal working groups have developed some initial
    recommendations and more comprehensive recommendations are being
    researched and evaluated. We anticipate this review process will
    culminate in final recommendations being presented to the FAS
    Administrator in the fall of 2005.

                        LIVESTOCK RISK PROGRAM FOR LAMB

        Question. What is the status of the sheep industry's proposed
    Livestock Risk Program for lamb?
        Answer. Unfortunately, details of the proposed Livestock Risk
    Protection (LPR) program for Lamb submission and discussions of the
    proposal with the submitters cannot be disclosed. Submissions under
    section 508(h) (4)(A) of the Federal Crop Insurance Act (Act) must be
    considered to be confidential commercial or financial information
    during the period preceding any decision by the Board.
        Applied Analytics Group (AAG) and the American Sheep Industry
    Association (ASIA) submitted a proposal to include lamb in the LPR
    program in accordance with Section 508(h) of the Act. On October 28,
    2004, the Federal Crop Insurance Corporation (FCIC) Board of Directors
    (Board) voted to send the proposed LRP Lamb Program for external review
    by a panel of five persons experienced as actuaries and in underwriting
    as required by the Act.
        On January 13, 2005, the Board considered the input it received
    from the external reviewers and the Risk Management Agency and
    discussed the responses to such by AAG and ASIA. Based on these
    discussions, the Board agreed to table the proposal for 45 days to
    provide AAG and ASIA time to provide modifications to their LRP lamb
    submission.
        AAG and ASIA met again with the Board on April 28, 2005, to discuss
    issues raised by the external reviewers and RMA and concerns of the
    Board.
        On April 28, 2005, the Board voted unanimously to give notice of
    intent to disapprove the LRP lamb submission.
        The Board is sympathetic to the needs of the sheep industry for a
    viable risk management tool; but, must also assure any proposed program
    complies with all applicable provisions of the Act, the interests of
    producers are adequately protected, premiums rates are actuarially
    appropriate, and that program integrity will be protected.

                                 PUBLIC LAW 480

        Question. The fiscal year 2006 budget proposes transferring $300
    million from the Public Law 480 Title II account to USAID. What effect
    will this have on USDA's role in administering food aid?
        Answer. At this time it is not expected that USDA will have an in-
    depth administrative role with regard to the $300 million; however,
    interagency coordination across all food aid programs will continue.
    USDA will continue to procure the food under Public Law 480 title II.
    USDA's role in procuring commodities funded through the $300 million
    allocated to USAID will depend on whether the commodities are purchased
    in the United States or outside of the United States. If the
    commodities are procured outside of the United States, USDA would not
    be expected to have a role in the procurement of these commodities.
    USAID will be responsible for the budget and the financial management
    of those resources.

                             WEB-BASED APPLICATIONS

        Question. FSA has put emphasis on web-based applications. What
    percentage of producers are utilizing this technology?
        Answer. According to the August 2003 Computer Usage and Ownership
    Report of the National Agricultural Statistics Service, a total of 48
    percent of U.S. farms have internet access. Of the 58 percent of farms
    that have access to a computer, 54 percent own or lease one. Thirty
    percent of farms use a computer for their farm business.
        Question. Do you have benchmarks to track your success?
        Answer. We are tracking internet usage daily for the web-based
    applications we have deployed. FSA is currently receiving approximately
    200,000 external web-site hits monthly. Over 45,000 customers have
    obtained eAuthentication credentials--i.e., electronic signature--to
    conduct business electronically with FSA.
        The major web-based applications that have been deployed include:
      --Web-based Forms.--Since the first forms became available in June
            2002, FSA has been expanding this capability, specifically
            targeting forms that our customers can electronically access,
            sign, and submit on line. FSA has posted over 700 forms to our
            eForms website, with over 100 in Spanish.
      --Electronic Loan Deficiency Payments (eLDP's).--Pre-approved
            producers can access a web-based application and interactively
            file applications for LDP's. The web-based applications will
            accept the LDP transactions, calculate and issue electronic
            payments, and issue electronic notification of the payments to
            the participating producers. The eLDP project was deployed
            nationwide in September 2004. Over $30 million has been
            distributed, and 12,000 applications have processed. Over 7,000
            customers have established eLDP profiles.
      --Electronic Direct and Counter Cyclical Payment Program (eDCP).--The
            eDCP was deployed in October 2004 and enables producers to
            enroll using web-based public access facilities in the new
            system.
      --Electronic Representative (eRep).--Deployed in September 2004, this
            application allows various entities such as partnerships,
            corporations, trusts, and estates, to conduct business with FSA
            electronically.
      --Customer Financial Inquiry Data Mart.--This application provides
            FSA customers access to FSA/CCC payment, receipt, debt, and IRS
            reporting information. Deployed March 2004 in conjunction with
            the USDA Customer Statement.
      --USDA Common Customer Statement.--Deployed March 2004. With linkages
            to FSA's Customer Financial Inquiry Data Mart and Farm Loan
            Customer Status Web Service, allows producers to obtain
            information such as payments and receipts.
      --Farm Business Plan Manager--Equity Manager.--This farm business
            planning and financial/credit analysis tool is being used to
            determine credit worthiness during the life of an FSA farm
            loan. Initial deployment to FSA farm loan employees occurred in
            2004. Access will be expanded to FSA guaranteed lenders in
            2005.
        Question. How are you encouraging producers to take advantage of
    this technology?
        Answer. We are encouraging producers in a number of ways. At
    various farm trade shows we are displaying and demonstrating our new
    applications as well as providing printed brochures and posters. In our
    county offices the print material is also available, and FSA employees
    are promoting these new tools and providing our customers instruction
    on using them. FSA employees are also promoting these tools when
    speaking in different forums across the country. In addition, almost
    every press release, brochure, and poster that FSA produces contains a
    promotional web-site link.
                                     ______

                  Questions Submitted by Senator Conrad Burns

                                   BEEF TRADE

        Question. Resuming beef trade with major foreign markets is a
    priority for me, as it is for many Senators. I know USDA shares that
    priority. However, news reports from some of these countries,
    particularly Japan, indicate that consumer fears about U.S. beef safety
    still exist.
        In addition to your efforts to open the borders, what types of
    things is USDA doing to promote U.S. beef internationally, and reassure
    consumers in major markets that our beef is the safest in the world?
        Answer. The Japanese and Korean governments have specifically asked
    that USDA implement a risk communications plan to help sell any
    agreement between the United States and their respective countries on
    Bovine Spongiform Encephalopathy (BSE). In response, FAS and the U.S.
    Meat Export Federation (USMEF) have produced a joint pre- and post-
    opening risk communications plan that focuses on consumer, media, and
    political beef trade concerns and misperceptions about BSE. Both USDA
    and USMEF have begun to implement and plan activities to communicate
    the proper messages such as editorials, journalist trips to the United
    States, BSE seminars, advertisements, and dissemination of technical
    materials.
        In addition, Dr. Charles Lambert, Deputy Under Secretary for
    Marketing and Regulatory programs, has led a U.S. delegation of experts
    to Tokyo for outreach activities and technical discussions with
    Japanese government officials. Outreach activities include press
    briefings and roundtables with the press, industry, and consumers to
    help convince Japanese that U.S. beef is safe.

                                     SUGAR

        Question. The 1.2 percent marketing assessment for sugar producers
    appears, at first glance, to be not much more than a tax on sugar. If I
    understand correctly, the revenues go directly into the General Fund,
    rather than to an agriculture-related purpose. Can you provide a little
    more background on the rationale for this assessment?
        Answer. The sugar marketing assessment is proposed as part of a
    package that spreads the deficit reduction burden across all farmers
    that benefit from Federal agricultural programs. The deficit reduction
    activities that will affect most agricultural program beneficiaries,
    i.e. reduction in marketing loan gains, tightening payment limitations,
    and the general 5 percent reduction in payments, will not affect sugar
    program beneficiaries because the sugar program does not improve sugar
    beet and sugarcane growers' income by direct payments from the Federal
    Government. The sugar program increases farm income by increasing the
    domestic sugar price by limiting supply through an import tariff-rate
    quota and a domestic marketing quota. There is a nonrecourse sugar loan
    available, but the sugar program is specifically required to manage
    supply to avoid the cost of sugar loan collateral forfeitures. A sugar
    marketing assessment, similar to the current proposal, was included in
    the Omnibus Budget Reconciliation Acts of 1990 and 1993 to spread the
    cost of deficit reduction among all Federal program beneficiaries.

                                 CROP INSURANCE

        Question. Last year, RMA successfully negotiated a new Standard
    Reinsurance Agreement for crop insurance providers, which included some
    reductions in administrative & overhead costs, as well as underwriting
    gains. This year's budget includes further reductions in underwriting
    gains, as well as some modifications to premium subsidies. Crop
    insurance is a critical risk management tool for my producers in
    Montana, and I want to ensure that the program remains strong. Can you
    discuss the Administration's commitment to effective risk management
    tools, and how this year's proposals strengthen crop insurance
    delivery?
        Answer. One of the highlighted goals of the Administration's budget
    is strengthening crop insurance delivery to ensure that farmers have
    adequate yield and price protection. The value of crop insurance
    protection in 2006 will be about $41 billion, representing more than 80
    percent of the Nation's acres planted to principal crops. Despite the
    high level of participation, demand still exists for ad hoc disaster
    assistance due in part to reliance on catastrophic coverage which
    affords the producer only 27.5 percent protection in the event of a
    total loss.
        In continuing the Administration's efforts to more effectively
    budget for and administer disaster assistance programs, the 2006 budget
    includes a proposal to compel producers to purchase more adequate
    coverage by tying the receipt of direct payments or any other Federal
    payment for crops to the purchase of crop insurance.
        Other changes include modifications to the fee for catastrophic
    coverage that is intended to make the program more equitable in its
    treatment of both large and small farms, restructuring premium rates to
    better reflect historical losses, and reduction in delivery costs. The
    combination of changes is expected to save the government approximately
    $140 million per year, beginning in 2007.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                            FSA AGENCY LOAN OFFICERS

        Question. I understand a disproportionately large number of Farm
    Service Agency loan officers will be eligible to retire in the next 2-5
    years. Moreover, we are told it takes at least 2 years of on-the job-
    training before a new loan officer can function at full competence.
    Considering the critical impact these employees have on America's
    farmers and ranchers, this raises some important questions. How many of
    your senior loan officers, in the national office and in the field, are
    eligible to retire?
        Answer. FSA's records indicate that 287, or 17 percent, of the
    agency's loan officers will be eligible to retire in fiscal year 2005.
        Question. How many will be eligible to retire in each of the next 1
    to 5 years?
        Answer. So far, the agency has analyzed the data for the next 3
    fiscal years. The information for those years is as follows:

    ------------------------------------------------------------------------
                                              Number of Loan
                                                 Officers       Percent of
                   Fiscal year                  Eligible to     Total Loan
                                                  Retire         Officers
    ------------------------------------------------------------------------
    2006....................................             345              21
    2007....................................             408              25
    2008....................................             492              30
    ------------------------------------------------------------------------

        Each year's retirement eligibility includes those eligible from the
    previous year, plus those becoming eligible to retire during that year.
        Question. How many do you think will actually leave in fiscal year
    2006?
        Answer. Because each individual's situation is different, it is
    difficult to predict the actual number of retirements in any given
    year. However, given the high workload, the high rate of change in
    program policies and information technology, and similar stress factors
    associated with the farm loan manager position, we expect that a
    substantial percentage of those employees eligible for retirement will
    actually retire.
        Question. What plans are you making in your 2006 budget request to
    prepare your staff to replace those positions?
        Answer. The President's fiscal year 2005 Budget included a request
    for 100 trainee positions to establish a ``pipeline'' of new loan
    officers in anticipation of coming retirements. However, because
    appropriated funds were below the President's request, the agency made
    the difficult decision to forgo filling those positions. Given the
    continued need for fiscal restraint, the fiscal year 2006 President's
    Budget did not include the 100 positions. As part of a comprehensive
    review of agency operations, FSA is studying the best approach to
    ensuring a sufficient, well-trained cadre of farm loan officers.
        Question. If you agree that having adequate and fully competent
    loan officers is necessary for the agency to fulfill its mission, why
    are you not requesting funds to maintain an adequate force of loan
    officers instead of asking for $3,300,000 for new outreach efforts?
        Answer. Adequate and fully competent loan officers are indeed
    necessary for the agency to fulfill its mission. Under an initiative
    known as ``FSA Tomorrow,'' the agency is performing a top-to-bottom
    review of its operations to determine whether its current structure
    best serves present and future requirements. The need to ensure
    adequate staffing of trained loan officers as well as employees in all
    mission-critical occupations will be addressed as part of that review.
        The stakeholder discussions that FSA held in developing its
    strategic plan revealed that outreach to ensure equitable access to
    programs by underserved populations is a critical issue. The agency
    believes that its goal of outstanding customer service cannot be
    realized if it fails to reach many of its potential customers.
    Therefore, even in view of the many difficult choices required in
    carrying out operations while constraining costs, FSA believes that an
    enhanced outreach program is a high priority.
        Question. Where and what population will you target in your
    requested outreach efforts?
        Answer. FSA's outreach efforts will address various populations
    throughout the country that are underserved, particularly in access to
    farm loan programs. As an example, one of FSA's outreach projects is a
    cooperative agreement with the National Tribal Development Association
    located in Montana. The National FSA American Indian Credit Outreach
    Initiative, which has been ongoing for 3 years, is designed to reach
    out to Native Americans on reservations to inform them about FSA farm
    loan programs and to assist them in applying for loans. FSA has other
    cooperative agreements to inform minority producers about FSA programs
    and to encourage their participation. FSA is also reaching out, in
    partnership with other Department of Agriculture agencies, to
    community-based organizations to encourage minority participation in
    FSA loan programs.
        The additional $3,300,000 requested in the President's fiscal year
    2006 Budget will be used to expand FSA's work with its partners and
    customers to increase program participation of underserved customers,
    with special emphasis on socially disadvantaged and/or limited resource
    farmers, women, and members of minority groups such as Native
    Americans, Hispanics, Asian-Pacific Americans, and African Americans.
        Without this requested funding increase, the resources required to
    perform this much-needed work must be taken from FSA's salaries and
    expenses budget, thus placing downward pressure on FSA's hiring
    ceilings.
        Question. Have you ever tested your employees, for example, by
    using third party entities, to see if your loan programs are being
    administered in compliance with Federal statutes including the Equal
    Credit Opportunity Act?
        Answer. To date, third party testers have not been used. The agency
    uses several different compliance review processes to ensure that all
    regulatory requirements are met. FSA program and civil rights staffs
    conduct routine reviews of office operations and loan processing and
    servicing activities. If at any time problems become evident, special
    targeted reviews are conducted as well. The agency maintains a special
    focus on monitoring the processing of loans from minority and female
    applicants; periodic reviews of denied applications must be performed
    by managers, and corrective action taken immediately upon detection of
    problems.
        Question. Would not such tests be an appropriate way to identify
    and address existing problems within your agency while conducting
    additional outreach efforts? Wouldn't this be a cost-effective way to
    deal with overall problems within the agency?
        Answer. Additional compliance testing will not completely solve
    several of FSA's problems with regard to underserved populations. In
    order to apply for farm loans, producers, especially women and
    minorities, must be made aware of the available loan programs. They
    must also, in some cases, be encouraged and assisted by community-based
    organizations and minority-serving educational institutions. Special
    efforts must also be made to communicate with minority producers who
    have special cultural and linguistic needs. While FSA agrees that
    customer service during the loan application and approval process is
    crucial, removing barriers to applying is also essential. FSA is
    currently focusing its outreach effort on overcoming these known
    barriers.

                          FAS FOREIGN OFFICE SECURITY

        Question. The President's budget includes within the FAS salaries
    and expenses account, nearly $3 million for capital security costs in
    overseas locations and an additional $650,000 contribution for the
    Baghdad Embassy. What assurances do you have that FAS location needs
    will be met as are now indicated by the contribution rates you have
    been assigned?
        Answer. The State Department has developed a capital construction
    program to provide adequate and secure space for all agencies overseas.
    The costs of the program are based on a worldwide headcount and not
    tied to specific facilities in specific locations. We will continue to
    work with the State Department to ensure that FAS will be provided with
    adequate space for the numbers of personnel for which it is being
    charged.
        Question. What input have you had with the State Department in
    development of the rates of contributions USDA has been assigned for
    this purpose?
        Answer. After announcing the program, the State Department accepted
    some feedback from other agencies regarding the provision of credit for
    rent currently being paid and charging different rates for different
    types of personnel. Other than making those two changes to the
    calculation of agency contributions, the State Department has not
    adopted any other suggestions. The overall level of the program was
    determined by State, as was the rate of contribution for each employee.
                                     ______

                   Questions Submitted by Senator Tom Harkin

               WTO DECISION ON USDA COMMODITY AND TRADE PROGRAMS

        Question. In the course of crafting the 2002 farm bill, the House
    and Senate Agriculture Committees, with extensive advice from USDA,
    sought to keep the farm bill provisions consistent with our
    international trade obligations. Despite those efforts, last month a
    WTO appeals panel upheld the claims of the government of Brazil, which
    asserted that the U.S. cotton support program and certain other
    programs violate WTO rules. As a result, Congress faces a July 1, 2005
    deadline for modifying the export credit guarantee and Cotton Step 2
    programs in order to come into compliance with that WTO ruling. We will
    also have to address changes in the price-related farm programs by some
    later date. Congress needs the best advice of USDA regarding options
    for changes to the export credit guarantee and cotton step 2 programs
    that would be adequate to satisfy the requirements of the WTO appellate
    panel's decision. When will we receive this advice and guidance?
        Answer. USDA is consulting carefully and extensively with the U.S.
    Trade Representative, industry, and others to craft a response to the
    WTO Appellate Body's decision. We will fully comply with the WTO
    decision. USDA will provide advice and guidance to Congress when we
    have determined how best to comply, taking into account the security of
    our cotton producers, the stability of our farm program, and the
    commercial opportunities and obligations of all who rely on our export
    credit programs, as well as our ambitions in the ongoing Doha WTO
    negotiations.

                     FARM SERVICE AGENCY-STATE ALLOCATIONS

        Question. Earlier this year I received a letter from a constituent
    who was laid off from her temporary position with her county Farm
    Service Agency office. She was informed that because the State agency
    had not received its budget allocation for fiscal year 2005, there was
    not enough money to keep her on staff. Was there a particular problem
    with the State FSA budget allocations this year?
        Answer. FSA's fiscal year 2005 President's budget assumed an
    overall reduction in temporary staff years of 1,067 due to the
    completion of final Farm Bill implementation activities. Although FSA
    was operating under multiple continuing resolutions from October 1,
    2004 through December 8, 2004, temporary ceiling levels and allotments
    were made to all States. The total temporary employee ceiling level for
    Iowa is 70 staff years. The total temporary employee usage through the
    first half of the fiscal year was 36.72 staff years or 52 percent of
    the total ceiling level. FSA provided Iowa with full funding through
    the various continuing resolution periods, and subsequently for the
    full year, in order to ensure the ability of the State to manage its
    workforce in correlation with annual workload needs.
        Question. What actions will FSA take to avoid future problems?
        Answer. FSA complied fully with the requirements of the continuing
    resolutions and issued timely allotments to all States. FSA will
    continue to make every effort in the future to provide timely and
    accurate funding to all States.
        Question. Does the FSA have enough funds to adequately staff local
    offices?
        Answer. FSA completed a thorough review in order to ensure that
    critical mission goals are accomplished within the available resources,
    given that FSA's appropriation was $27.1 million below the requested
    amount.

                    FARM SERVICE AGENCY--BENEFICIAL INTEREST

        Question. For most producers, claiming loan deficiency was a
    relatively routine procedure, but far too many producers encountered
    beneficial interest problems that blocked them from receiving payment.
    I encourage you to provide equitable relief where the loss of
    beneficial interest was inadvertent or unintentional. I also understand
    that FSA is working to combine forms to avoid some of the confusion
    next year and should simplify the process for both producers and FSA
    county office employees. What is the status of equitable relief for
    these producers?
        Answer. The beneficial interest requirement for loan deficiency
    payments is the same as that which exists for commodity loans.
    Beneficial interest is a statutory requirement. Misaction or
    misinformation is determined on a case-by-case basis.
        Question. What is the status of the form revision?
        Answer. FSA is in the process of drafting a new form and
    instructions. We hope to have it available in time for corn harvest.

                   CONSERVATION RESERVE PROGRAM--SWITCHGRASS

        Question. As you mentioned in your comments--we have a challenge
    ahead of us as existing CRP contracts expire. Working with the Chariton
    Valley RC&D, we were able to combine CRP and energy production in an
    innovative project in southern Iowa. I am concerned that the CRP acres
    planted to switchgrass may not receive priority when the owners bid
    those acres for re-enrollment in the CRP. Will the administration
    support the concept of a CRP ``energy reserve'' so we can continue this
    innovative project?
        Answer. In August 2004, USDA asked for public comment on how to
    address the 28 million acres under CRP contracts that will expire
    between 2007 and 2010. USDA received about 5,200 comments, which we are
    reviewing and evaluating.
        As we develop our options on how to address extensions and
    reenrollments, we will take into consideration the role that CRP can
    play as a renewable fuel source. The pilot program in Iowa is a prime
    example of the benefit that CRP can provide to meet some of our energy
    needs in an environmentally sound manner.

                              SUBCOMMITTEE RECESS

        Senator Bennett. Thank you. We have managed to beat the
    clock by 5 minutes for which we are very grateful.
        As I said, all of the prepared material that you brought
    with you will be included in the record, and we will examine
    it. We thank you for your service and your attention to all
    these matters.
        The next hearing will be tomorrow afternoon. We will
    examine food, nutrition, and consumer services, marketing and
    regulatory programs, and food safety.
        Thank you again. The subcommittee is recessed.
        [Whereupon, at 1:43 p.m., Wednesday, April 13, the
    subcommittee was recessed, to reconvene at 2 p.m., Thursday,
    April 14.]

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

                                  ----------

                            THURSDAY, APRIL 14, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:03 p.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett, Burns, and Kohl.

                           DEPARTMENT OF AGRICULTURE

    STATEMENTS OF:
            ERIC M. BOST, UNDER SECRETARY FOR FOOD, NUTRITION, AND CONSUMER
                SERVICES
            WILLIAM T. HAWKS, UNDER SECRETARY FOR MARKETING AND REGULATORY
                PROGRAMS
            DR. MERLE D. PIERSON, ACTING UNDER SECRETARY FOR FOOD SAFETY

                 OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. The subcommittee will come to order.
        This is the third hearing that we have had on the USDA's
    budget request for fiscal 2006. And our witnesses today are Mr.
    Eric Bost, who is the Under Secretary for Food, Nutrition, and
    Consumer Services; Mr. William Hawks, the Under Secretary for
    Marketing and Regulatory Programs; and Dr. Merle Pierson,
    Acting Under Secretary for Food Safety.
        Gentlemen, we welcome you all. We see that Dennis Kaplan,
    your keeper, is here again, as he has been in the past. Mr.
    Kaplan, we appreciate your diligence and willingness to attend
    these.
        This is a very diverse group of activities for the
    Department of Agriculture. Mr. Bost manages the food stamps and
    WIC, a variety of other feeding and nutrition programs. And you
    control roughly half the budget, maybe a little more than half.
    So----
        Mr. Bost. About 62 percent.
        Senator Bennett. Sixty-two percent. All right. So everybody
    has to be very nice to you.
        Mr. Bost. I wish.
        Senator Bennett. You wish. All right.
        Dr. Pierson's principal agency is the Food Safety and
    Inspection Service. So you are concerned with the Canadian
    border and BSE and Avian flu and processing plants and all of
    the rest of that. So you are in the news a lot.
        And then Mr. Hawks manages the Animal and Plant Health
    Inspection Service, the Agricultural Marketing Service, and the
    Grain Inspection, Packers and Stockyards Administration. So
    these agencies foster the marketing of U.S. agricultural
    products. You are the sales arm, I suppose, of this group.
        So we are in the same situation we were yesterday. We have
    the supplemental on the floor. We do not have a vote scheduled
    in the moment, but we are subject to being interrupted. So I
    would hope that each witness would make a short summary so that
    we can proceed to questions as quickly as possible. And of
    course, we do have your complete written statements, and they
    will, indeed, become part of the record.
        Senator Kohl.
        Senator Kohl. Thank you once again, Senator Bennett.
        We are finishing off a busy week. We welcome Mr. Bost, Mr.
    Hawks, and Dr. Pierson, and we thank you for coming today to
    help us finish off this week of agriculture appropriations
    hearings.
        Together, you oversee budgets of more than $60 billion in
    mandatory and discretionary spending, with the vast majority of
    that money going to nutrition assistance programs. The missions
    that you represent--feeding the hungry, making sure the food
    supply in this country is safe, and protecting the health of
    this country's most important plant and animal resources--are
    each very important. And your agencies have received some of
    the rare increases that are to be found in the President's
    budget this year.
        So I congratulate you on pulling that off. Looking at the
    budget overall, it must have been a difficult task to do. This
    does not mean, however, that we don't have concerns and
    questions regarding your budgets. We do, and so we look forward
    to your testimony and look forward to having a chance to ask a
    few questions.
        Thank you very much, Senator Bennett.
        Senator Bennett. Let us go in the order in which you are
    seated across the way, starting with you, Mr. Bost, and then go
    across.

                           STATEMENT OF ERIC M. BOST

        Mr. Bost. Thank you, Mr. Chairman, and good afternoon,
    Senator Kohl.
        For the record, I am Eric Bost, Under Secretary for Food,
    Nutrition, and Consumer Services. You have my written
    statement. So I will be very brief in terms of my opening
    remarks.
        The President's 2006 budget request for the nutrition
    assistance programs is a record high $59 billion and ensures
    that all eligible low-income children, seniors, and families
    and individuals have access to nutrition assistance programs.
    Since I have been Under Secretary, I have focused on three
    major challenges: one, improving access so that all eligibles
    are able to participate in our programs; two, building a
    healthier United States by promoting better diets and a
    healthier lifestyle; and three, improving the accuracy and
    integrity in all of our programs.
        The 2006 request supports anticipated participation and
    costs for food stamps, WIC, and the Child Nutrition Programs
    and provides contingency funds in the amount of $3 billion for
    food stamps and $125 million in WIC.
        In terms of integrity, one of the things that we are very
    pleased with and very proud of, is that the error rate in the
    Food Stamp Program is at 6.63 percent. This is the lowest that
    it has ever been in the history of the Food Stamp Program and a
    25 percent reduction over the course of the last 4 years.
        The $5.5 billion request for the WIC Program would fully
    support the anticipated participation of 8.5 million persons,
    and continues our commitment to ensure that low-income pregnant
    women, infants, and children have access to healthy food,
    nutrition, education, and when necessary, referrals to other
    health and social services.

                              PREPARED STATEMENTS

        In closing, the President's direction and leadership has
    been very clear. The Administration's record funding request
    has priorities to ensure access, maintain and improve
    integrity, and to help Americans live longer, healthier, and
    better lives.
        I would be happy to answer any questions that you may have.
        [The statements follow:]

                       Prepared Statement of Eric M. Bost

        Thank you, Mr. Chairman, and members of the subcommittee for this
    opportunity to present the Administration's fiscal year 2006 budget
    request for USDA's Food, Nutrition, and Consumer Services (FNCS).
        I am here today to discuss with you the President's budget request
    that demonstrates the Administration's unwavering commitment to our
    Nation's 15 nutrition assistance programs--programs that ensure a
    nutrition safety net for the Nation's children, elderly and low-income
    households. I am proud of our accomplishments and proud to work for the
    President who provides clear and continued support for these programs
    that protect our children, elderly and low-income households from
    hunger; improve their nutritional intake; and help to prevent the
    health risks associated with poor nutrition and physical inactivity.
        Three principles have continuously guided our administration of
    these programs: (1) promoting access and awareness of the programs so
    that all eligible persons can make informed decisions about whether to
    participate with dignity and respect; (2) addressing the growing
    epidemic of obesity, with its staggering implications for both National
    health care costs and individual quality of life; and (3) enhancing the
    integrity with which our programs are administered. For these programs
    to be successful, our stewardship of public resources needs to inspire
    the trust and confidence of the American people.
        The President's budget for fiscal year 2006 requests a record level
    of $59 billion dollars in new budget authority to administer these
    vital programs. We will continue our efforts to improve the public's
    awareness of our programs and to, wherever possible, simplify our
    administrative processes. By doing so, we can better ensure all
    eligible persons have open and informed access to the nutrition
    assistance programs. Many potentially eligible individuals do not take
    advantage of our programs' benefits and assistance. Clearly, we have
    more work to do to reach those who are eligible for our programs.
        Our 15 programs provide nutrition assistance, including both access
    to healthy food and nutrition education and promotion to support and
    encourage a healthy lifestyle. With this nutrition mission in mind, and
    the Center for Nutrition Policy and Promotion's (CNPP) focus on
    providing a comprehensive Food Guidance System that is the basis of
    nutrition promotion for our programs as well as for the broader
    population, we play a critical role in the integrated Federal response
    to the growing public health threat posed by overweight and obesity.
        Finally, we will strive to enhance the efficiency and accuracy with
    which our programs are delivered. In fiscal year 2003, the most recent
    year for which data is available, we have once again achieved a record
    level of Food Stamp payment accuracy with a combined payment error rate
    of only 6.63 percent. This is the fifth consecutive year of
    improvement, lowering the error rate by over 4 percentage points and
    making it the lowest rate in the history of the program. We will
    maintain our efforts with State partners toward continued improvement
    in the payment error rate. While I am confident that the coming year
    will bring more good news about the administration of the Food Stamp
    Program, we do have concerns that the Farm Bill's provisions governing
    sanctions and incentives may diminish States' determination to maintain
    this progress. We will also continue efforts to address the issue of
    proper certification in the school meals programs in a manner that
    improves the accuracy of this process without imposing barriers to the
    participation of eligible children. We will also begin new analytical
    work under this budget request to better assess the accuracy of
    eligibility determinations in the Child and Adult Care Food Program.
        Hard work of USDA staff, of the Congress, and of our State and
    local program partners has accomplished many things, but important work
    remains to be done. This budget request provides critical support for
    this work. I would like to review the highlights of the request and the
    improvements in performance and results it is designed to support.

                                 PROGRAM ACCESS

        At its most basic level, ensuring program access must begin with
    making certain that sufficient resources are provided to these programs
    so all who are eligible and in need can have ready access to benefits.
    The President's fiscal year 2006 budget requests funds to support
    record levels of participation in the Food Stamp Program and the WIC
    Program. The Administration's strong commitment to adequately fund
    these critical programs acknowledges the inherent difficulties in
    anticipating future demand for program services, and provides for
    contingency funding should program costs exceed our estimates.
        For the Food Stamp Program, the budget continues the $3 billion
    contingency reserve appropriated in fiscal year 2005 but also offers,
    as an alternative, a proposal for indefinite budget authority for
    program benefits. This authority would be an efficient way to ensure
    benefits are funded as economic circumstances change. In WIC, the
    contingency reserve appropriated in fiscal year 2005 would be
    replenished to the $125 million level and would be available to the
    program should participation or food costs exceed the levels
    anticipated in the budget.
        Adequate program funding, however, is not enough to ensure access
    to program services for those who need them. The design of our programs
    must not create barriers that prevent eligible people in need of
    service from accessing our programs. We have recently implemented
    legislative changes brought about by the Farm Bill that expanded
    eligibility and simplified program rules to improve access to the Food
    Stamp Program and have worked diligently to encourage our State
    partners to take advantage of the new options. We remain committed to
    the fundamental principles of improving program delivery and ensuring
    access of eligible people who wish to participate in our programs as we
    move forward with the implementation of program changes enacted as part
    of the reauthorization of the Child Nutrition and WIC Programs last
    year.

                 COMBATING THE EPIDEMIC OVERWEIGHT AND OBESITY

        The statistics surrounding our National epidemic of overweight and
    obesity are staggering. Nearly 365,000 deaths a year are related to
    poor diet and physical inactivity; poor diet and inactivity are the
    second leading cause of preventable death after smoking. Obesity is
    costing Americans $123 billion in healthcare costs each year. About 60
    million American adults are obese; and, if this trend continues, this
    number will rise to 69 million by 2010; 64 percent of adults aged 20-74
    are either overweight or obese.
        Overweight, obesity and physical inactivity are major risk factors
    for chronic diseases such as diabetes, cardiovascular disease and
    cancer each of which undermines the quality of life, leads to premature
    death, and contributes to the costs I just mentioned. Diabetes has
    increased by 49 percent in the past 10 years, reflecting a strong
    correlation with obesity; 18 million people have diabetes, and it is
    increasingly diagnosed in children and adolescents; 1 in 3 persons born
    in 2000 will develop diabetes if there is no change in current health
    habits. Between 1971 and 2000, women's daily intake of calories rose by
    22 percent, while men increased their daily intake by 7 percent. Recent
    trends among children are alarming as well. In the past 20 years, the
    percentage of children who are overweight has doubled and the
    percentage of adolescents who are overweight has more than tripled. If
    we do not stem this tide, this may be the first generation of children
    that will not have a longer life expectancy than their parents.
        The Federal nutrition assistance programs can play a critical role
    in combating this epidemic by providing not just access to healthful
    food, but also promoting better health through nutrition education and
    promotion of physical activity. These FNS program services, along with
    the work of the CNPP to improve the diets of all Americans, are a key
    component of the President's HealthierUS initiative. I believe the
    American public is served well by USDA's continual contributions to
    addressing the critical nutrition-and health-related issues facing us
    today. The CNPP continues to have an integral role in the development
    and promotion of updated dietary guidance and nutrition education. The
    Dietary Guidelines for Americans (Guidelines), published jointly every
    5 years by the USDA and the U.S. Department of Human Services (HHS), is
    the cornerstone of Federal nutrition policy, allowing the Federal
    Government to speak with one voice. With the latest edition of the
    Guidelines released January 12, 2005, we have provided the American
    public with updated science-based advice that promotes health and helps
    to reduce the risk of major chronic diseases--including addressing
    obesity through diet and physical activity. For the first time the two
    Departments created a consumer brochure and released it along with the
    Guidelines to help consumers make smart choices from every food group,
    find a balance between food and physical activity and get the most
    nutrition out of their calories.
        While the Guidelines will continue to serve the American public as
    a representation of science-based Federal nutrition policy, USDA is
    completing its work on a comprehensive Food Guidance System, replacing
    the Food Guide Pyramid, that will serve Americans well by translating
    the principles of the Guidelines and interpreting them into healthful
    food choices. This new comprehensive Food Guidance System, due to be
    released later this spring, will provide a framework that the American
    public can use for selecting the types and amounts of foods they need
    for a nutritionally adequate diet. With the release and targeted
    promotion of both the Guidelines and the USDA's Food Guidance System, I
    believe the American public will be motivated to make more healthful
    food choices--and thus reduce the trends related to overweight and
    obesity and other nutrition-related adverse outcomes. Both the
    Guidelines and the new Food Guidance System will be widely and
    consistently promoted across the nutrition assistance programs through
    the Eat Smart. Play Hard.TM campaign, and within programs
    through Team Nutrition, WIC nutrition education, and Food Stamp Program
    nutrition education.

                    ENHANCING PROGRAM INTEGRITY AND DELIVERY

        With this budget request, we are asking the Nation to entrust us
    with over $59 billion of public resources. We are keenly aware of the
    immense responsibility this represents. To maintain the high level of
    public trust that we have earned as good stewards of the resources we
    manage, we will continue our ongoing commitment to program integrity as
    an essential part of our mission to help the vulnerable people these
    programs are intended to serve.
        This is not a new commitment. As I noted earlier, in fiscal year
    2003, the most recent year for which data is available, the Food Stamp
    Program achieved a record high payment accuracy rate of 93.4 percent.
    We have also been working to develop strategies to improve the accuracy
    of eligibility determinations in our school meals programs--an issue of
    mutual concern to all those that care about these programs. The Federal
    administrative resources provided for in this budget will allow us to
    advance our close work with our State and local program partners on
    both of these essential integrity initiatives--continuing both our
    successes in the Food Stamp Program and our intensified efforts in
    school meals.
        In the remainder of my remarks, I'd like to touch on several key
    issues:

                               FOOD STAMP PROGRAM

        The President's budget anticipates serving a monthly average of
    29.1 million persons in fiscal year 2006, an increase of 2.6 million
    over our projections of the current fiscal year. Our $40.7 billion
    request fully funds this level of service.
        While the President's budget anticipates continuing improvement in
    the Nation's economy, Food Stamp Program participation traditionally
    continues to rise for some time after the aggregate employment begins
    to improve. We have made a concerted effort over the last 3 years to
    raise awareness of the benefits of program participation and encourage
    those who are eligible, especially working families, senior citizens,
    and legal immigrants, to apply. In the past 6 months we have provided
    16 grant awards of approximately $2 million to community and faith-
    based organizations to test innovative food stamp outreach strategies
    to underserved, eligible individuals and families. While these efforts
    have brought more people into the program, many eligibles remain who
    could be participating but are not. We continue to aggressively promote
    the message that Food Stamps Make America Stronger, in the sense that
    the program puts healthy food on the tables of low-income families and
    has a positive impact on local economies. Particular attention has been
    focused on those legal immigrants who had their eligibility restored by
    the Farm Bill, the elderly, and working families.
        While we seek to encourage all who are eligible and in need to
    participate in the program, we also need to ensure access to the
    program is administered in an equitable manner across all States. The
    budget contains a proposal to eliminate categorical Food Stamp
    eligibility for Temporary Assistance for Needy Families (TANF)
    participants who receive only TANF services including, for example, an
    informational brochure and not cash benefits among persons with income
    above the normal food stamp threshold. This proposal, with partial
    implementation in fiscal year 2006, is expected to impact 161,000
    persons and reduce benefits by $57 million. When fully implemented in
    fiscal year 2007, this change is estimated to affect approximately
    312,000 individuals and save $113 million annually. The President's
    proposal restores equity among participants and ensures that Food Stamp
    benefits go to individuals with the most need while retaining
    categorical eligibility for the much larger number of recipients who
    receive cash assistance through TANF, SSI and General Assistance.
        The Budget also requests a continuation of a policy included in
    last year's Appropriations to exclude special military pay received by
    members of the armed forces serving in combat zones when determining
    food stamp benefits for their families back home.
        Over the next year, we will also be working with the Congress to
    consider renaming the Food Stamp Program to better reflect its purpose
    of providing nutrition assistance and promoting health among low-income
    families. No additional funding is being requested to support the name
    change.
        Also included in the budget is a proposal to add the Food Stamp
    Program to the list of programs for which States may access the
    National Database of New Hires. Access to this National repository of
    employment and unemployment insurance data will enhance States' ability
    to quickly and accurately make eligibility and benefit level
    determinations, improving program integrity. This proposal has modest
    administrative costs associated with it, but is expected to produce a
    net program savings of $2 million annually beginning in fiscal year
    2007.
        To ensure the adequacy of resources available to the program, and
    as an alternative to the traditional contingency reserve, we have
    proposed indefinite authority for program benefits and payments to
    States and other non-Federal entities.

                            CHILD NUTRITION PROGRAMS

        The President's budget requests $12.4 billion to support the
    service of appealing, nutritious meals to children in public and
    private schools and child care facilities through the Child Nutrition
    Programs in fiscal year 2006. In the National School Lunch Program, we
    anticipate serving almost 30 million children per day in fiscal year
    2006, for a total of more than 5 billion meals served during the fiscal
    year. Similarly, the School Breakfast Program will serve approximately
    9.6 million children each school day for a total of more than 1.6
    billion meals. The request for budget authority is an increase of $634
    million from levels appropriated in fiscal year 2005. In fiscal year
    2006, FNS will implement program changes and new activities resulting
    from the 2004 reauthorization of these programs. These include efforts
    to promote fruit and vegetable consumption, including the newly
    authorized Fruit and Vegetable Program, and our continuing efforts to
    promote healthy behaviors through support for implementation of local
    wellness policies. To complement the agency's efforts, we have created
    the HealthierUS Schools Challenge to encourage communities to improve
    the foods offered at school and other aspects of a healthy school
    nutrition environment and to recognize schools that have made those
    improvements.

                                      WIC

        In fiscal year 2006, the President's budget request of $5.51
    billion anticipates supporting critical services to a record monthly
    average participation of 8.5 million women, infants and children
    through the Special Supplemental Nutrition Program for Women, Infants
    and Children (WIC). This is an increase of 300,000 participants per
    month from anticipated fiscal year 2005 participation levels. The $125
    million contingency reserve, appropriated in fiscal year 2003 and
    reestablished in fiscal year 2005, remains available to the program
    should participation or food costs exceed our projections. We currently
    anticipate using a small portion of the reserve in fiscal year 2005;
    the President's budget replenishes the reserve to the $125 million
    level.
        The budget also reflects the Administration's commitment to work
    with its State partners to manage program costs to ensure future access
    to this critical program for all who are eligible and seek its
    services. We propose to cap the level of Nutrition Services and
    Administration (NSA) funding at 25 percent of the total level grants to
    States. We also are renewing our commitment to continue the long
    successful partnership with our State partners to contain food package
    cost growth through sharing of best practices and providing technical
    assistance in the implementation of food cost containment strategies.
    New funding of $3 million is requested in the budget to explore and
    develop new food cost containment strategies.

                      COMMODITY SUPPLEMENTAL FOOD PROGRAM

        The Commodity Supplemental Food Program (CSFP) serves elderly
    persons and pregnant and post-partum women, infants and children. The
    budget requests $106.8 million for this program, the same level
    appropriated, after rescission, in fiscal year 2005. With level
    funding, we anticipate a reduction in participation of approximately
    44,000 persons.
        We face difficult challenges and decisions with regard to
    discretionary budget resources. The Department will pursue all means to
    minimize the impact of straight-line funding for the program. However,
    we have chosen to seek level funding for this program for several
    reasons. First, CSFP is not available in all States. Second, it is only
    available at a limited number of sites within those participating
    States. Finally, a Program Assessment Rating Tool (PART) analysis
    revealed a number of program weaknesses and concluded that the program
    is unable to demonstrate results for its target population. We believe
    our limited resources are best focused on those programs that are
    universally available to serve these needy populations.

                 THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

        TEFAP plays a critical supporting role for the Nation's food banks.
    This support takes the form of both commodities for distribution and
    administrative funding for States' commodity storage and distribution
    costs. Much of this funding flows from the States to the faith-based
    organizations, the cornerstone of the food bank community. The
    President's budget requests the fully authorized level of $140 million
    to support the purchase of commodities for TEFAP. Additional food
    resources become available through the donation of surplus commodities
    from USDA's market support activities. State administrative costs,
    critical support to the food bank community, are funded at $50 million
    in the President's request.

                       NUTRITION PROGRAMS ADMINISTRATION

        We are requesting $140.8 million in our Nutrition Programs
    Administration account, which reflects an increase of $2 million in our
    Federal administrative funding. This account supports Federal
    management and oversight of a portfolio of program resources totaling
    $59 billion, over 60 percent of the USDA budget. This modest increase
    will partially offset the personnel-related costs. As in past years, we
    will be carefully managing our administrative resources seeking cost
    savings to maintain our high performance at this funding level.
        While we understand the difficult budgetary circumstances the
    Federal Government now faces, FNCS must address the serious challenge
    posed by the impending retirement of close to 30 percent of its
    workforce over the next 5 years. I have begun that process by improving
    the management of human capital planning processes, strengthening
    services provided to employees, and implementing programs designed to
    improve the efficiency, diversity, and competency of the work force.
    With just nominal increases for basic program administration in most
    years, FNCS has reduced its Federal staffing levels significantly over
    time. We have compensated for these changes by working smarter--re-
    examining our processes, building strong partnerships with the State
    and local entities which administer our programs, and taking advantage
    of technological innovations. We are extremely proud of what we have
    accomplished and continue to seek new ways to meet the challenges
    before us.
        Mr. Chairman, I appreciate the opportunity to present to you this
    record level budget and what it means for the millions of Americans
    that count on us for nutrition assistance. I would be happy to answer
    any questions you may have.
                                     ______

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

        Thank you, Mr. Chairman, and members of the Subcommittee for
    allowing me this opportunity to present testimony in support of the
    fiscal year 2006 budget request for the Food and Nutrition Service
    (FNS).
        The Food and Nutrition Service is the agency charged with managing
    fifteen nutrition assistance programs which create the Nation's
    nutrition safety net and providing Federal leadership in America's
    ongoing struggle against hunger and poor nutrition. Our stated mission
    is to increase food security, reduce hunger and improve health outcomes
    in partnership with cooperating organizations by providing children and
    low-income people access to nutritious food and nutrition education in
    a manner that inspires public confidence and supports American
    agriculture. The budget request clearly demonstrates the President's
    continuing commitment to this mission and our programs.
        A request of $59 billion in new budget authority is contained
    within the fiscal year 2006 budget to fulfill this mission through the
    fifteen FNS nutrition assistance programs. These critical programs
    touch the lives of more than 1 in 5 Americans over the course of a
    year. Programs funded within this budget request include the National
    School Lunch Program (NSLP), which will provide nutritious school
    lunches to almost 30 million children each school day, the WIC Program,
    which will assist with the nutrition and health care needs of 8.5
    million at risk pregnant and postpartum women, infants and children
    each month, and the Food Stamp Program (FSP), which will ensure access
    to a nutritious diet each month for an estimated 29.1 million people.
    The remaining programs include the School Breakfast Program (SBP), The
    Emergency Food Assistance Program (TEFAP), the Summer Food Service
    Program (SFSP), the Child and Adult Care Food Program (CACFP), the Food
    Distribution Program on Indian Reservations (FDPIR), and the Commodity
    Supplemental Food Program (CSFP) and the Farmers' Market Programs. FNS
    seeks to serve the children and low-income households of this Nation
    and address the diverse circumstances though which hunger and
    nutrition-related problems present themselves and affect our
    participants within the design and delivery methods of our programs.
        The resources we are here to discuss represent an investment in the
    health, self-sufficiency, and productivity of Americans who, at times,
    find themselves in need of nutrition assistance. Under Secretary Bost,
    in his testimony, has outlined the three critical challenges which the
    Food, Nutrition and Consumer Services team has focused on under his
    leadership: expanding access to the Federal nutrition assistance
    programs; addressing the growing epidemic of overweight and obesity;
    and, improving the integrity with which our programs are administered.
    In addition to these fundamental priorities specific to our mission,
    the President's Management Agenda provides an ambitious agenda for
    management improvement across the Federal Government as a whole. I
    would like to report on our efforts to address three specific items
    under this agenda; reducing improper payments and enhancing the
    efficiency of program delivery, building partnerships with faith and
    community based organizations, and systematically planning for the
    human capital challenges facing all of the Federal service.

                       THE CHALLENGE OF IMPROPER PAYMENTS

        Good financial management is at the center of the President's
    Management Agenda. As with any Federal program, the nutrition
    assistance programs require sustained attention to program integrity.
    We cannot sustain these programs over the long term without continued
    public trust in our ability to manage them effectively. Program
    integrity is as fundamental to our mission as program access or healthy
    eating. Our efforts to minimize improper program payments focus on (1)
    working closely with States to improve Food Stamp payment accuracy; (2)
    implementing policy changes and new oversight efforts to improve school
    meals certification; and (3) improving management of Child and Adult
    Care Food Program providers, and vendors in WIC. We have identified
    these 4 programs as programs susceptible to significant improper
    payments and will continue to enhance the efficiency and accuracy with
    which these programs are delivered. I am happy to report that in fiscal
    year 2003, the most recent year for which data is available, we have
    achieved a record level of Food Stamp payment accuracy with a combined
    payment error rate of only 6.63 percent. This is the fifth consecutive
    year of improvement, making it the lowest rate in the history of the
    program. With this budget request, we will continue our efforts with
    our State partners toward continued improvement in the payment error
    rate. We will continue efforts to address the issue of proper
    certification in the school meals programs in a way that improves the
    accuracy of this process without limiting access of eligible children.
    New analytical work will begin under this budget request to better
    assess the accuracy of eligibility determinations in the Child and
    Adult Care Food Program.

                FAITH-BASED AND COMMUNITY ORGANIZATIONS OUTREACH

        Faith-based organizations have long played an important role in
    raising community awareness about program services, assisting
    individuals who apply for benefits, and delivering benefits. President
    Bush has made working with the faith-based community an Administration
    priority, and we intend to continue our outreach efforts in fiscal year
    2006. The partnership of faith-based organizations and FNS programs,
    including TEFAP, WIC, NSLP, and the CSFP, is long-established. Most
    faith-based schools participate in the NSLP and many child care
    providers and sponsors are the product of faith-based organizations. In
    addition, the majority of organizations such as food pantries and soup
    kitchens that actually deliver TEFAP benefits are faith-based. Across
    the country, faith-based organizations have found over the years that
    they can participate in these programs without compromising their
    mission or values. They are valued partners in an effort to combat
    hunger in America. I am happy to report that in the past 6 months we
    have provided 16 grant awards of approximately $2 million to community
    and faith-based organizations to test innovative food stamp outreach
    strategies to reach underserved, eligible individuals and families.

                            HUMAN CAPITAL MANAGEMENT

        We currently estimate that up to 80 percent of our senior leaders
    are eligible to retire within 5 years, as is nearly 30 percent of our
    total workforce. FNS must address this serious challenge by improving
    the management of the agency's human capital, strengthening services
    provided to employees, and implementing programs designed to improve
    the efficiency, diversity, and competency of the work force. With just
    nominal increases for basic program administration in most years, the
    Food and Nutrition Service has reduced its Federal staffing levels
    significantly over time. We have compensated for these changes by
    building strong partnerships with the State and local entities which
    administer our programs and taking advantage of technological
    innovations. We are extremely proud of what we have accomplished; full
    funding of the nutrition programs administration request in this budget
    is vital to our continued success.
        Now, I would like to review some of the components of our request
    under each program area.

                               FOOD STAMP PROGRAM

        The President's budget requests $40.7 billion for the Food Stamp
    account including the Food Stamp Program and its associated nutrition
    assistance programs. These resources will serve an estimated 29.1
    million people each month participating in the Food Stamp Program
    alone. Included in this request is the continuation of the $3 billion
    contingency reserve provided for the program in fiscal year 2005. While
    we anticipate the improvement in the general economy will at some point
    begin to impact the program, predicting the turning point of
    participation continues to be challenging. To better meet this
    challenge, we have proposed, as an alternative to the traditional
    contingency reserve, indefinite funding authority for program benefits
    and payments to States and other non-Federal entities. In addition, we
    have made a concentrated effort to encourage working families, senior
    citizens and legal immigrants to apply for benefits.
        We need to ensure program access is administered in an equitable
    manner across all States. The budget contains a proposal to eliminate
    categorical Food Stamp eligibility for Temporary Assistance for Needy
    Families (TANF) participants who receive only non-cash TANF services.
    This proposal, with partial implementation in fiscal year 2006, is
    expected to impact 161,000 persons and reduce benefits by $57 million
    among persons with incomes above the normal food stamp thresholds.
    Fully implemented in fiscal year 2007, this change is estimated to
    affect approximately 312,000 individuals and save $113 million
    annually. The President's proposal ensures that Food Stamp benefits go
    to the individuals with the most need and retains categorical
    eligibility for the large number of recipients who receive cash
    assistance through TANF, SSI and General Assistance. Included in the
    budget is a proposal to add the Food Stamp Program to the list of
    programs for which States may access the National Database of New
    Hires. Access to this National repository of employment and
    unemployment insurance data will enhance States' ability to quickly and
    accurately make eligibility and benefit level determinations, improving
    program integrity. This proposal is expected to produce a net program
    savings of $2 million annually beginning in fiscal year 2007.
        The budget also requests a continuation of a policy included in
    last year's Appropriations to exclude special military pay received by
    members of the armed forces serving in combat zones when determining
    food stamp benefits for their families back home. Over the next year,
    we will also be working with members of this Committee to rename the
    Food Stamp Program to better reflect its purpose of providing nutrition
    assistance and promoting health among low-income families.

                            CHILD NUTRITION PROGRAMS

        The budget requests $12.4 billion for the Child Nutrition Programs,
    which provide millions of nutritious meals to children in schools and
    in childcare settings every day. This level of funding will support an
    increase in daily School Lunch Program participation from the current
    29 million children to approximately 30 million children. Requested
    increases in these programs reflect rising school enrollment, increases
    in payment rates to cover inflation, and proportionately higher levels
    of meal service among children in the free and reduced price
    categories. We will also put into practice program changes and new
    activities resulting from the 2004 reauthorization of these programs.
    These include implementing the newly authorized Fruit and Vegetable
    Program, and continuing our efforts to promote healthy behaviors by
    supporting the implementation of local wellness policies. We created
    the HealthierUS Schools Challenge to encourage communities to improve
    the foods offered at school and other aspects of a healthy school
    nutrition environment and to recognize schools that made improvements.

                                      WIC

        The President's budget includes $5.51 billion for the Special
    Supplemental Nutrition Program for Women, Infants and Children, the WIC
    Program. The request will provide food, nutrition education, and a link
    to health care to a monthly average of 8.5 million needy women, infants
    and children during fiscal year 2006. We will continue, with a budget
    request of $15 million, an initiative begun in fiscal year 2004 and
    authorized in the program's 2004 reauthorization, to enhance
    breastfeeding initiation and duration. The $125 million contingency
    fund provided in the fiscal year 2003 appropriation and reestablished
    in fiscal year 2005, continues to be available to the program. We
    currently anticipate using a small portion of the reserve in fiscal
    year 2005 for projected program costs; the President's budget
    replenishes the reserve to the $125 million level.

                   COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

        The Commodity Supplemental Food Program (CSFP) serves elderly
    persons and at risk low-income pregnant and post-partum and
    breastfeeding women, infants and children up to age six. The budget
    requests $106.8 million for this program, the same level appropriated
    in fiscal year 2005. Under this funding level, we anticipate a decrease
    of 44,000. We face a difficult challenge with regard to discretionary
    budget resources. CSFP operates in selected areas in just 32 States,
    the District of Columbia, and two Indian Tribal Organizations. The
    populations served by CSFP are eligible to receive similar benefits
    through other Federal nutrition assistance programs that offer them
    flexibility to meet their individual needs. We believe our limited
    resources are best focused on programs available in all communities
    nationwide.

                 THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

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

                    NUTRITION PROGRAMS ADMINISTRATION (NPA)

        We are requesting $140.8 million in this account, an increase of $2
    million over our fiscal year 2005 level. This increase will partially
    offset personal-related costs of the FNS workforce in fiscal year 2006.
    Our request for Federal administrative resources is needed to sustain
    the program management and support activities of our employees
    nationwide. I believe we need this modest increase in funding in order
    to maintain accountability for our $59 billion portfolio and to assist
    States to effectively manage the programs and provide access to all
    eligible people.
        Thank you for the opportunity to present this written testimony.
                                     ______

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

        Thank you, Mr. Chairman, and members of the Subcommittee, for
    allowing me this opportunity to present testimony in support of the
    Administration's budget for fiscal year 2006.
        With the Nation facing significant public health issues related to
    the quality of the American diet, I believe that the outcome-based
    efforts of the Center for Nutrition Policy and Promotion are keys to
    promoting more healthful eating habits and lifestyles across the
    Nation. Working from its mission to improve the health of Americans by
    developing and promoting dietary guidance that links scientific
    research to the nutrition needs of consumers, the Center for Nutrition
    Policy and Promotion has a critical role in how USDA meets its
    strategic goal to improve the Nation's nutrition and health.
     trends show need for revised nutrition guidance and educational tools
        Recent studies of America's dietary habits and physical activity
    reveal disturbing trends. First, a combination of poor diet and
    sedentary lifestyle not only undermine the quality of life, life
    expectancy, and productivity, they contribute to about 20 percent of
    the 2 million annual deaths in the United States.
        Second, specific diseases and conditions, such as cardiovascular
    disease, hypertension, overweight and obesity, and osteoporosis, are
    clearly linked to a poor diet. Recent statistics are staggering with 64
    percent of adults (ages 20 to 74) being either overweight or obese.
    Children have not escaped this unhealthy outcome. Over the past 20
    years, the percentage of children who are overweight has more than
    doubled from 7 to 15 percent, and the percentage of adolescents who are
    overweight has more than tripled from 5 to 16 percent.
        And third, the lack of physical activity has been associated with a
    number of conditions, including diabetes, overweight and obesity,
    cardiovascular disease, and certain cancers. Supporting evidence
    indicates that about 30 percent of women and 25 percent of men get
    little or no exercise.

      DIETARY GUIDELINES FOR AMERICANS ESTABLISH FEDERAL NUTRITION POLICY

        In conjunction with the Department of Health and Human Services
    (HHS), USDA released the sixth edition of the Dietary Guidelines for
    Americans on January 12, 2005. USDA's involvement is critical in
    helping to stem and eventually reverse some of these disturbing trends.
        The basis for Federal nutrition policy, the Guidelines, provide
    advice for healthy Americans, ages 2 years and older, about food
    choices that promote health and prevent disease. These Guidelines not
    only form Federal nutrition policy, they also set standards for the
    nutrition assistance programs, guide nutrition education programs, and
    are the basis for USDA nutrition education and promotion activities.
    Finding Your Way to a Healthier You, which is based on the Guidelines,
    is but one of many strategies that will be needed to help consumers
    make smart choices from every food group, find their balance between
    food and physical activity, and get the most nutrition out of their
    calories.
              food guidance system serves as premier teaching tool
        The updated Food Guidance System, currently recognized as the Food
    Guide Pyramid, is used to help the American public consume a healthful
    diet. The goals for revising the USDA's Food Guidance System are two-
    fold: To provide the most up-to-date science and to use better
    implementation strategies to help Americans develop healthier
    lifestyles. This new system also supports two pillars of the
    President's HealthierUS Initiative: to ``Eat a Nutritious Diet'' and to
    ``Be Physically Active Every Day.'' We expect the new system to be
    released later this spring.
        USDA takes considerable pride in its approach to updating the Food
    Guidance System by maintaining an open and transparent process that
    employed the public notice and comment period in the Federal Register.
    Now, strategic promotion and implementation of the Food Guidance System
    in both the public and private sectors will be essential in
    transforming these scientific underpinnings into actionable, targeted
    strategies that will motivate Americans to develop and maintain
    healthful dietary and lifestyle habits.

       EFFECTIVE PARTNERSHIPS STRENGTHEN DISSEMINATION OF SCIENCE-BASED
                         GUIDANCE AND EDUCATIONAL TOOLS

        With your continued support and with robust partnerships among and
    between USDA agencies and other Departments, and with information
    multipliers from nutritionists, physicians, corporations, and others,
    we are in a much stronger position to address the problems of obesity
    and overweight. Over the past year, USDA and its partners, including
    the scientists of the Dietary Guidelines Advisory Committee, have
    updated the Nation's nutrition guidance. Now, with the collaborative
    efforts focused on how best to reach the various populations served by
    our diverse agencies and Departments, I am confident that we can begin
    to stem the nutrition-- and health-related trends that are so adversely
    affecting the American public.
        I thank the Committee for the opportunity to present this written
    testimony.

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

                         STATEMENT OF WILLIAM T. HAWKS

        Mr. Hawks. Thank you, Mr. Chairman, Senator Kohl. It is
    certainly a pleasure to be with you to discuss the budget for
    Marketing and Regulatory Programs, which include Animal and
    Plant Health Inspection Service; Agricultural Marketing
    Service; and Grain Inspection, Packers and Stockyards
    Administration.
        We have identified in Marketing and Regulatory Programs
    some issues that need special attention over the next few
    years: enhancing market access by reducing technical barriers
    to trade and sanitary and phytosanitary (SPS) measures,
    improving plant and animal health and agricultural quality by
    continuing to work closely with the Department of Homeland
    Security and with farmers and ranchers to control endemic pests
    and disease, and harmonizing international standards by putting
    sanity back in some of the sanitary and phytosanitary issues.
        APHIS's primary mission is to safeguard animal and plant
    health, and APHIS has negotiated sanitary and phytosanitary
    regulations to maintain and open markets around the world and
    to protect the health of plants and animals.
        The trade issues resolution management efforts enable APHIS
    to negotiate fair trade in international markets. In fiscal
    year 2004, 112 SPS issues were resolved, allowing over $5
    billion worth of trade to occur. In June 2004, we launched a
    one-time enhanced bovine spongiform encephalopathy (BSE)
    surveillance program. To date, we have tested almost 318,500
    animals, none of which have been positive. In addition, we are
    moving ahead with a National Animal Identification System and
    are on schedule there.
        GIPSA facilitates the marketing of livestock, meat,
    poultry, cereals, oil seed, and related agriculture products.
    It also promotes fair and competitive trade. GIPSA is
    requesting an increased funding largely to significantly
    upgrade its critical information management systems and
    business functions.

                              PREPARED STATEMENTS

        AMS, Agricultural Marketing Service activities assist the
    U.S. agriculture industry in marketing their products and
    finding ways to improve their profitability. AMS' budget
    request seeks an increase of $10 million in the Marketing
    Services account to invest in the Web-Based Supply Chain
    Management System.
        This concludes my statement, and I will be happy to respond
    to questions.
        [The statements follow:]

                     Prepared Statement of William T. Hawks

        Mr. Chairman and members of the Committee, I am pleased to appear
    before you to discuss the activities of the Marketing and Regulatory
    Programs (MRP) of the U.S. Department of Agriculture and to present our
    fiscal year 2006 budget proposals for the Animal and Plant Health
    Inspection Service (APHIS), the Grain Inspection, Packers and
    Stockyards Administration (GIPSA), and the Agricultural Marketing
    Service (AMS).
        In addition to my statement, Dr. Ron DeHaven, Administrator of
    APHIS, Mr. David Shipman, Acting Administrator of GIPSA, and Dr. Ken
    Clayton, Acting Administrator of AMS have statements for the record.
        Under my leadership, MRP has addressed several broad goals and
    objectives to increase marketing opportunities and to protect American
    agriculture from damages caused by pests and diseases, both intentional
    and unintentional. The key to private sector financial success is
    relatively simple. First, offer the highest quality products. Second,
    produce them at the lowest possible cost. And, third, earn a fair price
    in the marketplace.
        MRP helps American farmers and ranchers do all three. AMS and GIPSA
    certify the quality of agricultural commodities and provide industry
    with a competitive edge earned by the USDA seal of approval for grading
    and inspection. APHIS protects the health of plants and animals,
    thereby keeping costs low. Additionally, AMS administers the commodity
    marketing order programs to help farmers earn fair prices; APHIS
    negotiates sanitary and phytosanitary (SPS) regulations to maintain and
    open markets around the world; and GIPSA works to ensure that livestock
    producers have a level playing field upon which to compete. A healthy
    and marketable product provides the foundation of competitive success.

                                MRP INITIATIVES

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

                                FUNDING SOURCES

        The MRP activities are funded by both the taxpayers and
    beneficiaries of program services. The budget proposes that the MRP
    agencies carry out programs costing $1.8 billion; with $436 million
    funded by fees charged to the direct beneficiaries of MRP services and
    $450 million from Customs receipts.
        On the appropriation side, under current law, the Animal and Plant
    Health Inspection Service is requesting $866 million for salaries and
    expenses and $5 million for repair and maintenance of buildings and
    facilities; the Grain Inspection, Packers and Stockyards Administration
    is requesting $40 million; and the Agricultural Marketing Service is
    requesting $88 million.
        The budget proposes user fees that, if enacted, would generate
    about $39 million in savings to the U.S. taxpayer. Legislation will be
    proposed to provide USDA the authority to recover the cost of
    administering the Packers and Stockyards Act, developing grain and
    other commodity standards that are used to support fee-based grading
    programs and for other purposes, and enabling additional license fees
    for facilities regulated under the Animal Welfare Act. I will use the
    remainder of my time to highlight the major activities and our budget
    requests for the Marketing and Regulatory Programs.

                   ANIMAL AND PLANT HEALTH INSPECTION SERVICE

        The fundamental mission of APHIS is to anticipate and respond to
    issues involving animal and plant health, conflicts with wildlife,
    environmental stewardship, and animal well-being. Together with their
    customers and stakeholders, APHIS promotes the health of animal and
    plant resources to enhance market access in the global marketplace and
    to ensure abundant agricultural products and services for U.S.
    customers. I would like to highlight some key aspects of the APHIS
    programs:
        Enhanced Market Access.--The Trade Issues Resolution and Management
    efforts are key to ensuring fair trade of all agricultural products.
    APHIS' staff negotiates SPS standards, resolves issues, and provides
    clarity on regulating imports and certifying exports which improves the
    infrastructure for a smoothly functioning market in international
    trade. Ensuring that the rules of trade are based on science helps open
    markets that have been closed by unsubstantiated SPS concerns.
        In fiscal year 2004, reopening markets for United States products
    posed the greatest challenges. In regard to beef markets that were
    closed to U.S. exports because of BSE, APHIS has been successful with
    reopening access to more than 20 countries. Altogether, APHIS resolved
    112 SPS issues in fiscal year 2004, allowing over $5 billion worth of
    trade to occur.
        Recent developments in biotechnology underscore the need for
    effective regulation to ensure protection of the environment and food
    supply, reduce market uncertainties, and encourage development of a
    technology that holds great promise. APHIS' Biotechnology Regulatory
    Services unit coordinates our services and activities in this area and
    focuses on both plant-based biotechnology and transgenic arthropods. We
    also are examining issues related to transgenic animals.
        Improved Plant and Animal Health and Quality.--While APHIS
    continues to work closely with the Department of Homeland Security
    (DHS) to exclude agricultural health threats, it retains responsibility
    for promulgating regulations related to entry of passengers and
    commodities into the U.S. APHIS' efforts have helped keep agricultural
    health threats away from U.S. borders through increased offshore
    threat-assessment and risk-reduction activities. APHIS has also
    increased an already vigilant animal and plant health monitoring and
    surveillance system to promptly detect outbreaks of foreign and endemic
    plant and animal pests and diseases.
        Between June, 2004, when we launched the one-time significantly
    enhanced surveillance program for BSE, and March 22, 2005, we have
    tested more than 284,000 animals. None have tested positive. Once we
    have evaluated the results of the enhanced testing program, a decision
    on the number of animals needed to be tested in the future will be
    made.
        In addition, we are moving ahead with the National Animal
    Identification System (NAIS). By late March, 44 States had premises
    registration abilities that are operational for the NAIS. The goal is
    to have all States operational for premises registration by mid-year
    2005.
        Because efforts to exclude foreign pests and diseases are not 100
    percent successful, APHIS also assists stakeholders in managing new and
    endemic agricultural health threats, ranging from threats to
    aquaculture to cotton and other crops, tree resources, livestock and
    poultry. In addition, APHIS assists stakeholders on issues related to
    conflicts with wildlife and animal welfare.

                           APHIS' 2006 BUDGET REQUEST

        In a year of many pressing high-priority items for taxpayer
    dollars, the budget request proposes about $866 million for salaries
    and expenses. There are substantial increases to support the
    Administration's Food and Agriculture Defense Initiative, address SPS
    trade barriers, and deal with specific threats to the agriculture
    sector. A brief description of key initiatives follows.
        A total of about $169 million for Foreign Pest and Disease
    Exclusion.--Efforts will focus on enhancing our ability to exclude
    Mediterranean fruit fly, screwworm, and foreign animal diseases. In
    addition, we also request funds to open new offices in Brazil,
    Thailand, India, Italy, and West Africa to facilitate U.S. exports.
        A total of about $239 million for Plant and Animal Health
    Monitoring and Surveillance.--Due to the critical role of APHIS in
    protecting the Nation from both deliberate and unintentional
    introductions of an agricultural health threat, the budget requests an
    increase of about $44 million, as part of the Food and Agriculture
    Defense Initiative. This includes initiatives that enhance plant and
    animal health threat monitoring and surveillance, including in those
    that could be introduced in wildlife; ensure greater cooperative
    surveillance efforts with States; enhance emergency coordination; boost
    animal vaccine availability; enhance regulatory controls of biological
    agents that pose a grave threat to human, animal, or plant health; and
    other efforts. We will continue efforts to build the NAIS.
        A total of $346 million for pest and disease management programs.--
    Once pests and disease are detected, prompt eradication reduces long-
    term damages. In cases where eradication is not feasible (e.g.,
    European gypsy moth), attempts are made to slow the advance, and
    damages, of the pest or disease. APHIS provides technical and financial
    support to help control or eradicate a variety of agricultural threats.
        The budget proposes a number of increases, including citrus canker,
    emerald ash borer, the brown tree snake, and rabies, as well as
    additional support for rural airports to protect against bird strikes.
    Other programs were reduced. For example, successes in boll weevil
    eradication efforts allow a reduction in that program.
        A total of $18 million for the Animal Care programs.--Additional
    funding will help APHIS maintain its animal welfare and horse
    protection programs despite the rapid growth in the number of new
    licensees and registrants. The budget includes a proposal to collect
    $11 million in registration fees charged to research facilities,
    carriers, and in-transit handlers of animals. Since these facilities
    are the direct beneficiaries of APHIS' services, it is appropriate that
    the costs be recovered.
        A total of about $86 million for Scientific and Technical
    Services.--Within USDA, APHIS has chief regulatory oversight of
    genetically modified organisms. To help meet the needs of this rapidly
    evolving sector, the budget includes a request to, in part, enhance the
    regulatory oversight of field trials of crops derived with
    biotechnology and initiate a regulatory role towards transgenic
    animals, arthropods, and disease agents. Also, APHIS develops methods
    and provides diagnostic support to prevent, detect, control, and
    eradicate agricultural health threats, and to reduce wildlife damages
    (e.g., coyote predation). It also works to prevent worthless or harmful
    animal biologics from being marketed.
        A total of $8 million for improving security and IT operations.--
    This effort builds upon efforts started with Homeland Security
    Supplemental funds. It also includes providing the State Department
    funds to help cover higher security costs for APHIS personnel abroad. A
    portion of the increase would also be used to upgrade key computer
    resources for eGov, cyber security, and other efforts.

            GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION

        GIPSA's mission is to enhance market access for livestock, meat,
    poultry, cereals, oilseeds, and related agricultural products and to
    promote fair and competitive trade for the benefit of consumers and
    American agriculture. GIPSA fulfills this through both service and
    regulatory functions in two programs: the Packers and Stockyards
    Programs (P&SP) and the Federal Grain Inspection Service (FGIS).
        Packers and Stockyards Programs.--The strategic goal for P&SP is to
    promote a fair, open and competitive marketing environment for the
    livestock, meat, and poultry industries. Currently, with 152 employees,
    P&SP monitors the livestock, meatpacking, and poultry industries,
    estimated by the Department of Commerce to have an annual wholesale
    value of over $118 billion. Legal specialists and economic, financial,
    marketing, and weighing experts work together to monitor emerging
    technology, evolving industry and market structural changes, and other
    issues affecting the livestock, meatpacking, and poultry industries
    that the Agency regulates.
        We conducted over 1,900 investigations in fiscal year 2004 to
    enforce the Packers and Stockyards Act for livestock producers and
    poultry growers and helped restore over $17 million to the livestock,
    meatpacking, and poultry industries.
        The Swine Contract Library began operation on December 3, 2003.
    Producers can see contract terms, including, but not limited to, the
    base price determination formula and the schedules of premiums or
    discounts, and packers' expected annual contract purchases by region.
    Thirty-two firms operating 51 plants accounting for approximately 95
    percent of industry slaughter are subject to the Swine Contract
    Library. GIPSA has received over 700 contracts to date.
        The Livestock and Meat Marketing Study, for which Congress
    appropriated $4.5 million in fiscal year 2003, faced a complex set of
    issues that has delayed its completion date. GIPSA announced an award
    to the Research Triangle Institute (RTI) in June, 2004. RTI assembled a
    coalition of researchers from Colorado State University, Iowa State
    University, Montana State University, North Carolina State University,
    and the Wharton School of Business. RTI is continuing preparations for
    data collection and the overall study and is scheduled to release study
    reports in mid-year 2005 and mid-year 2006. The first report will
    provide information about the types of livestock arrangements in the
    cattle, hog, and sheep industries based on a survey conducted by RTI.
    The second report will provide detailed economic analyses about the
    arrangements. Despite the delay, the study will be completed within the
    amount appropriated.
        Federal Grain Inspection Service.--FGIS facilitates the marketing
    of U.S. grain and related commodities under the authority of the U.S.
    Grain Standards Act and the Agricultural Marketing Act of 1946. As an
    impartial, third-party in the market, we advance the orderly and
    efficient marketing and effective distribution of U.S. grain and other
    assigned commodities from the Nation's farms to domestic and
    international buyers. We are part of the infrastructure that undergirds
    the agricultural sector.
        GIPSA works with government and scientific organizations to
    establish internationally recognized methods and performance criteria
    and standards to reduce the uncertainty associated with testing for the
    presence of biotechnology traits in grains and oil seeds. It also
    provides technical assistance to exporters, importers and end users of
    U.S. grains and oilseeds, as well as other USDA agencies, industry
    organizations, and other governments. These efforts help facilitate the
    sale of U.S. products in international markets.
        Our efforts to improve and streamline our programs and services are
    paying off for our customers, both in terms of their bottom lines and
    in greater customer satisfaction. FGIS' service delivery costs average
    $0.29 per metric ton, or approximately 0.14 percent of the $19 billion
    value of U.S. grain exports. In fiscal year 2004, approximately 1.8
    million inspections were performed by FGIS employees on more than 230
    million tons of grains and oilseeds.
        One indicator of the success of our outreach and educational
    initiatives is the number of foreign complaints lodged with FGIS
    regarding the quality or quantity of U.S. grain exports. In fiscal year
    2004, FGIS received only four complaints regarding poor quality and no
    complaints regarding inadequate weights from importers on grains
    inspected under the U.S. Grain Standards Act. These involved 96,695
    metric tons, or about 0.1 percent by weight, of the total amount of
    grain exported during the year.

                          GIPSA'S 2005 BUDGET REQUEST

        For 2005, the budget proposes a program level for salaries and
    expenses of $40 million. Of this amount, $20 million is devoted to
    grain inspection activities for standardization, compliance, and
    methods development and $20 million is for Packers and Stockyards
    Programs. The 2006 budget includes the following program increases:
        About $2 million for IT initiatives.--GIPSA needs to significantly
    upgrade its critical information management systems and modernize its
    business functions as part of a comprehensive eGov initiative including
    establishing an off-site, back-up Information Disaster Recovery
    Program. This effort will provide the basic enterprise architecture
    which will enable the Federal Grain Inspection Service to eliminate
    duplicate data entry currently used for maintaining agricultural
    product standards, recording certifications from grain inspectors, and
    responding to customer's requests for inspections and test results. The
    system will match, for the first time, all quality test assurance
    results with those obtained by re-inspection and Board appeals. The
    basic enterprise architecture will also enable the Packers and
    Stockyards Program to rapidly receive electronic information from
    livestock, meat packing and poultry operators, thereby reducing
    industry's costs of data submission. This large multi-year initiative
    would deliver improved performance and reduce costs years into the
    future.
        Nearly $1 million to develop new grain testing measures.--Domestic
    and export marketing opportunities will be enhanced for ethanol co-
    products, improved wheat quality, and low linolenic soybeans.
        User fees.--User fees, if enacted, would be charged to recover the
    costs of developing, reviewing, and maintaining official U.S. grain
    standards used by the grain industry. This fee proposal would enable
    GIPSA to recover $5 million in costs to develop, review, and maintain
    the official U.S. grain standards. Also, the Packers and Stockyards
    program would be funded by license fees of about $20 million that would
    be required of packers, live poultry dealers, swine contractors,
    stockyard owners, market agencies and dealers, as defined under the
    Packers and Stockyards Act. Current law provides the agency with
    registration requirements for the market agencies and dealers, but
    there is no authority for licensing fees. Both of these proposals are
    consistent with the Administration's efforts to shift funding for
    programs, which benefit identifiable groups, to user fees.

                         AGRICULTURAL MARKETING SERVICE

        The mission of the AMS is focused on facilitating the marketing of
    agricultural products in the domestic and international marketplace,
    ensuring fair trading practices, and promoting a competitive and
    efficient marketplace to the benefit of producers, traders, and
    consumers of U.S. food and fiber products. The Agency accomplishes this
    mission through a wide variety of publicly and user funded activities
    that help its customers improve the marketing of their food and fiber
    products and ensure that food and fiber products remain available and
    affordable to consumers. Consequently, most AMS programs enhance market
    access to current trading information, including availabilities of
    supply, location and size of demand, underutilized market facilities,
    and availability of means of transportation. In addition, the
    Standardization program contributes to the harmonization of
    international quality standards.
        Market News.--Market news reports improve market efficiency for all
    parties by offering equal and ready access to current, unbiased market
    information so that agricultural producers and traders can determine
    the best place, price, and time to buy or sell. AMS Market News
    provides this information by reporting current prices, volume, quality,
    condition, and other market data on farm products in more than 1,300
    production areas and specific domestic and international markets. The
    reports are widely distributed through the internet and news media. The
    Livestock Mandatory Price Reporting Program ensures access to
    information on meat and livestock trades continue to be available for
    producers in a consolidating industry. These data, including prices,
    contracts for purchase, and other related information on fed cattle,
    swine, lamb, beef, and lamb meat, are publicly disseminated in over 100
    daily, weekly, or monthly reports.
        Commodity Standards.--AMS works with the agricultural industry to
    establish and improve commonly recognized quality descriptions for
    agricultural commodities that support access to domestic and
    international markets. The Standardization program supports exports of
    U.S. agricultural products by helping to represent the interests of
    U.S. producers in a variety of international standards development
    meetings. AMS experts continue to participate in developing
    international dairy, meat, poultry, fruit, and vegetable standards.
    Recently, AMS' cotton specialists have been helping China adopt
    instrument testing and calibration standards for cotton comparable to
    those used in the United States to facilitate cotton trading between
    the United States and China. Compatible standards and classing
    procedures are in the interest of the United States, since China is the
    world's largest importer of cotton and the United States is its biggest
    foreign supplier.
        National Organic Program.--The National Organic Standards program
    supports market access for organic producers by setting national
    standards for organic products sold in the United States, which
    provides assurance for consumers that the organic products labeled
    ``organic'' uniformly meet those requirements. The U.S. organic food
    industry has increased to a $15 billion annual sales level and is still
    growing.
        Pesticide Data and Microbiological Data Programs.--AMS also
    provides consumer assurance and helps to maintain domestic and export
    market demand for U.S. foods by collecting pesticide residue data and
    microbiological baseline data. In 2004, the Pesticide Data program
    performed over 100,000 analyses on more than 12,000 samples. The data
    gathered and reported by AMS on pesticide residues and microbiological
    pathogens supports science-based risk assessments performed by a number
    of entities, including regulatory agencies.
        Transportation Services.--The Transportation Services program
    supports market access by facilitating the movement of U.S. agriculture
    products from farm to market. This program helps maintain farm income,
    expand exports, and sustain the flow of food to consumers by providing
    ``how to'' technical expertise, research, and data on domestic and
    international transportation to growers, producers, and others in the
    marketing chain, and for government policy decisions. The
    Transportation Services program also produces periodic publications
    that improve market access by providing information for agricultural
    producers and shippers on trends, availability, and rates for various
    modes of transportation, including grain and refrigerated transport,
    agricultural containers, and ocean shipping.
        Wholesale, Farmers, and Alternative Markets.--AMS program experts,
    in cooperation with local and city agencies, improve market access to
    market facilities by assisting local efforts to develop or improve
    wholesale and farmers markets, and to discover other direct marketing
    opportunities. This program also supports research projects to help
    agricultural producers discover new or alternative marketing channels
    and new technology.
        Federal/State Marketing Improvement Program (FSMIP).--AMS helps to
    resolve local and regional agricultural market access problems by
    awarding Federal matching grants funds for projects proposed by State
    agencies. In 2004, the FSMIP program allocated grant funds to 23 States
    for 27 projects such as studies on linking producers with new buyers
    groups and innovative uses for locally important agricultural products.
        Commodity Purchases.--USDA nutrition programs provide growers and
    producers with access to an alternative outlet for their commodities.
    AMS food purchases stabilize markets and support nutrition programs,
    such as the National School Lunch Program, the Emergency Food
    Assistance Program, the Commodity Supplemental Food Program, and the
    Food Distribution Program on Indian Reservations. AMS works in close
    cooperation with both the Food and Nutrition Service (FNS) and the Farm
    Services Agency (FSA) to administer USDA commodity purchases and to
    maximize the efficiency of food purchase and distribution operations.
    AMS, FNS, and FSA each provide a component of program administration
    according to their organizational structure and expertise. This complex
    system requires close coordination between the three agencies. To help
    control the vast array of details inherent to the procurement process,
    the Processed Commodities Inventory Management System (PCIMS) was
    developed more than 10 years ago to track bids, orders, purchases,
    payments, inventories, and deliveries of approximately $2.5 billion of
    commodities used in all food assistance programs every year and another
    $1 billion in price support commodity products maintained in inventory.
    PCIMS is still being used by the three agencies with modifications
    having been made over the years, when feasible, to add capabilities
    such as financial tracking or to meet changes in program delivery.

                            AMS' 2006 BUDGET REQUEST

        For 2006, the AMS budget proposes a program level of $742 million,
    of which $204 million (27 percent) will be funded by existing user
    fees, $450 million (61 percent) by Section 32 funds and $88 million (12
    percent) by appropriations, which includes $3 million to be derived
    from proposed new user fees. More specifically, the budget includes the
    following:
        An increase of $0.5 million to provide Market News on pork
    products.--A legislative proposal to extend and amend the Livestock
    Mandatory Price Reporting Program would include negotiated sales as
    well as formula and contract transactions on pork cuts for domestic and
    international trade. Currently, pork cut information is provided on a
    voluntary basis by buyers and sellers of pork products and includes
    only products traded on a negotiated basis. Consequently, these reports
    only cover 5 percent of total pork cuts traded. Under mandatory
    reporting, approximately 80 percent of pork products traded would be
    reported.
        An increase of $3.1 million to implement Country of Origin Labeling
    (COOL).--Beginning in 2005, AMS will be responsible for enforcing
    mandatory COOL for fish and shellfish. On September 30, 2006, mandatory
    labeling requirements will be expanded to include all other covered
    commodities. In order to ensure compliance with COOL, the budget
    proposes a surveillance and enforcement program. In 2006, AMS will
    initiate random audits of designated retailers to achieve a nationwide
    compliance rate of 70 percent for covered commodities reviewed. From
    2007 to 2010, AMS will increase its target compliance rate to 95
    percent to ensure that the public receives credible and accurate
    information.
        An increase of $0.9 million for the Pesticide Data Program and the
    Pesticide Recordkeeping Programs.--These funds are requested to
    maintain State partnerships critical to the administration of these
    programs.
        An increase of $10 million to begin development of the Web-based
    Supply Chain Management System (WBSCM).--The proposed system will
    significantly improve customer service and administrative efficiency.
    Discretionary appropriated funding is requested rather than mandatory
    Section 32 funding because the discretionary funding more accurately
    reflects the relative priority of the system versus other discretionary
    information technology needs. Implementation of WBSCM will improve the
    efficiency of Federal procurement of commodities by reducing ordering
    and delivery times from 24 days to 5 days.
        As Secretary Johanns testified before this committee last month,
    the 2006 budget funds our most important priorities while exercising
    fiscal discipline that is necessary to reduce the Federal deficit. The
    AMS budget has a number of proposals that moves us in the right
    direction while continuing to meet key priorities.
        A decrease of $4.0 million for the termination of the AMS
    Biotechnology Program.--The Biotechnology Program was initiated in 2002
    to develop the agency's capacity to test bio-engineered fruits,
    vegetables, nuts, and seeds. Due to difficulties in developing new
    testing methodologies as well as lack of demand for these services, the
    fee for service program has not yet been established. Should demand for
    these services become apparent, AMS will work with the affected
    industries to determine if alternative mechanisms can be utilized to
    facilitate the marketing of agricultural commodities by differentiating
    bioengineered from conventional commodities.
        $3 million in new user fees.--Appropriated funding would be reduced
    through the collection of user fees for the development of domestic
    commodity grade standards that are associated with a grading program.
    Users of grading services are direct beneficiaries of commodity
    standards and, therefore, should be charged for the development of
    commodity grades associated with the grading and inspection program. In
    order to implement this proposal, legislation will be submitted to
    Congress to authorize these fees.
        A reduction of $2.5 million in 1-year funding for a grant to
    Wisconsin.--This project dealt with the development of specialty
    markets under the Federal-State Marketing Improvement Program.

                                   CONCLUSION

        This concludes my statement. I am looking forward to working with
    the Committee on the 2006 budget for the Marketing and Regulatory
    Programs. We believe the proposed funding amounts and sources of
    funding are vital to enhancing market access, improving plant and
    animal health and quality, and achieving harmonization of international
    standards. It also reduces the deficit and protects American
    agriculture from terrorists. We are happy to answer any questions.
                                     ______

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

        Mr. Chairman and members of the Subcommittee, it is a pleasure for
    me to represent the Animal and Plant Health Inspection Service (APHIS)
    before you today. APHIS is an action-oriented agency that works with
    other Federal agencies, Congress, States, agricultural interests, and
    the general public to carry out its mission to protect the health and
    value of American agriculture and natural resources. This mission is
    vital not only in protecting the livelihoods of agricultural producers
    and the industries related to them, but also to United States homeland
    security. In working to carry out our mission, we rely on a set of
    interlocking protection strategies as depicted below:

        APHIS' protection system is based on a strategic premise that
    safeguarding the health of animals, plants, and ecosystems makes safe
    agricultural trade possible and reduces losses to agricultural and
    natural resources. All nine objectives in the protection system are key
    components of this strategic premise. Failing to succeed in any one
    objective endangers the entire system.
        APHIS' efforts begin with offshore threat assessment and risk
    reduction activities at the sources of exotic agricultural pests and
    diseases. Through our pest and disease exclusion programs, we follow
    animal and plant health throughout the world and use this information
    to set effective agricultural import policy, and facilitate
    international trade by clarifying and amending import requirements, as
    necessary. Our off-shore risk reduction activities also include
    conducting pest and disease eradication programs in foreign countries
    and pre-clearance inspection of certain commodities in off-shore
    locations; performing intense monitoring and surveillance for exotic
    fruit flies and cattle fever ticks in high-risk, border areas of the
    United States; and cooperating with the Department of Homeland
    Security's Bureau of Customs and Border Protection to inspect arriving
    international passengers, cargo, baggage, mail, and means of
    conveyance.
        To minimize agricultural production losses and export market
    disruptions, APHIS quickly detects and responds to new invasive
    agricultural pests and diseases, or other emerging agricultural health
    situations, through our plant and animal health monitoring programs.
    The Agency creates and updates endemic pest and disease information
    systems, and monitors and conducts surveys in cooperation with States
    and industry. APHIS also surveys for exotic plant pests and
    investigates reports of suspicious animal pests and diseases to reduce
    their spread, which eliminates significant losses and helps maintain
    pest-free status for export certification of agricultural commodities.
        APHIS also works closely with State, industry, and academic
    partners to maintain national detection networks and emergency response
    teams for plant and animal pest and disease outbreaks that may occur
    here in the United States. We work with these same partners to manage
    or eradicate economically significant endemic pests and diseases, and
    manage wildlife damage to agricultural and natural resources.
    Additionally, APHIS administers the Animal Welfare and Horse Protection
    Acts, and maintains the scientific expertise necessary to develop new
    methods to detect, diagnose, and control animal and plant pests and
    diseases.
        APHIS' mission of protecting the health and value of United States
    agricultural and natural resources encompasses a wide variety of
    activities, and the Agency strengthens key components of its protection
    system by focusing on several key objectives and strategies. I would
    like to present our recent accomplishments and budget initiatives for
    fiscal year 2006 to you in light of our five strategic mission
    priorities for the coming year.

    Ensuring the Safe Research, Release, and Movement of Agricultural
            Biotechnology
        Among our highest priorities for the next several years is
    continuing to build our recently established Biotechnology Regulatory
    Services (BRS) program. The growth of agricultural biotechnology hinges
    on the public's acceptance of this technology as safe, and APHIS'
    regulatory role is key to ensuring global acceptance. Through the BRS
    program, APHIS regulates the introduction (i.e., importation,
    interstate movement, and field release) of genetically engineered
    organisms such as plants, insects, microorganisms, and any other
    organism to ensure that they do not constitute pest threats.
        In fiscal year 2004, APHIS continued to strengthen the BRS program
    by reshaping the organization, enhancing its Compliance Unit, and
    increasing its workforce expertise (including the establishment of
    staffs devoted to environmental and ecological analysis and genetically
    altered animals). We are continuing our effort to significantly
    increase the rate of inspection for all genetically engineered crop
    field tests, with the target of inspecting each pharmaceutical and
    industrial field test site 5 times during the growing season. APHIS has
    also continued its efforts to increase the transparency of our
    biotechnology-related activities to the public and stakeholders. For
    example, we now announce the availability of environmental assessments
    (EAs) for field tests of genetically engineered plants used to
    manufacture pharmaceutical and industrial compounds in the Federal
    Register for a 30-day comment period, allowing stakeholders and the
    public to be a part of the decision-making process before APHIS
    approves a permit. We have also launched a new, more user-friendly
    website for our biotechnology-related programs that provides greater
    accessibility to our permits and decisions, news and upcoming events,
    and a link to our shared, comprehensive website developed with the Food
    and Drug Administration and the Environmental Protection Agency. In
    addition, we are continuing to make significant accomplishments in our
    international activities related to regulatory coordination. Among
    other things, we worked with Canada and Mexico to implement how trade
    of biotechnology products will comply with the articles of the
    Biosafety Protocol, thus helping to ensure uninterrupted trade between
    our countries. In the past year, APHIS personnel also met with
    approximately 20 teams of foreign officials (primarily from developing
    countries) to provide regulatory overviews and conduct risk assessment
    training.

    Strengthening Emergency and Homeland Security Preparedness and
            Responses
        The program activities under this strategic priority minimize
    agricultural production losses and export market disruptions by quickly
    detecting and responding to new invasive agricultural pests and
    diseases or other emerging agricultural health situations. The Agency
    focuses on preventing the introduction and establishment of pests and
    diseases by responding to outbreaks quickly and efficiently at the
    national, State, and local levels. We work to ensure early detection
    through formal plant pest surveys and animal disease surveillance
    programs as well as through outreach programs to our stakeholders and
    the general public.
        The Animal Health Monitoring and Surveillance (AHMS) and Pest
    Detection programs coordinate national detection efforts for animal and
    plant pests and diseases. Both work closely with State and university
    cooperators to ensure that any introduction of exotic or foreign pests
    and diseases is quickly detected. These programs are also working
    closely with USDA's Cooperative State Research, Education, and
    Extension Service to coordinate the National Animal Health Laboratory
    Network and the National Plant Diagnostic Network to increase testing
    capacity in the United States for economically and environmentally
    significant animal and plant diseases.
        To prevent foreign animal disease incursions, APHIS thoroughly
    investigates all suspicious situations. In fiscal year 2004, the AHMS
    program conducted 870 suspected foreign animal disease investigations,
    up from 480 in fiscal year 2003. The program is also continuing to
    implement an enhanced surveillance program in response to the December
    2003 detection of bovine spongiform encephalopathy (BSE) in Washington
    State. APHIS is sampling as many cattle from high-risk categories (such
    as those exhibiting signs of central nervous system disorders) as
    possible in a 12-18 month period. As of March 22, more than 284,000
    animals have been sampled under the enhanced surveillance plan, none of
    which tested positive. The enhanced surveillance effort will provide
    sufficient data and information to establish the probable prevalence
    level of BSE in the United States.
        To facilitate response efforts in the event of a future foreign
    animal disease outbreak, APHIS and its State and industry cooperators
    are establishing a National Animal Identification System (NAIS)
    designed to identify, within 48 hours of discovery, any agricultural
    premise exposed to a disease so that potential outbreaks can be
    contained and eradicated as quickly as possible. The NAIS is a
    networked computerized system that will allow us to identify livestock
    and poultry and record their movements over their life-spans.
    Currently, 44 States have premises registration capabilities that are
    operational in the NAIS, and our goal is to have all States operational
    by mid-2005. As of January 30, 2005, APHIS has awarded or committed
    more than $13 million to 42 States and Native American Tribes to focus
    primarily on animal premises identification, which is the foundation of
    the NAIS.
        Through the Pest Detection program, APHIS and its cooperators have
    established State, regional, and national Cooperative Agricultural Pest
    Survey (CAPS) committees to ensure that stakeholders at each level are
    involved in the process of targeting plant pests for survey each year.
    APHIS targets pests based on their risk of entry and potential to cause
    significant economic or environmental damage. In fiscal year 2004, the
    CAPS committees began institutionalizing a system to choose survey
    projects based on both the pests' risk factors and States' priorities.
    In 2004, the Agency and its cooperators conducted national surveys for
    20 high-risk pests and 424 individual surveys across the country.
        In fiscal year 2004, APHIS continued working with State
    cooperators, the American Soybean Association, and university partners
    to prepare for the arrival of soybean rust in the United States. As
    part of our efforts to minimize the impact of the disease, we trained
    more than 300 soybean producers, handlers, and consultants in soybean
    rust detection and worked with pesticide companies to ensure that
    options for fungicide mitigation would be available to soybean
    producers. We also assembled a soybean rust detection assessment team
    and put the assessment team into action early in fiscal year 2005 when
    the Agency detected soybean rust for the first time in Louisiana. APHIS
    and other USDA agencies are continuing to work with the soybean
    industry to help producers adjust to the presence of soybean rust in
    the United States through the development of monitoring and
    surveillance programs (and a website to disseminate up-to-date
    information about the disease's spread), predictive modeling techniques
    to identify at-risk areas for disease spread, and decision criteria for
    fungicide application.
        Under the Animal and Plant Health Regulatory Enforcement program,
    our Investigative and Enforcement Services unit continues to provide
    support to all APHIS programs by conducting investigations of alleged
    violations of Federal laws and regulations under APHIS' jurisdiction
    through appropriate civil or criminal procedures. Regulatory
    enforcement activities prevent the spread of communicable animal pests
    and diseases in interstate trade. In fiscal year 2004, APHIS conducted
    774 investigations involving animal health programs, resulting in 271
    warnings, 71 civil penalty stipulations, six Administrative Law Judge
    Decisions, and $158,625 collected in fines. APHIS also conducted 2,391
    investigations involving plant quarantine violations resulting in 214
    warnings, 807 civil penalty stipulations, 27 Administrative Law Judge
    decisions, and approximately $1.4 million collected in fines.
        The Agency maintains a cadre of trained professionals prepared to
    respond immediately to potential animal and plant health emergencies.
    APHIS' Emergency Management System (EMS) is a joint Federal-State-
    industry effort to improve the ability of the United States to
    successfully manage animal health emergencies, ranging from natural
    disasters to introductions of foreign animal diseases. The EMS program
    identifies national infrastructure needs for anticipating, preventing,
    mitigating, responding to, and recovering from such emergencies. By
    Presidential Homeland Security Directive, APHIS is restructuring its
    emergency response systems according to the National Incident
    Management System and developing an Incident Command System training
    curriculum for our employees. In fiscal year 2004, APHIS held two
    emergency response table-top exercises with Canada and Mexico designed
    to provide training to the employees involved, and identify weaknesses
    in our cooperative emergency response networks. The two recent
    exercises covered a simulated foreign animal disease outbreak and
    vaccine distribution from the vaccine bank.
        APHIS has been challenged with numerous emergencies over the last
    several years. We took quick and aggressive action to address plant and
    animal health situations with Mediterranean fruit fly, citrus canker,
    emerald ash borer, exotic Newcastle disease, low and high pathogenic
    avian influenza, wildlife rabies, sudden oak death, white spot syndrome
    disease, and BSE. Over $234 million of Commodity Credit Corporation
    funds was approved for these emergencies in fiscal year 2004.
        As reinforced by the Bioterrorism Preparedness and Response Act of
    2002, APHIS also tracks plant and animal disease agents that could be
    used in acts of bioterrorism. The Act requires that entities, such as
    private, State, and Federal research laboratories, universities, and
    vaccine companies, as well as individuals that possess, use or transfer
    select agents and toxins identified as a severe threat to animal and
    plant health or public health, register with the appropriate Federal
    authority--either APHIS or the Centers for Disease Control and
    Prevention (CDC). APHIS is cooperating with CDC to promulgate final
    joint regulations on requirements that facilities must meet if they
    wish to possess, transfer, or use select agents. Our fiscal year 2006
    budget requests the establishment of a new line item, Select Agents, to
    help consolidate and coordinate these activities throughout the Agency.

    Reducing Domestic Threats Through Increased Offshore Threat Assessment
            and Risk-reduction Activities
        Responding to introductions of invasive pests and diseases once
    they arrive on our shores is extremely costly for United States
    taxpayers and agricultural producers alike. Accordingly, APHIS is
    working to enhance its offshore threat assessment and risk reduction
    programs with the goal of reducing the need for expensive emergency
    response programs. Officials with our Agricultural Quarantine
    Inspection, Trade Issues Resolution Management, Foreign Animal Disease/
    Foot and Mouth Disease (FAD/FMD), and Import/Export programs track
    plant and animal health issues around the world and use the information
    to set import policies to ensure that agricultural diseases are not
    introduced through imports. This information also helps determine what
    pests and diseases might have pathways into the United States and
    informs our monitoring and surveillance efforts here at home. APHIS is
    establishing a formal international information gathering program under
    the FAD/FMD and Pest Detection line items to build on these efforts.
    The program has already placed three animal and plant health
    specialists in South Africa, Brazil, and the Dominican Republic, and
    the fiscal year 2006 budget would expand the program to collect
    information from 16 additional countries.
        APHIS also targets certain high-risk pests and diseases for
    eradication in other countries. Several devastating agricultural pests
    and diseases, including FMD, Mediterranean fruit fly (Medfly),
    screwworm, classical swine fever, and tropical bont tick are present in
    Central and South America or the Caribbean. Without the efforts of
    APHIS and cooperating governments to eradicate these pests and diseases
    at their sources, they would likely reach the United States through
    means of natural spread. Through the FAD/FMD program, APHIS and
    cooperating countries established a permanent barrier against FMD at
    the Panama/Colombian border. Under an agreement with Panama and Mexico,
    we collected 1,166 samples of suspected vesicular disease throughout
    Central America; fortunately, all tested negative for FMD. Through the
    international cooperative Medfly eradication program, or Moscamed, we
    cooperate with Mexico, Guatemala, and Belize to eradicate and control
    Medfly, thereby preventing the pest from moving north into the United
    States. In fiscal year 2004, the program reduced the infested area in
    the southern Mexican provinces of Chiapas and Tabasco by over 60
    percent.
        Because of climate and weather conditions, California, Texas,
    Florida, and other border States are vulnerable to outbreaks of exotic
    fruit flies and other agricultural pests such as cattle fever ticks.
    APHIS conducts preventive release programs (PRPs) of sterile flies in
    California and Florida to prevent Medfly from becoming established.
    Since the California PRP began in 1996, APHIS has detected only four
    Medflies in the State and reduced the number of Medfly infestations in
    the Los Angeles area by 97 percent, saving over $145 million in
    eradication costs. In response to a recent Medfly outbreak in Tijuana,
    APHIS extended the PRP to an additional 251 square-mile area to prevent
    the outbreak from spilling into California. APHIS also conducts
    intensive trapping activities and emergency response programs to ensure
    that other exotic fruit flies, such Oriental fruit fly, do not become
    established. In addition, APHIS operates Mexican fruit fly (MFF)
    suppression programs in Texas, and will enhance its efforts to ensure
    that MFF does not become established in the United States.
        To ensure our import regulations are enforced and adequately
    protect United States agricultural and natural resources, we work
    closely with the Department of Homeland Security's Bureau of Customs
    and Border Protection to monitor and intercept prohibited items that
    arrive at United States ports of entry. In fiscal year 2004,
    agricultural inspectors checked the baggage of nearly 69 million
    arriving passengers and cleared 48,335 ships and 2,580,470 cargo
    shipments. In total, agricultural inspectors intercepted 49,180
    reportable pests at land borders, maritime ports, airports, and post
    offices.

    Managing Issues Related to the Health of United States Animal and Plant
            Resources and Conflicts With Wildlife
        In addition to preventing the entry and establishment of new
    agricultural pests and diseases, APHIS works to limit the damage caused
    by those already present in the United States, eradicate certain
    established or domestic pests and diseases, and manage wildlife damage
    to agricultural and publicly owned resources. As with all our efforts,
    we work closely with State, Tribal, industry, and academic partners in
    these programs and leverage these partnerships for more efficient and
    effective operations. APHIS also enforces the Animal Welfare and Horse
    Protection Acts, which protect certain animals from mistreatment when
    used in commerce or for exhibition purposes.
        The Boll Weevil Eradication Program continues to make significant
    progress toward eliminating this serious cotton pest from the United
    States. As fiscal year 2005 began, more than 9 million acres of cotton
    spread over nine States were weevil-free. While fiscal year 2004
    activities were hampered by weather events, the program still expects
    that 90 percent of cotton acreage will be weevil-free by the end of
    this year. APHIS is also continuing Pink Bollworm eradication and
    suppression activities. Pending growers' approval, APHIS, its State and
    industry partners, and the Government of Mexico plan to implement a
    comprehensive cooperative eradication program in three phases. When
    compared with fiscal year 2001 trapping data, activities in phase one
    have already shown a reduction in pink bollworm adults by over 94
    percent in Texas, 97 percent in New Mexico, and 99 percent in
    Chihuahua, Mexico.
        APHIS also continues its effort to address the last stubborn
    pockets of endemic animal diseases such as bovine tuberculosis,
    brucellosis, and pseudorabies. Forty-six States are now accredited-free
    of bovine tuberculosis, and forty-eight have achieved class free status
    for brucellosis. At the start of fiscal year 2005, all fifty States and
    three United States territories had reached Stage V (free) status for
    pseudorabies. APHIS is working with State cooperators to focus on
    preventing the transmission of these diseases between wildlife and
    domestic livestock, and to identify remaining infected herds. In
    addition, relatively new efforts are now well underway to assist
    producers in controlling diseases such as low pathogenic avian
    influenza.
        APHIS' Wildlife Services (WS) Operations Program works to protect
    agricultural crops from wildlife damage; protect livestock from
    predation; prevent the transmission of wildlife-borne diseases to
    safeguard the livestock industry; protect and preserve natural
    resources, including threatened and endangered species; protect human
    health and safety by preventing wildlife collisions with aircraft and
    wildlife conflicts with humans; and protect wildlife damage to
    property. The program provided wildlife hazard management assistance to
    over 550 airports nationwide in fiscal year 2004, up from 42 in fiscal
    year 1990. APHIS also continues to reduce the threat that wildlife
    rabies poses to livestock and human health by maintaining a barrier
    against the spread of the disease to uninfested areas. In fiscal year
    2004, the WS Operations program reinforced oral rabies vaccination
    zones along the Appalachian Ridge through the distribution of more than
    6.3 million vaccine baits over 31,000 square miles, and in areas of
    Texas with the distribution of 2.75 million baits over 29,000 square
    miles.
        APHIS and its cooperators are increasingly aware of the connection
    between wildlife disease and both domestic animal and human health. For
    example, bovine tuberculosis in deer continues to affect Michigan's
    ability to eradicate the disease from its cattle population, and the
    transmission of chronic wasting disease between wild deer and elk and
    domestic deer and elk continues to be of concern. Accordingly, APHIS
    continued to implement its Wildlife Disease Surveillance and Emergency
    Response Program, and participated in disease surveillance and control
    activities for 15 wildlife and domestic diseases in fiscal year 2004.
        APHIS' Animal Welfare Program carries out activities designed to
    ensure the humane care and treatment of animals used in research,
    exhibition, the wholesale pet trade, or transported in commerce. The
    program places primary emphasis on voluntary compliance through
    education, but we also utilize inspection of records, investigation of
    complaints, and reinspection of problem facilities to ensure that
    protected animals receive an appropriate level of care. When education
    efforts fail to achieve voluntary compliance, APHIS personnel
    investigate alleged violations of Federal animal welfare and horse
    protection laws and regulations, and oversee subsequent prosecution of
    violators through appropriate civil or criminal procedures. In fiscal
    year 2004, APHIS conducted 288 animal welfare investigations, resulting
    in 205 formal cases submitted for civil administrative action. We also
    issued 120 letters of warning and resolved 56 cases, resulting in
    $92,972 in fines. Administrative law judges resolved another 41 cases,
    resulting in $455,642 in fines.
        APHIS continued to emphasize public education and outreach in
    fiscal year 2004 through participation in canine care workshops around
    the country with commercial breeders as the target audience; veterinary
    workshops to educate veterinarians providing services to regulated
    facilities; and, two exotic cat care workshops. Through regulatory
    inspections and educational efforts, the Animal Welfare program
    succeeded in raising the level of facility compliance from a baseline
    of 58 percent in 2001 to 70 percent in 2004.

    Resolving Trade Barrier Issues Related to Sanitary and Phytosanitary
            (SPS) Issues
        All of APHIS' efforts to protect the health of United States
    agricultural resources and keep them free of major pests and diseases
    support American farmers' ability to sell their products on the world
    market. In turn, our efforts to facilitate safe trade with other
    countries, including activities such as monitoring world agricultural
    health and providing assistance to developing countries to build
    regulatory capacity, help ensure that imported products will not
    threaten our domestic production capability and health status.
        Because of APHIS' expertise in animal and plant health issues and
    regulatory role, the Agency serves as a key resource in resolving
    sanitary and phytosanitary issues that become trade barriers. The
    Agency works closely with trade policy organizations, including USDA's
    Foreign Agricultural Service and the United States Trade
    Representative. Officials with our Trade Issues Resolution Management
    programs work to minimize trade disruptions caused by animal and plant
    health issues. In fiscal year 2004, reopening markets for United States
    poultry and beef posed the greatest challenges. Outbreaks of low
    pathogenic avian influenza (LPAI) and exotic Newcastle disease
    continued to affect poultry markets throughout the Americas, Asia, and
    Europe. However, since August 2004, the United States regained LPAI-
    free status under the World Health Organization for Animal Health (OIE)
    definition. As a result, APHIS reopened poultry markets in all 25
    European Union countries, Russia, Japan, and Chile, among others. The
    total value of United States exports of poultry and poultry products
    actually increased by 15 percent between January and August of 2004,
    compared to the same period in fiscal year 2003. APHIS continues to
    work with the limited number of trading partners that maintain bans on
    United States poultry because of LPAI, including China.
        In regard to beef markets that were closed to United States exports
    because of BSE, APHIS has been successful with reopening markets for
    United States beef in more than 20 countries. Canada and Mexico have
    partially reopened their markets to certain United States beef
    products, and we continue to work on reopening borders with Japan, a
    major export market for United States beef, as well as other Asian
    nations. APHIS has been successful in opening many export markets for
    other ruminant products, such as pet food and bovine embryos and semen,
    banned because of BSE.
        Altogether, APHIS resolved 112 sanitary and phytosanitary issues in
    fiscal year 2004, allowing over $5 billion worth of trade to occur. Our
    export accomplishments included opening new markets for pork to
    Australia and seed potatoes to China, and expanding existing market
    access for wheat to Brazil, grains to Canada, and corn to Argentina. In
    addition, we retained 23 markets for beef and beef products worth more
    than $330 million world-wide.

                        FISCAL YEAR 2006 BUDGET REQUEST

        The fiscal year 2006 Budget Request for Salaries and Expenses
    totals just over $866 million, an increase of $57.9 million over the
    fiscal year 2005 Consolidated Appropriations Act. About $6.5 million of
    the increase is for pay raises. Of the total request, approximately
    $436 million is identified in the President's Homeland Security
    initiative, including $299 million in discretionary funding. Of the
    $436 million, $174 million is identified in the President's Food and
    Agriculture Defense Initiative, which serves to protect the agriculture
    and food system in the United States from intentional, unintentional,
    or naturally occurring threats.
        The increase, approximately 7 percent above the fiscal year 2005
    appropriation, is for initiatives designed to address the increasing
    domestic and international threats to the health of United States
    agriculture. On the domestic side, these include continuing
    enhancements to our Biotechnology Regulatory Services program;
    enhancements to both animal and plant health surveillance systems and
    diagnostic capabilities; the ability to track animal and plant
    pathogens and toxins identified as Select Agents; the build up our
    animal disease vaccine bank; the ability to address wildlife disease
    threats to livestock health; and an investment to substantially reduce
    emergency fund transfers for a variety of plant pest and disease
    programs. In the international arena, APHIS plans to use additional
    funding to establish a formal international information collection
    program that will help us set agricultural import policy and inform
    others of our monitoring and surveillance efforts here in the United
    States; enhance CSF eradication in the Caribbean; complete construction
    of a new sterile screwworm production facility in Panama; and protect
    and expand the $53 billion annual agricultural export market, among
    other things.
        The following paragraphs detail some of the accomplishments
    expected under the fiscal year 2006 budget request:

    Ensuring the Safe Research, Release, and Movement of Agricultural
            Biotechnology
      --An increase of $4,320,000 for the Biotechnology Regulatory Services
            Program will allow us to continue to develop biotechnology
            regulatory infrastructure, policies, and regulations while
            conducting daily program operations, i.e., preparing risk
            assessments, issuing permits, reviewing petitions for
            deregulation, inspecting field test sites, building capacity in
            developing countries, and international activities.

    Strengthening Emergency and Homeland Security Preparedness and
            Responses
      --An increase of $16,893,000 for the Pest Detection Program to
            continue outreach to volunteers; surveying for cactoblastis
            (cactus moth) and soybean pests; increasing cooperative
            agreements with State cooperators by an average of $110,000 per
            agreement. We anticipate being able to detect 95 percent of
            newly introduced economically significant pests before they
            spread.
      --An increase of $6,707,000 for the Animal Health Monitoring and
            Surveillance Program to enhance the current disease monitoring
            and surveillance system by increasing and integrating its
            infrastructure in order to better protect the Nation's animals
            from the threat of emerging and foreign animal diseases.
      --An increase of $1,950,000 for the Wildlife Disease Monitoring and
            Surveillance Program to build an animal disease surveillance
            system that has domestic and international components for
            establishing methods for surveillance data collection in
            wildlife populations and investigating the prevalence of
            specific diseases that may move from wildlife to livestock or
            poultry populations. Wildlife disease specialists will be
            trained to respond to disease outbreaks within 72 hours by
            fiscal year 2006 with the ultimate goal of reducing response
            time to 24 hours.
      --An increase of $5,867,000 for the Veterinary Diagnostics Program to
            continue its investment in the National Animal Health
            Laboratory Network and begin a transition to new information
            technology that will align the program's abilities, efficiency,
            and effectiveness with the ever-growing demand for program
            services. The investment will increase the program's ability to
            respond to the threat of bio-terrorism and further APHIS'
            commitment to the safety of the United States livestock
            population.
      --An increase of $9,671,000 for the Emergency Management System
            Program to improve the response time for emergencies by 2 days
            to enhance the animal health emergency preparedness.
      --An increase of $25,651,000 for the Emerging Plant Pests Program to
            enhance survey and tree removal to control emerald ash borer;
            remove trees infected by and exposed to citrus canker; and,
            enhance the Agency's emergency response infrastructure.
      --An increase of $5,250,000 for the Select Agents Program to fully
            carry out the activities mandated by the Agricultural
            Bioterrorism Protection Act of 2002.
      --An increase of $928,000 for Animal and Plant Health Regulatory
            Enforcement to continue support to all APHIS programs by
            conducting investigations of alleged violations of Federal laws
            and regulations under APHIS' jurisdiction; overseeing/
            coordinating subsequent prosecution of violators through
            appropriate civil or criminal procedures; and providing Quick
            Response Teams to assist in market surveillance, border
            blitzes, and emergency program efforts such as those provided
            during exotic Newcastle and BSE emergency outbreaks in fiscal
            year 2003 and 2004.

    Reducing Domestic Threats Through Increased Offshore Threat Assessment
            and Risk-reduction Activities
      --An increase of $6,424,000 for the Foreign Animal Diseases/Foot and
            Mouth Disease Program (FAD/FMD) to place animal specialists
            overseas to collect information on FAD, and expand classical
            swine fever work into Central America, targeting Belize and
            Nicaragua.
      --An increase of $3,670,000 for the Screwworm Program to purchase
            essential equipment for its new sterile screwworm production
            facility in Panama, which will help establish a permanent
            barrier against the pest at the Panama-Columbia border.

    Managing Issues Related to the Health of United States Animal and Plant
            Resources and Conflicts With Wildlife
      --An increase of $770,000 for the Animal Welfare Program to respond
            to rapid growth in the number of new licensees and registrants,
            particularly in western States, by hiring eight new animal care
            inspectors and stationing them at key locations where workloads
            are most critical. Of the amount requested for Animal Welfare
            activities, approximately $11 million will be derived from new
            user fees.
      --An increase of $1,666,000 for the Fruit Fly Exclusion and Detection
            Program to be prepared to respond rapidly to domestic
            outbreaks, prevent the northward spread of the Mediterranean
            fruit fly into Central Mexico, and provide adequate numbers of
            sterile flies for the preventive release program in the United
            States.
      --An increase of $3,000,000 for the Wildlife Services Operations
            Airport Safety Program to enhance human safety by reducing
            wildlife strikes to aircraft.
      --An increase of $5,000,000 in funding for rabies under the Wildlife
            Services Operations Program to maintain the oral rabies
            vaccination barrier against spread of this disease to the west
            of the Appalachian Mountains.
      --An increase of $750,000 in the Wildlife Services Operations Program
            for brown tree snake interdiction activities in Guam to prevent
            the spread of this invasive animal to areas with fragile
            ecosystems, such as Hawaii and the Northern Marianas.
      --An increase of $5,000,000 in the Wildlife Services Operations
            Program to provide funding for Homeland Security (Food and
            Agriculture Defense) initiative of wildlife disease
            surveillance as requested in the fiscal year 2005 Budget.

    Resolving Trade Barrier Issues Related to Sanitary and Phytosanitary
            (SPS) Issues
      --An increase of $5,742,000 for the Trade Issues Resolution and
            Management Program to expand and retain markets to provide new
            market access and facilitate trade worth $2.4 billion in fiscal
            year 2006 in part through opening new offices in Thailand,
            India, Italy, West Africa, and Brazil.

                                   DECREASES

        To support our high priority programs, we propose several
    offsetting decreases:
        The high priority placed on deficit reduction limited the
    availability for certain activities. We propose decreases of
    $31,300,000 for the Boll Weevil program, which is possible because of
    the program's success and will not affect its ability to meet the
    target of complete eradication by 2008; $1,412,000 for the Brucellosis
    program; $1,855,000 for the Chronic Wasting Disease program; $1,128,000
    for the Grasshopper program; $15,435,000 for the Johne's Disease
    program; $829,000 for the Noxious Weeds program; and, $11.48 million
    for Wildlife Services Operations. Within the Emergency Plant Pests line
    item, we propose reductions of $13,682,000 for Asian longhorned beetle
    and $1,445,000 for sudden oak death. Within the appropriated
    Agricultural Inspection Quarantine program, we propose to shift
    $2,748,000 from the Hawaiian interline inspection program to our newly
    expanded National Plant Germplasm and Biotechnology Laboratory, which
    supports the Agency's emergency response capabilities, eradication
    programs, pest exclusion activities, biotechnology permitting programs,
    and the newly mandated Select Agents program. We are also proposing new
    user fees for the Animal Welfare program, which would generate
    $10,857,000 and replace the same amount of appropriated funding.

                                   CONCLUSION

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

      Prepared Statement of David R. Shipman, Acting Administrator, Grain
               Inspection, Packers and Stockyards Administration

                                  INTRODUCTION

        Mr. Chairman and Members of the Committee, I am pleased to
    highlight the accomplishments of the Grain Inspection, Packers and
    Stockyards Administration (GIPSA), and to discuss the agency's fiscal
    year 2006 budget proposal.
        GIPSA's activities are an integral part of USDA-wide efforts to
    support a competitive global marketplace for U.S. agricultural
    products. Our mission is to facilitate the marketing of livestock,
    poultry, meat, cereals, oilseeds, and related agricultural products,
    and to promote fair and competitive trading practices for the overall
    benefit of consumers and American agriculture.
        We fulfill our service and regulatory roles through our Packers and
    Stockyard Program, which promotes a fair, open, and competitive
    marketing environment for the livestock, meat, and poultry industries
    and our Federal Grain Inspection Service, which provides the U.S. grain
    market with Federal quality standards and a uniform system for applying
    these standards to promote equitable and efficient marketing.

                                  ORGANIZATION

        We carry out our mission with a dedicated staff of 722 employees
    working in partnership with a variety of State and private entities.
    Our Packers and Stockyards Program relies on three regional offices
    specialized in one of the following: poultry, hogs, or cattle/lamb. Our
    grain inspection services are delivered by the national inspection
    system, a network of Federal, State, and private inspection personnel.
    The system includes 10 GIPSA field offices, 2 Federal/State offices,
    and 56 State and private agencies authorized by GIPSA to provide
    official services.

                         PACKERS AND STOCKYARDS PROGRAM

        Our Packers and Stockyards Program (P&SP) administers the Packers
    and Stockyards Act (P&S Act) to ensure fair and competitive marketing
    in livestock, meat and poultry for the benefit of consumers and
    American agriculture. The P&S Act is intended to protect producers,
    growers, market competitors, and consumers against unfair,
    discriminatory, or deceptive practices that might be carried out by
    those subject to the Act. To meet this objective, GIPSA seeks to
    educate, regulate and investigate individuals and firms subject to the
    P&S Act; to respond to anti-competitive behavior, unfair, deceptive, or
    unjustly discriminatory trade practices; and to ensure livestock
    producers and poultry growers are paid for their products. GIPSA takes
    appropriate corrective action when there is evidence that firms or
    individuals have violated the P&S Act.
        The livestock, meatpacking, and poultry industries are important
    segments of American agriculture and the Nation's economy. With only
    152 employees, we regulate these industries, estimated by the
    Department of Commerce in fiscal year 2002 to have an annual wholesale
    value of $120 billion. At the close of fiscal year 2004, 5,678 market
    agencies and dealers and 2,015 packer buyers were registered. In
    addition, there were 1,443 facilities that provided stockyard services,
    an estimated 6,000 slaughtering and processing packers, meat
    distributors, brokers and dealers, and 202 live poultry dealers
    operating subject to the P&S Act.
        Our regulatory responsibilities are the heart of our mission to
    administer the P&S Act. To this end, GIPSA closely monitors practices
    that may violate the P&S Act. Last fiscal year, we conducted over 1,900
    investigations, of which 146 were handled by Rapid Response Teams. As a
    result of these investigations, the Packers and Stockyards Program
    helped restore over $17 million to the livestock, meatpacking, and
    poultry industries. The amount of monetary returns varies by year;
    however, in the first 5 months of fiscal year 2005 we have helped
    restore over $18 million to the livestock, meatpacking, and poultry
    industries.
        We continue to work with violating firms to achieve voluntary
    compliance, and continue to initiate appropriate corrective action when
    we uncover evidence that the P&S Act has been violated. During fiscal
    year 2004, with assistance from the Office of the General Counsel, we
    filed 15 administrative or justice complaints alleging violations of
    the P&S Act. These formal disciplinary complaints resulted in five
    decisions ordering the payment of $61,750 in civil penalties and
    suspending 12 registrants from operating for periods of 45 days to 5
    years.
        We regularly assist the FBI, State and local law enforcement
    agencies with their investigations. Some of our investigations involve
    overlapping jurisdiction, and sometimes these agencies call on GIPSA
    for its expertise. In addition, we communicate with our sister agencies
    within USDA, the Department of Justice, the Commodity Futures Trading
    Commission, and local and State governmental organizations to discuss
    common issues and when appropriate, coordinate plans.
        To ensure that producers and growers are aware of the protections
    the P&S Act provides, we have a hotline (1-800-998-3447) by which
    stakeholders and others may anonymously voice their concerns. In fiscal
    year 2004, 65 percent of the hotline calls received resulted in
    investigations. To encourage voluntary compliance, we regularly attend
    industry meetings and conduct orientation sessions (28 in fiscal year
    2004) for new auction market owners and feed mills to educate them
    about their fiduciary and other responsibilities under the P&S Act.
        Following the discovery of the bovine spongiform encephalopathy
    (BSE) positive cow in December, 2003, we established three special task
    forces to provide protection to livestock producers and members of the
    cattle industry commensurate with the P&S Act. These task forces were
    based in our Denver office which has lead responsibility for cattle,
    and included technical experts from our Atlanta and Des Moines regional
    offices and headquarters.
        The BSE Task Forces monitored livestock markets and packers for
    financial failures; reviewed changes in procurement practices; analyzed
    changes in market prices; received complaints from the public; and
    conducted 96 investigations. These investigations identified 11
    violations of the P&S Act. Two of these firms have corrected the
    violations; one investigation file has been forwarded for a possible
    formal complaint; and the remaining firms have been given an
    opportunity to comply with the P&S Act.
        Following the disclosure of avian influenza in February 2004 by the
    Animal and Plant Health Inspection Service (APHIS), we created a new
    Avian Influenza/Poultry Policy Task Force out of the Atlanta Regional
    Office. Like the BSE Task Force, the AI Task Force developed strategies
    to identify and respond to potentially unlawful practices unique to
    current market caused by the outbreak. In the current fiscal year, the
    AI Task Force will continue monitoring the industry and responding to
    the current AI situation.
        Together with our stakeholders and other interested parties, this
    year we developed and published two voluntary industry standards, in
    addition to two standards established earlier, for technologies used to
    assess quality and determine payment for livestock, meat or poultry.
    These standards help both producers and packers. Producers are more
    likely to get full value for the quality of livestock they produce and
    packers are more likely to pay only for the product they want to
    purchase. We will continue to work with stakeholders to develop
    additional standards, as needed, to enhance transparency in the
    marketplace.
        In fiscal year 2004 we also reviewed the current bonding
    requirements under the P&S Act and the returns to unpaid sellers from
    the bonds of failed firms. The results of this work are under review to
    determine whether regulatory changes are necessary to meet the
    objectives of the P&S Act.
        In fiscal year 2004, GIPSA implemented a web-based Swine Contract
    Library in accordance with the requirements of the Livestock Mandatory
    Reporting Act of 1999. Packers are required to file with GIPSA swine
    purchase contracts and monthly reports about the number of swine they
    expect to be delivered under contract in the next 12 months.
        The Swine Contract Library (SCL) includes information from swine
    packing plants with a slaughter capacity of 100,000 swine or more per
    year. Thirty-two firms operating 51 plants accounting for approximately
    95 percent of industry slaughter are subject to the SCL. GIPSA has
    received over 707 contracts to date. Information, by region, including
    price, premiums, discounts, grids, formulas, and other important
    contract terms extracted from offered and available contracts used to
    purchase hogs is now available to the public through the internet.
        The Livestock and Meat Marketing Study, for which Congress
    appropriated $4.5 million in fiscal year 2003, will have a delayed
    completion. GIPSA awarded $4,319,373 to the Research Triangle Institute
    (RTI) on June 14, 2004. RTI assembled a coalition of researchers from
    Colorado State University, Iowa State University, Montana State
    University, North Carolina State University, and the Wharton School of
    Business. RTI is continuing preparations for data collection and the
    overall study. RTI is scheduled to release study reports in mid-year
    2005 and mid-year 2006. The first report will provide information about
    the types of livestock arrangements in the cattle, hog, and sheep
    industries based on a survey conducted by RTI. The second report will
    provide detailed economic analyses about the arrangements. The study
    will be completed within the amount appropriated.

                        FEDERAL GRAIN INSPECTION SERVICE

        Our Federal Grain Inspection Service (FGIS) facilitates the
    marketing of U.S. grain and related agricultural products through the
    establishment of standards for quality assessments, regulation of grain
    handling practices, and management of a network of Federal, State, and
    private laboratories that provide impartial, user-fee funded official
    inspection and weighing services under the authority of the U.S. Grain
    Standards Act and the Agricultural Marketing Act of 1946.
        FGIS establishes terms and methods for quality assessments that the
    grain industry relies on to buy and sell over $51 billion of
    commodities annually. These standards for quality assessments provide
    the U.S. grain marketing system with the means to align post-harvested
    crop quality with the diverse quality needs of today's food and feed
    industry. GIPSA currently maintains more than 1,400 different quality
    assessment terms and methods to characterize the quality of grain and
    grain related products.
        We are expanding our work with producers, technology providers, and
    food and feed manufacturers to consensually identify the essential
    quality attributes that require standard measurement to effectively
    differentiate quality and add value to U.S. agriculture. For example,
    FGIS, working with seed companies and producers, has identified the
    need to measure the level of linolenic acid in soybeans, an attribute
    that improves the stability and lessens or precludes the need to
    hydrogenate soy oil. Hydrogenation produces trans fatty acids, which
    have been linked to health problems. We now need to work with the
    soybean industry and establish acceptable reference standards and rapid
    assay methods to measure the level of linolenic acid in soybeans, an
    initiative included in our fiscal year 2006 budget request. While
    commercial production of low linolenic soybeans will begin in 2005,
    some industry sources estimate that within several years, they will
    account for 20 percent of soybean acreage at a value of $5 billion.
        We are also working with the wheat industry in an effort to regain
    the U.S. wheat market share which has declined from 33 percent of the
    international market in 1995 to an estimated 26 percent in 2004. Our
    goal is to develop rapid measurement methods to differentiate wheat
    quality at the first point of sale and allow the U.S. wheat industry to
    better meet the needs of foreign buyers. To date, working with the
    wheat industry, we have identified several key quality attributes, such
    as gluten strength, that require rapid measures, as well as the need to
    validate international reference methods relating to the attributes.
    Gaining consensus on the salient wheat attributes and reference methods
    will allow GIPSA to pursue the development of rapid analytical methods
    for use at the first point of sale, another initiative included in the
    fiscal year 2006 budget.
        As we develop measures of new attributes entering the market, we
    are ensuring the current measurement methods are accurate and cost-
    effective. For example, we are working to transform the measurement of
    grain moisture. Maintaining current calibrations for moisture
    measurement is time consuming and resource intensive. Advances in the
    basic means to measure moisture, led by GIPSA, have the potential to
    greatly reduce maintenance costs and improve the accuracy of moisture
    measurements over a much wider range. These advances will benefit the
    entire grain industry, from producer to food manufacturer.
        Similar improvements are being implemented for wheat and barley
    protein measurements this year. In collaboration with industry and
    government officials throughout the world, GIPSA has advanced new
    Artificial Neural Network (ANN) technology for protein measurement,
    which reduces overall program costs and promotes greater harmonization
    with U.S. trading partners.
        We are introducing digital technology to improve the subjective
    assessments made by inspectors and, in some instances, replace them
    with objective measures. The percentage of broken rice is a critical
    factor for producers and the rice industry. Using digital technology,
    we have improved the consistency of measurements and simultaneously
    reduced the analytical time by over 75 percent.
        We are also working with stakeholders on grading standards to
    further facilitate trade. As the production of peas for feed has
    surged, as evident by a 108 percent increase in production from 2003 to
    2004, a need for national feed pea standards has evolved. We are
    working to meet this need. As the global competition in soybean markets
    intensifies, we are collaborating with the soybean industry to
    determine whether changes in analytical methods and grading standards
    would improve the United States competitive position. One grading
    factor under review is test weight per bushel, a factor used to market
    soybeans in the United States for over a half century, but not used by
    our major international competitors. We are also working closely with
    the wheat industry to ensure the wheat standards facilitate the
    expansion of the new and evolving market for Hard White Wheat. All of
    these activities improve the American agriculture's ability to deliver
    the specific quality of grain desired by food manufactures and
    consumers, and strengthen its competitive position in the global
    market.
        In the biotechnology arena, we are improving the reliability and
    accuracy of testing for the presence of modern biotechnology-derived
    grains to help U.S. agriculture avoid market disruption as trading
    partners around the world implement new import requirements. Our Test
    Kit Evaluation Program validates the performance of commercially
    available rapid tests for biotechnology-derived grains. Our Proficiency
    Program improves the performance and reliability of Government and
    private laboratories that test for biotechnology-derived grains in the
    United States and worldwide. More than 100 organizations participated
    in the program in fiscal year 2004, compared to 22 in 2002.
        In response to the results of the proficiency program, we are
    working to harmonize international reference materials and
    biotechnology measurement methods used in commerce to measure the level
    of biotechnology-derived events in raw agricultural products. The
    current focus of many laboratories is to assay for the presence or
    absence of a particular transgenic event, whereas the regulatory
    requirements evolving for agricultural products usually require
    reliable methods to measure the quantity of a biotechnology derived
    event.
        Our international outreach goes beyond work in the area of
    biotechnology. We work cooperatively with other government agencies to
    support market development and remove obstacles to U.S. grain reaching
    world markets.
        In recent years, we have focused on providing technical support to
    the Mexican and Asian markets. Last year, GIPSA worked with Mexico's
    private and public grain sectors to harmonize sampling and analytical
    methods with the goal of minimizing trade disruptions due to
    differences between GIPSA-certified quality and an importer's own
    quality assessment. We helped establish five grain inspection
    laboratories at major corn importing facilities in Mexico and trained
    personnel from Mexican commercial firms and government agencies on U.S.
    grain inspection policies and procedures. We also spearheaded the
    establishment of a Government-to-Government Grain Industry Consultative
    Group as a technical-level forum to address cross-border grain quality
    issues.
        Since fiscal year 2002, GIPSA has placed a temporary duty officer
    in Asia to address immediate and long-term issues in the region, to
    promote a better understanding and adoption of United States sampling
    and inspection methods to minimize differences in inspection results
    and to develop face-to-face relationships with customers, USDA
    Cooperators and Government officials. In October 2005, we placed an
    officer in Kuala Lumpur for 2 months, and this representative will
    return to Kuala Lumpur for 2 more months beginning March 2005.
    Following the completion of this assignment, GIPSA will place another
    representative in the region for a 4-month assignment to continue our
    work in the region.
        We also provide technical consultative services for international
    customers. During fiscal year 2004, GIPSA's consultative work included
    conducting assessments of agricultural standards and transportation
    management systems in South Africa, Botswana, Namibia, and Mozambique;
    helping establish grain inspection laboratories in Kenya, Uganda, and
    Tanzania; helping Egypt set up a biotech testing laboratory; helping
    Iraq set wheat contract terms that resulted in their importation of
    U.S. wheat, and giving a grain marketing seminar to Iraqi officials (in
    Jordan); working with Canadian and Mexican officials to establish a
    trilateral agreement on implementation of the Biosafety Protocol;
    continuing work with Chinese officials on trade issues to ensure their
    continued importation of U.S. soybeans; helping the USDA/Foreign
    Agricultural Service and Animal and Plant Health Inspection Service
    resolve various grain quality issues in other countries that would
    otherwise have restricted U.S. grain exports; and briefing visiting
    trade and governmental teams representing 55 countries around the
    world.
        In addition to facilitating the marketing of U.S. grain by
    developing grain quality assessment methods and carrying out
    international outreach efforts, GIPSA administers a national inspection
    system comprising Federal, State, and private laboratories. These
    laboratories provide valuable service to all sectors of the grain
    industry on a user fee basis, 24 hours a day, 7 days a week. The world
    recognizes the certificates issued by these laboratories as the gold
    standard for grain quality certification. Buyers and sellers around the
    world have confidence in and rely on the GIPSA certificate to trade
    grain.
        This confidence was earned. The dedicated Federal, State, and
    private employees of the national grain inspection system work
    tirelessly to ensure the integrity and reliability of the national
    inspection system. They issue over 3 million certificates annually,
    representing over 250 million tons of grain.
        GIPSA continuously works to improve service delivery by this
    network of laboratories and meet the needs of a changing market. In
    fiscal year 2004, we revised the regulations on appeal inspections
    under the U.S. Grain Standards Act to streamline the process and better
    reflect market needs. These changes improved service delivery time and
    reduced operational costs to both GIPSA and the grain industry. We also
    revised sampling and inspection procedures to better meet the needs of
    exporters shipping grain in small containers rather than large bulk
    vessels. As a result of high freight rates for bulk ocean vessels and
    an abundant supply of containers, the U.S. grain market experienced a
    significant increase in the use of containers to ship export grain
    overseas, especially to Asian markets. This shipping mode, once
    reserved for specialty, high-value grain, was being used for basic
    commodity grain and shifted the need for inspection services at
    interior locations.

                             EGOVERNMENT SOLUTIONS

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

                            PROTECTING THE HOMELAND

        In addition, GIPSA has dedicated resources to homeland security
    efforts. We continue to work closely with the USDA Office of Crisis
    Planning and Management (OCPM) to refine the Department's and the
    Agency's Continuity of Operations Plan (COOP) and to support and staff
    the Department's Crisis Action Team (CAT). In fiscal year 2004, GIPSA's
    COOP and CAT representatives participated in critical disaster-related
    exercises and training sessions.
        We provided technical assistance related to homeland security
    issues to a number of industry and governmental groups, including the
    USDA Homeland Security Working Group; worked with the National Food
    Laboratory Steering Committee to coordinate and integrate resources to
    support key components of the Food Emergency Response Network (FERN);
    and, in conjunction with USDA and the Animal and Plant Health
    Inspection Service, developed information for the USDA Sector Specific
    Plan that will be included in the National Infrastructure Protection
    Plan.

                              2006 BUDGET REQUEST

        To fund important initiatives and address the Agency's
    responsibilities, GIPSA's budget request for fiscal year 2006 is $40.4
    million under current law for salaries and expenses and $42.5 million
    for our Inspection and Weighing Services. These budgets include
    additional requests of $442,000 for employee compensation; $2,025,000
    to continue the modernization of our information management systems and
    business functions; and $950,000 for new grain testing measures. In
    addition our request includes a proposal to recover $25 million through
    user fees to cover the costs of grain standardization activities and
    Packers and Stockyards program activities.
        An increase of $442,000 for employee compensation will enable GIPSA
    to meet its objectives consistent with the priorities established by
    the Secretary of Agriculture. This critically important increase is
    needed to support and maintain current staffing levels to meet the
    current and projected increased demand.
        We are requesting an additional $2,025,000 for our IT modernization
    initiative. This multi-year project will upgrade information management
    systems and modernize our business functions. This request includes
    $1,000,000 to continue the development of eGov solutions; $775,000 for
    the formation of an Information Disaster Recovery Program, essential as
    we deploy the eGov solutions and our employees and customers become
    increasingly dependent on web-based applications for daily operations;
    and $225,000 for recurring costs associated with the operations of eGov
    solutions funded in fiscal year 2005 and deployed for operation.
        We are also requesting an additional $950,000 to develop new grain
    testing measures for ethanol co-products, wheat quality, and low
    linolenic soybeans. It is our responsibility to provide the U.S. market
    with the tools necessary to accurately and consistently measure a
    commodity's quality attributes, both chemical and physical, that our
    customers desire. New tests will facilitate the marketing of ethanol
    co-products, wheat, and low linolenic soybeans.
        Part of our appropriation request will be derived from proposed new
    user fees. The budget proposes a collection of 4.3 million from grain
    standardization user fees and $20.4 million from Packers and Stockyards
    program licensing fees. Both fees are proposed to assess those who
    benefit from the activities--the grain and livestock industries--rather
    than the general public.

                                   CONCLUSION

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

        Prepared Statement of Kenneth C. Clayton, Acting Administrator,
                         Agricultural Marketing Service

        Mr. Chairman and Members of the Committee, I am pleased to have
    this opportunity to represent the Agricultural Marketing Service in
    presenting our fiscal year 2006 budget proposal. To provide a starting
    point for discussion of our budget proposals, I would like to begin by
    reviewing our agency's mission and some of the programs through which
    we carry out that mission.

                                    MISSION

        The goal of the Agricultural Marketing Service--AMS--is to
    facilitate the marketing of agricultural products in the domestic and
    international marketplace, ensure fair trading practices, and promote a
    competitive and efficient marketplace to the benefit of producers,
    traders, and consumers of U.S. food and fiber products. We accomplish
    our mission through a wide variety of appropriated activities and
    through our user-funded grading, certification, and Perishable
    Agricultural Commodities Act programs.

                               MARKETING SERVICES

        Our Marketing Services programs benefit agricultural producers,
    traders, and consumers of dairy products, fruits, vegetables, specialty
    crops, livestock and meat, poultry, and cotton. These programs
    facilitate marketing by providing information, technical expertise, and
    customer assurance.
        Markets operate more efficiently when all parties have equal and
    ready access to current, unbiased market information so that
    agricultural producers and traders can determine the best place, price,
    and time to buy or sell. In order to provide this information, AMS
    Market News reports cover current prices, volume, quality, condition,
    and other market data on farm products in more than 1,300 production
    areas and specific domestic and international markets. Market News
    reports are disseminated within hours of collection via the Internet.
    The data is also made available through electronic means and the news
    media. AMS reporters collect market news data for over 700 commodities
    from buyers and sellers, mostly on a voluntary basis. However, Congress
    established Livestock Mandatory Price Reporting in 2000 to ensure that
    information on meat and livestock trades would continue to be available
    for producers in a consolidating industry. These data, including
    prices, contracts for purchase, and other related information, are
    publicly disseminated in over 100 daily, weekly, or monthly reports on
    fed cattle, swine, lamb, beef and lamb meat.
        Another way to improve market efficiency is to develop commonly-
    recognized agricultural product descriptions for use in commercial
    sales and purchases. AMS' Standardization program works closely with
    interested parties in agriculture and the food marketing system to
    ensure that quality descriptions are aligned with current U.S.
    marketing practices. The agriculture industry uses these descriptions
    to convey commodity quality in purchase specifications and sales
    contracts. AMS Market News reports trading based on these commodity
    quality standards. AMS currently maintains about 600 U.S. agricultural
    quality standards for domestic and international trading of cotton,
    dairy products, fruits and vegetables, livestock, meat, poultry, eggs,
    and rabbits.
        The Standardization program supports exports of U.S. agricultural
    products by representing the interests of U.S. producers in a variety
    of international standards development organizations. AMS experts
    continue to participate in developing international dairy, meat,
    poultry, fruit, and vegetable standards. Recently, AMS' cotton
    specialists have been working to facilitate cotton trading between the
    United States and China by helping China adopt instrument testing and
    calibration standards for cotton comparable to those used in the United
    States. Compatible standards and classing procedures are in the
    interest of the United States, since China is the world's largest
    importer of cotton and the United States is its biggest foreign
    supplier.
        The National Organic Standards program provides assurance for
    consumers that organic products uniformly meet established requirements
    nationwide. The U.S. organic food industry has increased to a $15
    billion annual sales level and is still growing. AMS program staff
    works with the National Organic Standards Board to update and maintain
    a National List of approved and prohibited substances for organic
    production. AMS program personnel accredit State, private, and foreign
    certifying agents who certify that organic production and handling
    operations comply with national organic standards. By the end of 2004,
    AMS had accredited a total of 97 certifying agents--56 domestic and 41
    foreign.
        AMS also provides consumer assurance by collecting pesticide
    residue data and microbiological baseline data that helps to maintain
    domestic and export market demand for U.S. foods. In fiscal year 2004,
    the Pesticide Data program performed over 100,000 analyses on more than
    12,000 samples. The data gathered and reported by AMS on pesticide
    residues and microbiological pathogens supports science-based risk
    assessments performed by regulating agencies.
        Our Transportation Services program facilitates the movement of
    U.S. agriculture products to market. This program helps support farm
    income, expand exports, and maintain the flow of food to consumers by
    providing ``how to'' technical expertise, research, and data on
    domestic and international transportation to growers, producers, and
    others in the marketing chain, and for government policy decisions. The
    Transportation Services program also produces periodic publications
    that provide information for agricultural producers and shippers on
    various modes of transportation, including grain transportation,
    refrigerated transport, ocean rates and transportation trends, and
    agricultural containers.
        Our Wholesale, Farmers, and Alternative Markets program experts, in
    cooperation with local and city agencies, assist local efforts to
    develop or improve wholesale and farmers market facilities, and to
    discover other direct marketing opportunities. This program also
    supports research projects on marketing channels and market technology
    improvements, as well as numerous marketing conferences and workshops
    across the country.

                       PAYMENTS TO STATES AND POSSESSIONS

        AMS' Payments to States and Possessions program is more commonly
    known as the Federal-State Marketing Improvement Program, or FSMIP.
    This program helps to resolve local and regional agricultural marketing
    problems by awarding Federal matching grant funds for projects proposed
    by State agencies. These matching grants are made available to State
    departments of agriculture and other State agencies for 25 to 35
    projects each year, with the State agencies contributing at least half
    of the project cost. In 2004 the FSMIP program allocated grant funds to
    23 States for 27 projects such as studies on linking producers with new
    buyer groups and innovative uses for locally important agricultural
    products.

                                   SECTION 32

        AMS' Section 32 program purchases perishable non-price supported
    agricultural commodities--meat, poultry, fruits, vegetables, and fish--
    to encourage the exportation and domestic consumption of agricultural
    commodities. The purchased foods are donated to the National School
    Lunch Program and other domestic nutrition programs. In fiscal year
    2004, AMS purchased 1.52 billion pounds of commodities that were
    distributed by FNS through its nutrition assistance programs.
        Section 32 of the Act of August 24, 1935 permanently authorized an
    appropriation equal to 30 percent of customs receipts for this purpose.
    These funds, plus unused balances up to $500 million from the previous
    fiscal year, may be used by the Secretary to support markets by
    purchasing commodities in temporary surplus, for domestic nutrition
    assistance programs, for diversion payments and direct payments to
    producers, for export support, and disaster relief. AMS retains only a
    small percentage of the funds available under Section 32. In fiscal
    year 2006, 81 percent of the $6.3 billion total will be transferred to
    FNS to administer the Child Nutrition Programs and 1 percent to the
    Department of Commerce for fishery products.
        For 2006, AMS expects to obligate $850 million, of which $400
    million will be spent on purchases for the Child Nutrition Programs.
    Most of the rest is available to AMS' commodity purchases program for
    emergency surplus removal. Section 32 funds also finance AMS'
    administrative costs for commodity purchasing activities and Federal
    administration of marketing agreements and orders, which help to
    stabilize market prices for milk, fruit, vegetables, and specialty
    crops.
        My description of our programs is not complete without some
    discussion of our agency's extensive partnerships.

                                  PARTNERSHIPS

        AMS depends on strong partnerships with cooperating State and
    Federal agencies to operate many of our programs. State agency partners
    collect data, provide inspection, monitoring, and laboratory services
    for AMS, and otherwise maximize the value of both State and Federal
    resources through sharing and coordination. For instance, AMS' Market
    News program maintains cooperative agreements with 40 States to
    coordinate their local market coverage with the regional and national
    coverage needed for AMS market reporting. State employees who inspect
    shipments of seed within a State provide information to AMS' Federal
    Seed program on potential violations in interstate shipments. Our
    transportation and direct marketing programs work with Federal, State,
    city and local policy-makers to maintain an efficient national
    transportation system and expand and improve market outlets for U.S.
    agriculture.
        Two AMS programs that could not function without their State
    partners are the Pesticide Data and Pesticide Recordkeeping programs.
    The Pesticide Data program depends on its State and Federal partners to
    collect and test the product samples on which program results are
    based. In fiscal year 2005, the program will direct about 80 percent of
    its funding to its eleven State partners in reimbursement for services
    provided. The information generated by the program can be utilized by
    other USDA agencies, academia, agricultural industry, international
    organizations, and global traders, as well as Federal agencies such as
    EPA and FDA for policy and regulatory actions. Our Pesticide
    Recordkeeping program depends on 36 States and territories that
    participate with AMS in record inspection activities, and all 50 States
    plus Puerto Rico are involved with educational programs for certified
    applicators. Other USDA agencies provide pesticide recordkeeping
    inspections under interagency agreements where State inspectors are not
    available. In fiscal year 2005, the program expects to complete nearly
    4,000 compliance inspections of certified private applicator records.
    These programs cannot operate without adequate reimbursement to the
    cooperating agencies--State and Federal--for their costs.
        USDA food purchase programs have developed a partnership between
    USDA agencies that maximizes the unique expertise that each agency
    brings to the process. AMS works in close cooperation with both the
    Food and Nutrition Service (FNS) and the Farm Services Administration
    (FSA) to administer USDA's nutrition assistance and surplus commodity
    programs. AMS purchases the non-price supported commodities--meat,
    fish, poultry, egg, fruit and vegetable products--and FSA supplies the
    price-supported commodities--flours, grains, peanut products, cheese
    and other dairy products, oils and shortenings--that supply nutrition
    assistance programs administered by FNS such as the National School
    Lunch Program, the Emergency Food Assistance Program, and the Food
    Distribution Program on Indian Reservations, according to their needs
    and preferences.
        To maximize the efficiency of food purchase and distribution
    operations, AMS, FNS, and FSA each provide a component of program
    administration according to their organizational structure and
    expertise, but the system is complex and requires close coordination.
    AMS and FSA purchase for FNS the entitlement commodities provided to
    schools. Schools and other nutrition assistance programs can also
    receive bonus commodities that are purchased to support agricultural
    markets through AMS' surplus commodity program. AMS and FSA are
    responsible for issuing and accepting bids, and for awarding and
    administering contracts. FNS is responsible for taking commodity orders
    from the States, monitoring purchases and entitlements throughout the
    year, and for the overall administration of the commodity nutrition
    assistance programs. Before a purchase is announced, AMS and FSA
    specialists work with potential vendors, FNS, and food safety officials
    to develop a specification for each product purchased that details
    product formulation, manufacturing, packaging, sampling, testing, and
    quality assurance. After market conditions, availability, and
    anticipated prices are assessed, and recipient preferences determined,
    AMS and FSA invite bids for particular United States produced and
    domestic origin food products under a formally advertised competitive
    bid program. Bids received from responsible vendors are analyzed and
    contracts are awarded by AMS and FSA. FSA administers the payments to
    vendors, ensures the proper storage of commodities when needed, and
    assists in their distribution. Approximately $2.5 billion of
    commodities are purchased for all of the domestic and foreign food
    assistance programs every year and another $1 billion in price support
    commodity products are maintained in inventory.
        To better coordinate the operations between AMS, FNS, and FSA, and
    control the vast array of details inherent to the procurement process,
    the three agencies developed the Processed Commodities Inventory
    Management System, or PCIMS, more than eleven years ago to track bids,
    orders, purchases, payments, inventories, and deliveries. However,
    PCIMS is an aging system that often cannot be adequately modified to
    keep up with the agencies' business practice improvements, requiring
    program employees to develop electronic entries external to PCIMS and
    then update the system with the results. To resolve these problems and
    improve program operations, AMS, FNS and FSA have been working together
    to design a Web-Based Supply Chain Management System to replace PCIMS.
    We are requesting a funding increase in fiscal year 2006 to begin
    building the new system.

                        FISCAL YEAR 2006 BUDGET REQUEST

        This leads us to our budget requests for fiscal year 2006. In
    Marketing Services, we propose to amend the Livestock Mandatory Price
    Reporting Act to continue the program and include pork cuts, implement
    a new verification program for Country of Origin Labeling, start
    building the Web-Based Commodity Supply Chain Management System, and
    increase financial support for our State partners in the Pesticide Data
    and Recordkeeping programs.

                      LIVESTOCK MANDATORY PRICE REPORTING

        We are asking for an increase in program funding of $545,000 to
    include pork cuts in the Livestock Mandatory Price Reporting, or LMPR,
    program. The mandatory reporting system was established in response to
    concerns of livestock producers over the diminishing availability of
    data caused by market concentration. Mandatory reporting has been
    successful--it reports 80 to 95 percent of transactions involving
    purchases of livestock and sales of boxed beef and lamb, lamb
    carcasses, and imported boxed lamb cuts. Under voluntary pork
    reporting, AMS is able to gather only about 5 percent of transactions.
    This proposal would increase reported data on pork cut trades to 80
    percent. It will require packers to report on additional types of
    trades and products by including formula and contract transactions, as
    well as negotiated sales, of domestic and export sales of pork cuts.
    Mandatory reported information will also include value-added and case-
    ready products not usually reported on a voluntary basis.
        The addition of pork cuts under mandatory reporting requires an
    amendment to the Livestock Mandatory Reporting Act of 1999. USDA is
    also proposing an amendment to extend the mandatory reporting program,
    which currently expires September 30, 2005. USDA is reviewing the
    program's effectiveness and considering potential enhancements proposed
    by industry stakeholders, but supports continuation of LMPR.

                           COUNTRY OF ORIGIN LABELING

        Our second increase request is for $3.1 million to initiate a new
    Country of Origin Labeling, or COOL, program. We propose to establish a
    cooperative Federal-State surveillance and enforcement program that
    will verify that buyers are getting the required information concerning
    the source of covered commodities. Mandatory COOL provisions are in
    effect for fish and shellfish as of April 4 this year and on September
    30, 2006, for the remaining commodities covered by the 2002 Farm Bill.
    During fiscal year 2006, we will establish an audit-based compliance
    system for fish and shellfish, and then will incorporate the remaining
    covered commodities--ground and muscle cuts of beef, pork, and lamb;
    fresh and frozen fruits and vegetables; and peanuts--after those
    provisions go into effect. Until the mandatory rule becomes effective
    and for 6 months following the effective date, we will focus our
    resources on industry education and outreach to ensure effective and
    appropriate implementation of the labeling requirements.
        We plan to implement the audit-based surveillance activities
    through agreements with cooperating State government agencies. AMS will
    provide training and oversight, respond to formal complaints, conduct
    surveillance audits, and conduct educational activities. We will audit
    5 percent of covered retailers, over 1,800 each year, to achieve a
    compliance rate beginning at 70 percent and rising to 95 percent by
    2010. This program will ensure the public receives credible and
    accurate information on the country of origin for covered commodities
    while not overburdening the State agencies.

                         SUPPORT FOR COOPERATING STATES

        We request $889,000 to strengthen our financial support to our
    State partners for the Pesticide Data and Recordkeeping programs so
    that these programs can continue to function effectively. This increase
    will allow AMS to reimburse the States for rising costs, including
    salaries, benefits, and travel expenses incurred by State personnel in
    carrying out Federal program activities, and will help the States
    retain specialized and experienced personnel.

                    WEB-BASED SUPPLY CHAIN MANAGEMENT SYSTEM

        For fiscal year 2006, AMS is requesting an increase of $10 million
    in our Marketing Services account to develop WBSCM, a next-generation
    multi-agency food purchase and distribution tracking system which will
    significantly improve administrative efficiency and customer service.
    As I mentioned, this is a joint effort of AMS, FNS and FSA to establish
    a Web-Based Supply Chain Management system that can replace, and
    surpass, the functions of the current Processed Commodity Inventory
    Management System.
        WBSCM has undergone extensive reviews within USDA and has been
    approved within the Department and by OMB as meeting e-government
    requirements. Once functioning, the new system will create a singe
    point of access for customers, allowing the agencies to share
    information with them more quickly and conveniently. WBSCM will improve
    program efficiency by greatly reducing the time required for processing
    purchases; shortening delivery times; improving USDA's ability to
    collaborate with other Departments; improving reporting capability;
    reducing transportation, inventory, and warehousing costs; and enabling
    future system updates as needed. WBSCM is also designed so that it
    could eventually support agencies that manage similar commodity
    distribution programs for export. Although implementation of the new
    system will be a multi-year effort, increased efficiency, better
    coordination, and improved services should begin as soon as WBSCM is
    able to provide the services now being performed by PCIMS.

                                 BIOTECHNOLOGY

        The Biotechnology program is proposed for termination, reducing our
    Marketing Services budget by $4 million. AMS had anticipated the need
    to respond to industry requirements to differentiate between
    bioengineered and conventional commodities. However, technological
    issues and a lack of demand for fee-based quality assurance and
    laboratory accreditation services have reduced the need for such a
    program. Should demand for services become apparent, AMS will work with
    the affected industries to determine if alternative mechanisms can be
    utilized to facilitate the movement of agricultural commodities.

                                   USER FEES

        Our Marketing Services request also reflects $2.9 million in new
    user fees based on a proposed legislative change that would convert
    most of our domestic standards activities to user-fee funding. USDA has
    proposed an amendment to the Agricultural Marketing Act of 1946 that
    will authorize the agency to implement, collect, and retain user fees
    for domestic standards that are associated with AMS grading and
    certification services.

                             BUDGET REQUEST SUMMARY

        Our budget request includes $84 million for Marketing Services. We
    request $1.3 million in FSMIP grants funding--a decrease of $2.5
    million that was provided in fiscal year 2005 to support Wisconsin
    products. For administration of Section 32 activities, we request $11.5
    million to support commodity purchasing and $16.1 million for the
    Marketing Agreements and Orders program. Our Marketing Services and
    Section 32 administrative funding requests include an increase for pay
    costs.
        Thank you for this opportunity to present our budget proposal.

        Senator Bennett. Thank you.
        Dr. Pierson.

                       STATEMENT OF DR. MERLE D. PIERSON

        Dr. Pierson. Mr. Chairman, Senator Kohl, I am pleased to
    appear before you today to discuss the status of the Food
    Safety and Inspection Service programs and our fiscal year 2006
    budget request.

                               PATHOGEN REDUCTION

        Excellent progress has been made in improving the safety
    and security of the U.S. meat, poultry, and egg products
    supply. And as a result of implementing science-- and risk-
    based policies, we have seen significant reductions in E. coli
    O157:H7, Listeria monocytogenes, and Salmonella in FSIS
    regulated products. Also there has been a dramatic decline in
    recalls.
        What has been the impact of our science-based policies on
    public health? The Centers for Disease Control and Prevention
    will be publishing tomorrow a report that analyzes food-borne
    disease data for 2004. I am pleased to tell you that the CDC
    report will state that for 2004, there were important declines
    in food-borne illness.
        For E. coli O157:H7, there was a 42 percent decrease from
    the 1996-1998 baseline, a continuation of last year's downward
    trend. For Campylobacter, the decrease from the baseline was 31
    percent. Listeria monocytogenes, 40 percent, and Salmonella, 8
    percent.
        While we have made considerable progress, there is more to
    be done. The USDA is committed to further protecting public
    health through our continuing programs, such as those
    described, as well as several science-based initiatives that we
    are now working on.

                        FISCAL YEAR 2006 BUDGET REQUEST

        For fiscal year 2006, FSIS is requesting an appropriation
    of $849.7 million. The fiscal year 2006 budget requests an
    increase of $19.5 million to support a food and agriculture
    defense initiative in partnership with several other Government
    agencies.
        The budget request includes an increase of $13.9 million to
    provide for a 2.3 percent pay raise for FSIS employees. In
    addition, we are requesting $2.2 million in order to fill
    supervisory and administrative duties as we make better use of
    the scientific skills of our veterinary medical officers. And
    $139 million is proposed to come from a new user fee.

                              PREPARED STATEMENTS

        Mr. Chairman, thank you for providing me the opportunity to
    speak about these issues and our progress and to submit written
    testimony, which is much more extensive than I have just given
    you. I certainly do promise you that we will do our best to
    remain a world leader in public health.
        [The statements follow:]

                    Prepared Statement of Dr. Merle Pierson

        Mr. Chairman and Members of the Subcommittee, I am pleased to
    appear before you today to discuss the status of the Food Safety and
    Inspection Service (FSIS) programs and the fiscal year 2006 budget for
    food safety within the U.S. Department of Agriculture (USDA). I am Dr.
    Merle Pierson, Acting Under Secretary for Food Safety. With me today is
    Dr. Barbara Masters, Acting Administrator of FSIS.
        As we begin another new year at USDA, I am proud to emphasize
    several areas where we have used science based policies to effectively
    protect the health and well being of millions of consumers worldwide.
    These successes would not have been possible without the resources you
    have so generously given to us. I also will share with you our goals
    for this year, and will conclude with a discussion of the fiscal year
    2006 budget request.
        The crux of our public health challenge centers on combating
    biological, chemical, and physical hazards that range from the easily
    understood to those that evolve and present new and complex challenges.
    Thus, we must not only rely on existing knowledge and strategies for
    food safety, but also continue to introduce and evaluate new
    approaches. For me, as someone who has spent their entire career as a
    food scientist, I am particularly proud of the work our office and FSIS
    has done in developing science based policies to improve the safety and
    security of the U.S. meat, poultry, and egg products supply.

    Evaluating the Effectiveness of the 2004 Vision
        While there are many approaches to measuring success, we looked at
    indicators related to public health outcomes and pathogen reduction.
    Such an evaluation is essential in determining the success of our
    strategies and developing new ways to combat threats to public health.
    In our high-speed, fast-food world, it can be difficult for some to
    understand that successful science is not immediate gratification and
    it is not easily measured. But over time, positive results, or I should
    say, dramatic declines in foodborne illnesses or incidence of pathogens
    in products, show that our risk based approach is working.

    Breaking the Cycle of Multi-Million Pound Recalls
        One indication of our progress is that we have seen a break in the
    annual cycle of multi-million pound recalls. Through the use of risk
    assessments, working with partners along the farm-to-table continuum,
    and basing our policies on sound science, we have been able to break
    this vicious cycle. I will illustrate this by discussing our E. coli
    O157:H7, Listeria monocytogenes, and Salmonella policies.
        After a comprehensive risk assessment on E. coli O157:H7 was
    completed, we developed additional strategies to eliminate this
    pathogen in beef establishments. We required all of the approximately
    2,900 beef slaughter and processing establishments to reassess their
    Hazard Analysis and Critical Control Point (HACCP) plans relative to
    the potential presence and control of E. coli O157:H7 in raw beef. Then
    our scientifically trained personnel conducted the first-ever
    comprehensive reviews of the reassessed HACCP plans.
        I believe this type of forward thinking initiated by USDA/FSIS will
    continue to contribute to the dramatic improvements we have been
    seeing. For instance, let's take a look at results from our
    microbiological surveillance testing program for E. coli O157:H7 over
    the past 4 years.
      --In CY 2001, our testing program yielded 59 positive results out of
            7,010 samples;
      --In CY 2002, there were 55 positive results from 7,025 samples;
      --In CY 2003, there were 20 positives out of 6,584 samples; and
      --In CY 2004, there were only 14 positives out of 8,010 samples.
        The effectiveness of using sound science is also evident when we
    look at Listeria monocytogenes. Our 2003 interim final rule on control
    of Listeria monocytogenes in ready-to-eat (RTE) meat and poultry
    products, based on a thorough risk assessment, outlined three
    strategies that an establishment could choose from to control the
    pathogen depending on its product(s) and the environment in which it
    operates: Alternative 1, provides for a combination of a post-lethality
    treatment and a growth-suppressing agent or process; Alternative 2,
    provides for either a post-lethality treatment or a growth-suppressing
    agent or process; and Alternative 3, relies on sanitation as the
    primary mitigation. In January 2005, FSIS revised its sampling
    verification procedures so that more product samples are collected when
    an establishment relies solely on sanitation practices for Listeria
    monocytogenes control, while fewer samples are analyzed in situations
    where an establishment has more aggressive process control measures and
    interventions.
        In 2003, we released data that showed a 25 percent drop in the
    percentage of positive Lm regulatory samples from the year before, and
    a 70 percent decline compared with years prior to the implementation of
    HACCP.
        Our science based initiatives, including those used to counter E.
    coli O157:H7, have played a significant role in also reducing the
    prevalence of Salmonella in raw meat regulatory samples. If we look at
    the percentage of regulatory samples positive for Salmonella from our
    scientific HACCP verification testing program, we see an overall
    aggregate downward trend from 1998 through 2003. Salmonella presence in
    raw meat and poultry regulatory samples has dropped substantially over
    the past 6 years. Out of the number of regulatory samples collected and
    analyzed by FSIS in 2003, 3.8 percent tested positive for Salmonella,
    as compared with 4.29 percent in 2002, and 10.65 percent in 1998.
        While the regulatory prevalence of Salmonella across all seven
    product categories tested continued to decrease in 2003, we are
    concerned that the percentage of positive Salmonella tests increased
    slightly in three poultry categories. FSIS has been examining
    Salmonella testing data from 1998 to the present in order to clearly
    identify those plants displaying negative performance trends.
    Enforcement Investigations and Analysis Officers can now conduct in-
    depth HACCP and sanitation verification reviews at those facilities to
    help ensure that this increase does not continue. FSIS compares
    regulatory testing results to pre-HACCP baseline prevalence to provide
    context to the yearly data. These 2003 numbers are still under the
    standard for the aggregate data, but FSIS is working aggressively to
    reverse the upward trend.
        Let me also add that when there has been foodborne illness, FSIS
    aggressively explores both epidemiological links to products from
    individual establishments as well as conducts a food safety assessment
    to determine whether or not insanitary conditions exist. If the
    epidemiological link is found or insanitary conditions exist,
    appropriate regulatory enforcement action is taken.
        I have provided a brief overview of some of the measures I believe
    have broken the annual cycle of multi-million pound recalls. I would
    like to mention trends we are seeing in recall data.
        In the late-1990s, the number of recalls had been increasing
    steadily with at least one multi-million pound recall being conducted
    every year; however, this trend has dramatically changed in the past 2
    years.
      --In 1997, there were 27 recalls;
      --Followed by 44 recalls in 1998;
      --58 recalls in 1999;
      --76 recalls in 2000;
      --87 recalls in 2001; and
      --Reaching an all-time high of 113 recalls in 2002.
        After we implemented the science based policies I mentioned
    earlier, we saw a dramatic decline in recalls, culminating in a
    reduction of nearly 18 percent in the number of pathogen-related
    recalls, from 28 in 2003, to 23 in 2004. While this is certainly good
    news, we still have areas of concern. One of the areas of concern is an
    increasing trend in the percentage of recalls triggered by undeclared
    allergens. This is a troubling development. We have alerted industry of
    our concerns and are currently taking case-by-case action and are
    looking at broader policies to address it industry-wide.
        Perhaps even more dramatic is the fact that 2004 marked the second
    year in a row that we did not have a multi-million pound recall of meat
    or poultry in the United States. The decline in the number of recalls
    is just one of several indicators that highlight the dramatic
    improvements that can be achieved in our food safety system when
    government, industry, consumers, and academia work together and use
    science as a guide. Another measure of progress came from a Gallup poll
    released this past August. It found that more than 85 percent of
    Americans are confident in the Federal Government's ability to protect
    our food supply.

    Declining Foodborne Illnesses
        This news is encouraging, but the most significant measure of
    public health impact is the annual report published by the Center for
    Disease Control and Prevention (CDC) last spring in which they reported
    significant declines from 1996 to 2003 in illnesses caused by E. coli
    O157:H7, Salmonella, Campylobacter, and Yersinia.
        Specifically to the products USDA regulates, the CDC reported that
    illnesses caused by Salmonella Typhimurium, typically associated with
    meat and poultry, decreased by 38 percent from 1996 to 2003. Human
    illnesses caused by E. coli O157:H7, often associated with ground beef,
    declined 42 percent from 1996 to 2003. The decrease in E. coli O157:H7
    infections occurred primarily during 2002-2003.
        The CDC attributes the changes in the incidence of these infections
    in part to the control measures implemented by government and industry
    leaders, enhanced food-safety education efforts, and increased
    attention by consumer groups and the media. We are hopeful that if we
    continue on our current course, this reduction will not be just for 1
    year, but will continue from now until we have achieved the greatest
    reduction possible in the illnesses caused by these pathogens.

    Bovine Spongiform Encephalopathy
        Science based policies and recalls are two tangible methods that
    external parties see USDA conducting to protect public health. However,
    a significant amount of public health protection comes from the
    extensive strategic planning efforts to improve our systems and
    infrastructure that are not as easily recognized. I mention this in
    reference to the first case of bovine spongiform encephalopathy (BSE)
    detected in the United States in December 2003.
        The December 23, 2003, detection of a BSE positive cow, originally
    from Canada, at a slaughter operation in Washington State could be seen
    by many as a precursor to the implementation of our BSE measures.
    However, we had completed an extensive amount of groundwork on FSIS'
    four BSE measures before USDA's major policy announcements on December
    30, 2003. Our swift actions were unprecedented. The process for
    publishing FSIS' interim final rule on BSE normally would have taken
    several months; however, with the prior strategic planning this
    normally daunting task was achieved in less than 2 weeks, and was done
    at the time with an eye for protecting public health. Our BSE
    regulations add a significant level of protection to an already robust
    food safety system. FSIS' BSE related interim final rules will be
    published as final rules following an analysis of the more than 22,000
    comments received on the interim final rules and the BSE Advance Notice
    of Proposed Rulemaking (ANPR) as well as completion of the Animal and
    Plant Health Inspection Service (APHIS) enhanced BSE surveillance
    program and the Harvard BSE risk reassessment.

    Training for the Mission
        Strong, science-based regulations and policies are merely words on
    paper without personnel trained to carry them out. I would like to
    thank the Congress, and this Subcommittee in particular, for the record
    level of funding it has provided us in the area of training and
    education. Each training accomplishment directly correlates to
    improvements in the safety and security of the U.S. meat, poultry, and
    egg supply. We are extremely proud of our efforts in this area and I
    would like to share some of our successes with you today.
        A large segment of our inspection program personnel is receiving
    intensive training in sanitation procedures and Hazard Analysis and
    Critical Control Point (HACCP) system principals, based on the type of
    products produced at the establishments where the inspectors are
    assigned. We expect to have this segment of our workforce fully trained
    by the end of the current fiscal year. In 2003, FSIS inaugurated Food
    Safety Regulatory Essentials (FSRE) training, which was designed to
    better equip inspection personnel in verifying an establishment's HACCP
    food safety system. All participants receive training in the
    fundamentals of inspection, covering HACCP, the Rules of Practice,
    Sanitation Performance Standards, and Sanitation Standard Operating
    Procedures. This program also provides food safety training based on
    the types of products being produced at the establishments where
    inspectors are assigned. In fiscal year 2004, 1,700 individuals
    received the Agency's FSRE training, more than doubling the amount of
    students trained in fiscal year 2003.
        FSIS has also initiated a comprehensive multi-year training and
    education effort designed to ensure that every FSIS employee fully
    understands their role in preventing or responding to an attack on the
    food supply. To date, over 5,000 employees have received food security
    training. The Law Enforcement Academic Research Network (LEARN), which
    is carrying out the training, has stated that this effort is
    unparalleled in the Federal sector since training is being provided to
    such a broad base of our employees.
        Furthermore, FSIS has successfully launched training for newly
    hired Public Health Veterinarians (PHVs) and for newly hired food
    inspectors. We are also going back to train ``new hires'' to ensure
    that employees who did not initially receive this training are now
    fully equipped with the latest scientific knowledge. In addition, we
    now require entering Consumer Safety Inspectors to undergo and pass
    FSRE training. We are also in the process of implementing policies to
    require passage of mandatory training courses for entering Enforcement
    Investigations and Analysis Officers (EIAOs) and for PHVs. Specifically
    in 2005, we plan to provide training for 1,200 food inspectors, 400
    PHVs, 200 EIAOs, 75 import inspectors, and 40 front line supervisors.
    We also plan to provide FSRE training for 1,400 Agency personnel. I
    also would like to note that we offer seats in our workforce training
    courses to State inspection personnel.
        These numbers are impressive, but what is even more meaningful are
    the systematic changes at FSIS that this training effort has brought.
    Our workforce is becoming the most scientifically trained in the world.
    While we know these are merely the first steps, and that this knowledge
    still needs to be extended to all our employees, we have embarked on a
    path that will bring added protections to public health for generations
    to come.

    Food Security
        Ensuring the security of FSIS inspected products is indeed an
    awesome responsibility, and it is one which FSIS and its predecessor
    agencies have been equipped to handle for almost a century. Over the
    past several years, we have strengthened our focus on both intentional
    and unintentional contamination by conducting risk and vulnerability
    assessments. Specifically for food security, vulnerability assessments
    have provided a solid foundation from which we have launched many
    important initiatives to safeguard our food supply from any intentional
    threats.
        We have found these assessments are very powerful risk management
    tools that can be used to develop strategies and policies that reduce
    or eliminate the potential risk at vulnerable points along the farm-to-
    table continuum. It is difficult to manage a threat when we are unsure
    of its scope, so it was especially important to take a broad look when
    developing the risk assessments.
        The vulnerability assessments we conducted provided us the vital
    data regarding risks in our system that otherwise would not have been
    as apparent to us if we had not conducted them. If we had made food
    security decisions without performing vulnerability assessments, it
    would have been akin to aiming at a target in the dark without night-
    vision goggles. We would have had no idea if we had hit our mark. And
    when that mark is the security of the food on American tables, accuracy
    is crucial.
        What we gleaned from these vulnerability assessments helped us
    develop more effective intervention strategies, especially when it
    comes to surveillance and incident response plans. The assessments
    allowed us to rank food products and potential contaminating agents in
    order of highest concern. By using this risk based ranking, during
    periods of heightened awareness, our laboratories can examine samples
    for threat agents posing the greatest risk as identified in our
    vulnerability assessments.

    Communications
        Public health benefits from our efforts in training and in food
    security cannot be fully realized without a comprehensive and cohesive
    communications infrastructure. For example, the highly trained import
    inspector may only have a few critical moments to alert his colleagues
    across the country in the event of a food security incident. Without
    ``real time'' information, inspectors in Montana may not know to stop a
    suspect cargo. In an emergency, the American public cannot afford for
    precious seconds to be lost while information slowly synchronizes over
    outdated modems. We are maximizing the effectiveness of our resources
    in this area and continue to work towards seamless integration, both
    internally and with our other food safety partners.
        To be a successful public health Agency, our employees need the
    right information to do their jobs. This information needs to be
    communicated quickly and accurately, ensuring public health will be
    protected. Data that is delayed is less useful and in extreme
    circumstances could have limited value because it is too late and could
    threaten the safety of our meat, poultry, and egg product supply. It is
    vitally important that the Agency continue to receive the necessary
    funds to develop and upgrade its information technology systems, which
    will improve efficiency and enhance communication among all FSIS
    employees. For FSIS, the use of databases to track inspection program
    tasks is essential for food safety verification. It is a vital
    communication resource whereby inspectors can enter information about
    their daily food safety, security, and humane handling verification
    duties. Because of our public health mission, real-time information and
    connectivity is vital, especially between key sites for our inspection
    program personnel. This is particularly important because FSIS has a
    geographically dispersed workforce. Managers in the field and at
    headquarters must make crucial management decisions based on tracking
    and analyzing information from their employees and the establishments
    they regulate. A rapid exchange of information with the field is
    critical for FSIS supervisors and managers to make better informed
    decisions on food safety and security issues, thus better protecting
    public health. We seek your continued support in this area.

    Humane Handling and Slaughter Activities
        FSIS continues to ensure compliance with the Humane Methods of
    Slaughter Act (HMSA) in livestock slaughter establishments that operate
    under Federal inspection. As part of their routine, ongoing and
    continuous inspection and enforcement duties, all FSIS inspection
    personnel are expected to take appropriate action, including suspending
    operations, if appropriate, of a livestock slaughter establishment if
    they observe any violations of HMSA. Further, all FSIS inspection
    personnel are trained and held accountable for enforcing HMSA during
    the slaughter process.
        District Veterinary Medical Specialists (DVMSs) provide technical
    expertise and oversight for HMSA-related activities, and ensure that
    humane handling and slaughter activities and enforcement are handled
    consistently by inspection program personnel. The Agency's DVMSs and
    Deputy District Managers meet periodically as a group at the Technical
    Service Center in Omaha, Nebraska, to correlate on humane enforcement
    issues, and, in fact, one such meeting was just held in March 2005.
        FSIS has continued to refine humane handling verification and
    tracking procedures for inspection personnel. On February 18, 2005, the
    Agency issued FSIS Notice 12-05, to provide inspection personnel with
    additional information for humane handling and slaughter verification
    activities related to animal stunning and procedures for checking for
    conscious animals.

    Future Initiatives
        While we have made considerable progress, I stress that there is
    more to be done to decrease the number of foodborne illnesses in the
    United States even further. USDA is committed to further improving
    public health through food safety and security through our continuing
    programs such as those I have described as well as several science-
    based initiatives I would like to mention.

                Enhanced Data Integration
        In order to better protect public health, our first initiative is
    to anticipate and predict food safety risks through enhanced data
    integration. One significant way to accomplish this is through the
    analysis of FSIS regulatory sampling data, as well as other sources of
    data, including baseline studies, in order to detect trends and
    identify connections between persistence, prevalence, and other factors
    such as practices employed by plants, seasonal variations, and
    establishment size.
        However, there is a missing link here. FSIS would need access to
    industry data. Including data collected by the establishment would add
    robustness to FSIS' information and improve the quality and validity of
    decisions that are made. Ensuring the availability of data to FSIS from
    industry, academia, States, consumers, and others will be necessary to
    help us protect food safety risks. One way to accomplish this may be
    through the establishment of a repository to provide data integrity and
    confidentiality. We are examining this initiative and will have more
    details available in the near future.

                Associate Program Outcomes to Public Health Surveillance
                        Data
        Our next initiative is to improve the association of program
    outcomes to public health surveillance data. We are working closely
    with the CDC and the Department of Health and Human Services' Food and
    Drug Administration (HHS-FDA) to improve our ability to link foodborne
    illness estimates with different food groups. Data on foodborne
    illnesses due to specific pathogens needs to be connected with
    prevalence data for different pathogens in specific foods.
        The Foodborne Diseases Active Surveillance Network, or FoodNet,
    allows FSIS and our Federal, State, and local food safety partners to
    integrate this data by determining the burden of foodborne disease,
    monitoring foodborne disease trends, and determining the extent of
    foodborne diseases attributable to specific foods. By comparing and
    contrasting the characteristics of pathogens recovered from food
    samples with those recovered from foodborne illness patients, we are
    able to improve our ability to link foodborne illness data with
    specific foods.
        As indicated from my overview earlier of our accomplishments, USDA
    and its partners have made significant and dramatic improvements in
    food safety since the implementation of HACCP as the driving component
    of FSIS' enforcement of the Federal Meat Inspection Act and the Poultry
    Products Inspection Act. The number of foodborne illnesses attributed
    to FSIS-regulated products has declined markedly as have the rates of
    contamination in regulatory samples. However, the implementation of our
    new science-based initiatives is critical for us to strengthen our food
    safety infrastructure even further. Enhancing data integration and
    improving the association of program outcomes to public health
    surveillance data will provide the additional, essential tools we need
    to improve public health.

    Fiscal Year 2006 Budget Request
        I appreciate having the opportunity to discuss a number of FSIS'
    accomplishments with you. Now, I would like to present an overview of
    the fiscal year 2006 budget request for FSIS.
        Implementation of these budget initiatives is imperative to helping
    us attain FSIS' public health mission. In fiscal year 2006, FSIS is
    requesting an appropriation of $849.7 million, a net increase of about
    $32.5 million from the enacted level for fiscal year 2005, which
    includes $139 million to be derived from proposed new user fees from
    the industry.

                Food and Agriculture Defense Initiative
        The fiscal year 2006 budget also requests an increase of $19.5
    million for FSIS to support a food and agriculture defense initiative
    in partnership with other USDA agencies, the Department of Health and
    Human Services and the Department of Homeland Security (DHS). Food
    contamination and animal and plant diseases can have catastrophic
    effects on human health and the economy. The three Federal departments
    involved are working together to create a comprehensive food and
    agriculture policy that will improve the government's ability to
    respond to the dangers of disease, pests, and poisons, whether natural
    or intentionally introduced. Our food and agriculture defense
    initiative has five components:
      --The Food Emergency Response Network (FERN);
      --Data systems to support the FERN;
      --Enhancing FSIS laboratory capabilities;
      --Biosurveillance; and
      --Follow-up bio-security training.
        For FERN we are seeking an increase of $13 million; for FERN data
    systems we are asking for an increase of $2.5 million; for enhancing
    laboratory capabilities we are requesting $2.5 million; for
    biosurveillance we are requesting an increase of $417,000; and for bio-
    security training we are seeking an increase of $1 million.
        The first component of the food and agriculture defense initiative
    is FERN, a coordinated initiative between FSIS and the Department of
    Health and Human Services' Food and Drug Administration (FDA) to
    develop an integrated network of Federal, State, and local
    laboratories. FERN is an integrated laboratory network capable of
    providing ongoing surveillance and monitoring of the food supply, as
    well as conducting the extensive testing necessary in the event of a
    terrorist attack on the food supply. The FSIS fiscal year 2006 budget
    request for FERN seeks an increase of $13 million from fiscal year 2005
    which will enable the Agency to manage, maintain, and expand on the
    existing group of FERN labs. These funds will improve the Agency's
    ability to handle the greatly increased number of samples that would be
    required to be tested in the event of a terrorist attack on the meat,
    poultry or egg products supply. These State and local laboratories in
    the FERN network would play an essential role in conducting this
    expanded testing.
        The second and third components of the food and agriculture defense
    initiative provide further support to FERN. The electronic laboratory
    exchange network (eLEXNET) is a national, web-based, electronic data
    reporting system that allows analytical laboratories to rapidly report
    and exchange standardized data. The fiscal year 2006 budget request
    would provide funding needed to make eLEXNET available to additional
    FERN and other food-testing laboratories nationwide. In turn, the
    budget request would enhance FSIS' laboratory capabilities in order to
    detect new bioterror-associated agents, and to ensure FSIS' capability
    and capacity to perform the toxin and chemical testing that will be
    standardized across all FERN laboratories.
        Fourth, the food and agriculture defense initiative will allow FSIS
    to participate in an interagency biosurveillance initiative that would
    improve the Federal Government's ability to rapidly identify and
    characterize a potential bioterrorist attack. Funding this initiative
    will improve Federal surveillance capabilities and enable FSIS to
    integrate with DHS to compile FSIS surveillance information rapidly
    with threat information. This funding would also allow FSIS to focus
    its resources on the vulnerable products and processes identified
    during the Agency's vulnerability assessments of imported and domestic
    products and establish a Foodborne Disease Surveillance Communication
    system to coordinate with DHS systems.
        Because the realm of biosecurity is ever changing, FSIS must
    provide its workforce with the most up-to-date information possible to
    ensure that meat, poultry, and egg products are protected from
    intentional contamination. Therefore, the final component of the food
    and agriculture defense initiative is follow-up biosecurity training of
    the workforce. This additional training is essential as part of the
    ongoing effort to protect the public by educating the workforce
    regarding the latest Agency policies, threat agents, and
    countermeasures to those agents.

                Public Health Training
        The maturation of HACCP has widened the scope of all front-line
    inspection duties. While slaughter line inspectors have largely
    retained their traditional tasks, other front-line personnel have
    acquired more complex responsibilities related to public health,
    including food safety assessments, food security, and documentation and
    analysis to support detentions, recalls, or other enforcement actions.
        Further integrating front-line inspection and science will allow
    scientifically-trained FSIS personnel to most effectively utilize their
    expertise. For instance, FSIS intends to fully employ the scientific
    skills of its Public Health Veterinarians--systems analysis,
    epidemiology, biostatistics, microbiology, pathology, and toxicology--
    to safeguard public health. Accordingly, FSIS has been revising
    veterinary work assignments so that PHVs spend 25 percent of their time
    on public health assessment and assurance. As part of the fiscal year
    2006 budget request, FSIS is requesting an increase of $2.2 million for
    relief positions so that the Agency can take full advantage of the
    training, experience, and responsibilities of these highly-trained
    PHVs. The Agency and the public will benefit from more effective
    utilization of the technical knowledge and skills of our veterinarians
    through their expanded public health activities.

                Supporting FSIS' Basic Mission
        The FSIS budget request for fiscal year 2006 supports the Agency's
    basic mission of ensuring that the Nation's commercial supply of meat,
    poultry, and egg products is safe, wholesome, and correctly labeled and
    packaged.
        In order to fulfill the Agency's statutory obligations to provide
    continuous inspection of meat, poultry, and egg products, the budget
    requests an increase of $13.9 million for the FSIS inspection program
    to provide for the 2.3 percent pay raise for FSIS employees in fiscal
    year 2006 and to assure that the Agency is provided sufficient funds to
    maintain programs without disruption to industry operations.

                User Fee Proposal
        In fiscal year 2006, FSIS estimates it will collect $122.9 million
    in existing annual user fees to recover the costs of overtime, holiday,
    and voluntary inspection. Of the $849.7 million requested in the fiscal
    year 2006 budget, $139 million is proposed to be derived from a new
    user fee that would recover the costs of providing inspection services
    beyond an approved 8-hour primary shift. A legislative proposal
    authorizing this new fee will soon be submitted to Congress. This will
    result in significant savings for the American taxpayer.

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

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

        Mr. Chairman and members of the Subcommittee, I am pleased to be
    here today as we discuss public health and the U.S. Department of
    Agriculture's (USDA) fiscal year 2006 budget request for the Food
    Safety and Inspection Service (FSIS).
        FSIS has a long, proud history of protecting public health. The
    Agency was established under its current name by the Secretary of
    Agriculture on June 17, 1981, and its history dates back to 1906. FSIS'
    mission is to ensure that meat, poultry, and egg products distributed
    in interstate commerce for use as human food are safe, secure,
    wholesome, and accurately labeled. FSIS is charged with administering
    and enforcing the Federal Meat Inspection Act (FMIA), the Poultry
    Products Inspection Act (PPIA), the Egg Products Inspection Act (EPIA),
    and the regulations that implement these laws.
        Ensuring the safety of meat, poultry, and egg products requires a
    strong infrastructure. To accomplish this task, FSIS has a large
    workforce of approximately 10,000 employees, most of whom are stationed
    throughout the country and are present in plants everyday. In fiscal
    year 2004, over 7,500 inspection personnel stationed in about 6,000
    federally inspected meat, poultry, and egg products plants verified
    that the processing of 43.6 billion pounds of red meat, 52.8 billion
    pounds of poultry, and approximately 4 billion pounds of liquid egg
    products complied with statutory requirements. In addition,
    approximately 4.2 billion pounds of meat and poultry and approximately
    12.1 million pounds of egg products were presented for import
    inspection at U.S. ports and borders from 27 of 33 countries that we
    have determined have inspection systems equivalent to our own. Ensuring
    that these products are safe, secure, and wholesome is a serious
    responsibility.
        As you are well aware, these are compelling times in food safety,
    and it is because of your support that we are making real progress in
    improving the safety of the U.S. food supply. I would like to thank you
    for providing FSIS the necessary resources to ensure the safety of the
    food supply. In fiscal year 2005, FSIS received $7.2 million for
    important training activities, including entry-level field employee
    training, Food Safety Regulatory Essentials training (FSRE), and bio-
    security training. These funds are helping to move the public health
    agenda forward dramatically. Now, I would like to tell you about our
    accomplishments during the past year, and about our priorities for
    better ensuring the safety and security of meat, poultry, and egg
    products in the future.

                    FOOD SAFETY ACCOMPLISHMENTS DURING 2004

        The American public remains confident in the safety of the U.S.
    meat, poultry, and egg supply, in part due to the many food safety
    accomplishments FSIS made in 2004. In August of 2004, a Gallup poll
    found that more than 85 percent of Americans are confident in the
    Federal government's ability to protect our food supply.
        During the past year, FSIS has continued to make progress in
    breaking the cycle of foodborne illness through vigilant testing and
    science-based policies. The 2004 annual Centers for Disease Control and
    Prevention (CDC) report on the incidence of infections from foodborne
    illness showed significant declines from 1996 to 2003 (inclusive) in
    the incidences of Yersinia infections (down 49 percent), E. coli
    O157:H7 (down 42 percent), Campylobacter (down 28 percent), and
    Salmonella (down 17 percent).
        The decrease in E. coli O157:H7 infections occurred primarily
    during 2002-2003. We anticipate this downward trend to continue when
    the next annual CDC report is released this spring. The CDC report
    attributes the changes in the incidence of these infections in part to
    the control measures implemented by government agencies and the food
    industry, as well as enhanced food safety education efforts. The CDC
    report noted that the decrease in human E. coli O157:H7 infections in
    2003 followed an October 2002 FSIS notice to manufacturers of raw
    ground beef products that they reassess their HACCP plans regarding
    this pathogen. Our FSIS experience noted declines in the frequency of
    E. coli O157:H7 contamination of ground beef for 2003 and 2004.
        Progress continues in combating E. coli O157:H7. After a
    comprehensive risk assessment on E. coli O157:H7 was completed, we
    required all of the approximately 2,900 beef slaughter and processing
    establishments to reassess their HACCP plans relative to the potential
    presence and control of E. coli O157:H7 in raw beef. Then, our
    scientifically trained inspection program personnel conducted the
    first-ever comprehensive reviews of the reassessed HACCP plans.
        The same rigorous scientific and risk-based approach that CDC
    attributes to the reduction of E. coli O157:H7 illness was used in the
    formulation of the Listeria monocytogenes rule that became effective
    October 6, 2003. Since implementation of the interim final rule, 57
    percent of establishments that were not already testing for the
    pathogen have now begun testing, 27 percent have initiated the use of
    an antimicrobial agent to inhibit the growth of this organism, and 17
    percent started using post-lethality treatments.
        Our 2003 interim final rule on control of Listeria monocytogenes in
    ready-to-eat (RTE) meat and poultry products, based on a thorough risk
    assessment, outlined three strategies that an establishment could
    choose from to control the pathogen depending on its product(s) and the
    environment in which it operates: Alternative 1, provides for a
    combination of a post-lethality treatment and a growth-suppressing
    agent or process; Alternative 2, provides for either a post-lethality
    treatment or a growth-suppressing agent or process; and Alternative 3,
    relies on sanitation as the primary mitigation. In January 2005, FSIS
    revised its sampling verification procedures so that more product
    samples are collected when an establishment relies solely on sanitation
    practices for Listeria monocytogenes control, while fewer samples are
    analyzed in situations where an establishment has more aggressive
    process control measures and interventions.
        Other indicators of success in combating these pathogens include a
    decrease in the number of recalls initiated for E. coli 0157:H7,
    Listeria monocytogenes, and Salmonella. After we implemented the
    science based policies I mentioned earlier, we saw a dramatic decline,
    culminating in a reduction of nearly 18 percent in the number of
    pathogen-related recalls, from 28 in 2003, to 23 in 2004. While this is
    certainly good news, we still have areas of concern. One of these is an
    increasing trend in the percentage of recalls triggered by undeclared
    allergens. This is a troubling development. We have alerted industry of
    our concerns and are currently taking case-by-case action and are
    looking at broader policies to address it industry-wide.
        We are also further strengthening the partnerships we have with our
    sister agency, the Animal and Plant Health Inspection Service (APHIS),
    and are participating in its enhanced bovine spongiform encephalopathy
    (BSE) surveillance program. Under the program, FSIS collects samples
    from all antemortem condemned cattle, except for veal calves not
    exhibiting central nervous system symptoms, and provides the samples to
    APHIS for BSE testing. Condemned cattle have never been allowed to
    enter the food supply. The goal of the APHIS surveillance program is to
    test as many high risk cattle as possible during a 12 to 18 month
    period to determine the prevalence of BSE in cattle in our country. In
    calendar year 2004, 176,468 cattle were tested throughout the United
    States, compared to 20,543 in 2003.

                    HUMANE HANDLING AND SLAUGHTER ACTIVITIES

        FSIS also ensures compliance with the Humane Methods of Slaughter
    Act (HMSA) in livestock slaughter establishments that operate under
    Federal inspection. As part of their routine, ongoing and continuous
    inspection and enforcement duties, all FSIS inspection personnel are
    expected to take appropriate action, including suspending operations,
    if appropriate, of a livestock slaughter establishment if they observe
    any violations of HMSA. Further, all FSIS inspection personnel are
    trained and held accountable for enforcing HMSA during the slaughter
    process.
        District Veterinary Medical Specialists (DVMSs) provide technical
    expertise and oversight for HMSA-related activities, and ensure that
    humane handling and slaughter activities and enforcement are handled
    consistently by inspection program personnel. The Agency's DVMSs and
    Deputy District Managers meet periodically as a group at the Technical
    Service Center in Omaha, Nebraska, to correlate on humane enforcement
    issues, and, in fact, one such meeting was just held in March 2005.
        The Agency continues to encourage industry to implement good
    management practices for the humane handling of animals, and requires
    industry to abide by all of the requirements of USDA's regulations and
    HMSA. On September 9, 2004, FSIS published a Notice encouraging
    establishments to use a systematic approach to ensure that they meet
    the requirements of the law during handling and slaughter. With a
    systematic approach, establishments focus on treating livestock in such
    a manner as to minimize excitement, discomfort, and accidental injury
    the entire time they hold livestock in connection with slaughter. FSIS
    believes that establishments using a systematic approach to humane
    handling and slaughter can best ensure that they meet the requirements
    of the HMSA, FMIA, and implementing regulations.
        FSIS also continues to refine humane handling verification and
    tracking procedures for inspection personnel. On February 18, 2005, the
    Agency issued FSIS Notice 12-05, to provide inspection personnel with
    additional information for humane handling and slaughter verification
    activities related to animal stunning and procedures for checking for
    conscious animals.

            FSIS PRIORITIES FOR 2005--HOLDING OURSELVES ACCOUNTABLE

        FSIS is holding itself accountable for improving public health.
    Last year, we outlined a series of priorities to better understand,
    predict, and prevent contamination of meat and poultry products to
    improve health outcomes for American families. I am determined to build
    upon these priorities and continue to improve the Agency's
    infrastructure with greater attention to risk so that we can then
    improve our performance under the public health model. The six
    priorities, all equally important, that I am about to share with you
    will drive our policies and actions during this calendar year.
    Training, Education & Outreach
        The first priority is training, education, and outreach. This has
    been, and will continue to be, a high priority, and we at FSIS would
    like to thank the Subcommittee for its invaluable support in this area.
    FSIS can only achieve its public health, food safety, and food security
    missions with adequate preparation of its workforce through scientific
    and technical training that reflects the Agency's risk-based approach
    to food safety and security. Results demonstrate that a highly trained
    workforce will lead to definitive advancements in public health.
        A large segment of our inspection program personnel is receiving
    intensive training in sanitation procedures and Hazard Analysis and
    Critical Control Point (HACCP) system principles, based on the type of
    products produced at the establishments where the inspectors are
    assigned. We expect to have this segment of our workforce fully trained
    by the end of the current fiscal year. In 2003, FSIS inaugurated Food
    Safety Regulatory Essentials (FSRE) training, which was designed to
    better equip inspection personnel in verifying an establishment's HACCP
    food safety system. All participants receive training in the
    fundamentals of inspection, covering HACCP, the Rules of Practice,
    Sanitation Performance Standards, and Sanitation Standard Operating
    Procedures. This program also provides food safety training based on
    the types of products being produced at the establishments where
    inspectors are assigned. In fiscal year 2004, 1,700 individuals
    received the Agency's FSRE training, more than doubling the amount of
    students trained in fiscal year 2003.
        FSIS has also initiated a comprehensive training and education
    effort designed to ensure that every FSIS employee fully understands
    their role in preventing or responding to an attack on the food supply.
    To date, more than 5,000 employees have received bio-security training.
    The Law Enforcement Academic Research Network (LEARN), which is
    carrying out the training, has stated that the scope of this effort is
    unparalleled in the Federal sector since training is being provided to
    such a broad base of our employees.
        Furthermore, FSIS has successfully launched training for newly
    hired Public Health Veterinarians (PHVs) and for newly hired food
    inspectors. We are also going back to train ``new hires'' to ensure
    that any employees who did not initially receive this training are now
    fully equipped with the latest scientific knowledge. In addition, we
    now require entering Consumer Safety Inspectors to undergo and pass
    FSRE training. We are also in the process of implementing policies to
    require passage of mandatory training courses for entering Enforcement
    Investigations and Analysis Officers (EIAOs) and for PHVs.
    Specifically, in 2005 we plan to provide training for 1,200 food
    inspectors, 400 PHVs, 200 EIAOs, 75 import inspectors, and 40 front
    line supervisors. We also plan to provide FSRE training for 1,400
    Agency personnel. I also would like to note that we offer seats in our
    workforce training courses to State inspection personnel.
        Additionally, FSIS has enhanced training by taking training
    opportunities into the field. In August 2003, FSIS announced new
    regional training centers in Atlanta, GA; Dallas, TX; Philadelphia, PA;
    Des Moines, IA; and Boulder, CO, designed to provide comprehensive
    workforce training programs to FSIS field employees. Since October
    2004, more than 2,000 employees have been trained regionally. We
    currently have five regional trainers and plan to hire and train an
    additional ten by the end of the fiscal year, if not sooner.
        We have also posted the training modules for the Food Inspector,
    Public Health Veterinarian, and the FSRE training on the FSIS Web site.
    This is significant because it makes the materials we are using to
    train our workforce more accessible to everyone, including our food
    safety partners and industry. When Agency policies change, these
    training materials, including the information posted on the Web site,
    are updated to reflect the latest scientific information.
        FSIS has also extended its outreach to owners and operators of
    establishments nationwide through teaching workshops that provide
    detailed information about new directives. In 2004, five BSE and 11 E.
    coli O157:H7 workshops were held across the country to target all
    audiences concerned with food safety. We took the training materials
    used at these meetings and distributed them to approximately 2,000
    plants (both Federal and State) that slaughter cattle and process beef
    products. In addition, several workshops were Web cast allowing
    participants from across the country to interact with the instructors
    and experts free of charge. Including Web cast participants, nearly a
    thousand people took part in the BSE and E. coli workshops. We are very
    proud of these FSIS outreach efforts and the resulting food safety
    accomplishments.
        Because everyone has a responsibility for food safety, educating
    the public about its role is a crucial element in FSIS' food safety
    mission. All food preparers, from consumers to food service employees,
    must know and understand basic safe food-handling practices. These
    efforts must be broad enough to ensure that no segment of the public is
    uninformed about safe food handling practices, yet at the same time,
    target various segments of the population to positively influence those
    behaviors that pose the greatest potential risk. Communicating with the
    public about food safety must be accomplished in a manner that is
    easily understandable so that it is useful to every segment of the
    population. Thus, FSIS has developed innovative and collaborative
    methods for delivering the food safety message.
        One such innovative way of spreading the food safety message is
    USDA's Food Safety Mobile, which was introduced in March 2003. This
    eye-catching ``food safety educator-on-wheels'' brings food safety
    information to consumers and builds on our partnerships in communities
    across the country. Through the Food Safety Mobile, FSIS is sharing its
    food safety message with the public, especially culturally diverse and
    underserved populations and those with the highest risk from foodborne
    illnesses. Since its launch in March 2003, through September 2004, the
    Food Safety Mobile traveled more than 40,000 miles and appeared in 178
    events in approximately 129 cities in 47 States and Washington, D.C.
        FSIS consumer education programs are modeled on the concept of
    integrated marketing. Utilizing that concept, the Agency is developing
    a mass media campaign plan aimed at improving the safe food handling
    habits of consumers at home. The campaign plan will include elements
    such as TV and radio ads, and a comprehensive multi-year plan for
    implementation and evaluation of the campaign. As part of this program,
    USDA and the State of Michigan launched a pilot mass media campaign
    focused on food thermometer use called ``Is It DONE Yet? You Can't Tell
    by Looking. Use a Food Thermometer to Be Sure.'' The FSIS and Michigan
    State University project was designed to prevent foodborne illness by
    promoting thermometer usage among consumers when preparing meat and
    poultry. Results show a significant increase in the number of consumers
    who reported using a food thermometer.
        USDA's Meat and Poultry Hotline is an additional tool that FSIS
    uses to share its food safety message. The Hotline handled over 104,000
    calls and 111 media inquiries during fiscal year 2004. The Hotline
    provides recorded information and live assistance on food safety issues
    for both English and Spanish-speaking callers.
        In April 2004, as a significant expansion of our food safety
    education outreach efforts, FSIS launched its newly designed, consumer-
    focused Web site that provides users with the latest information about
    food safety. ``Ask Karen'', the virtual food safety representative of
    the Agency, contains answers to over 1,300 food safety questions. More
    than 39,000 questions have been asked and answered since mid-2004. Also
    new to the redesigned Web site is a constituent subscription service
    that provides subscribers with up to the minute food safety
    information. As of March 2005, more than 9,700 subscribers signed up
    for over 90,000 subscriptions. FSIS averages more than 280 new
    subscribers per week.

    Food Security
        FSIS has accomplished much in the area of food security, making a
    strong system even stronger. USDA has had an effective and robust
    infrastructure in place for many decades that has protected the public
    against intentional and unintentional threats to the food supply. This
    science-based food safety and security verification system, with HACCP
    as the foundation, is designed to prevent and control contamination of
    the food supply during processing, regardless of whether the
    contamination is naturally occurring or introduced intentionally.
        Recently, we issued and updated a series of directives to employees
    that outlined specific instructions on the procedures, monitoring, and
    sampling to be taken in the event the Department of Homeland Security
    (DHS) declares a Yellow, Orange, or Red Alert. We particularly wanted
    to ensure that all FSIS divisions had specific instructions in place so
    that the U.S. meat, poultry, and egg products supply could remain the
    safest in the world should a threat to the Nation occur. In addition,
    we issued a directive which defined what steps the Agency would take if
    an emergency incident occurs. These instructions specifically outline
    steps and procedures for FSIS personnel to take so that the agency's
    daily operations are not interrupted by an incident. Depending on the
    threat level, inspection personnel will conduct food security
    verification procedures on a daily basis at minimum.
        Within FSIS, we have established a full-time staff whose sole
    responsibility is food security--the Office of Food Security and
    Emergency Preparedness (OFSEP). That office is in the process of
    updating seven vulnerability assessments for selected domestic and
    imported food products. We have found that these risk-based assessments
    are very powerful risk management tools that can be used to develop
    strategies and policies that reduce or eliminate the potential risk at
    vulnerable points along the farm-to-table continuum. The vulnerability
    assessments we conducted provided us with vital data on some inherent
    risks in our food safety system that otherwise would not have been as
    apparent.
        These assessments allowed us to rank food products and potential
    contaminating agents in order of highest concern. Using this risk-based
    ranking, during periods of heightened awareness our laboratories
    examine samples for threat agents posing the greatest risk as
    identified in our vulnerability assessments. For instance, if DHS
    declares a specific threat to the food supply or a particular product
    or process, then our lab personnel will activate the emergency response
    plan and test up to 100 percent of all food safety samples for possible
    food security risks.
        Protection of the United States' food supply is critical for
    maintaining the safety and health of the Nation's citizens and the
    security of our economy. The Food Emergency Response Network (FERN) has
    been created to provide an integrated means of protecting the food
    supply at the local, State, and Nation levels. FERN is a coordinated
    initiative between the U.S. Department of Agriculture's Food Safety and
    Inspection Service (FSIS) and the Department of Health and Human
    Services' Food and Drug Administration (FDA) to develop an integrated
    laboratory network capable of providing ongoing surveillance and
    monitoring of the food supply, as well as conducting the extensive
    testing necessary in the event of a terrorist attack on the food
    supply. Specifically, laboratories participating in FERN are
    responsible for detecting and identifying biological, chemical, and
    radiological agents in food. The involvement, participation, and
    expertise of local, State, and Federal laboratories in FERN assures
    that all food commodities under all jurisdictions are covered by the
    network. The size of the network and its wide geographic representation
    are also important because they will enable FSIS to rely on State and
    local laboratories to participate in handling the numerous samples that
    will be required to be tested in the event that a terrorist attack on
    the food supply involves meat, poultry, or eggs.
        FSIS Program Investigators are vigilant in ensuring food security,
    through annual reviews, audits, and investigations and by conducting
    other activities, including assessing product handling facilities,
    providing guidance to meat, poultry, and egg products industry
    officials regarding food security principals, and distributing Agency
    food security publications.
        We have also utilized a risk-based approach in education materials
    prepared for our stakeholders. For instance, we have developed three
    sets of guidelines for different segments of the farm-to-table
    continuum: Food Security Guidelines for Food Processors; Safety and
    Security Guidelines for the Transportation and Distribution of Meat,
    Poultry and Egg Products; and Food Safety and Food Security: What
    Consumers Need to Know. All of these publications are available on
    FSIS' Web site at www.fsis.usda.gov.
        We are looking at ways to further improve our Automated Import
    Information System (AIIS), which uses statistics to choose imports for
    reinspection and allows our inspectors at all ports-of-entry to share
    data. From the vulnerability assessment, we have enhanced this network
    to account for certain food security issues, and we are working with
    other agencies, such as the Customs and Border Patrol, to integrate our
    database systems to enhance the flow of vital information to further
    strengthen our food safety system against intentional attacks.
        FSIS and USDA work closely with the White House and DHS to
    coordinate our food security efforts. Moreover, FSIS is an integral
    part of the White House Interagency Food Working Group, which is
    charged with developing an interagency strategy to protect the food
    supply and minimize it as a target for terrorist activity.
        In addition, we are working with HHS-FDA, USDA's Food and Nutrition
    Service, and Agricultural Marketing Service to develop training in food
    security awareness. We also recently entered into a cooperative
    agreement with HHS-FDA, DHS, and the National Association of State
    Departments of Agriculture to develop the best practices by which
    Federal assistance can be provided to States and localities
    expeditiously and effectively.
        We are also interacting more closely with the intelligence and law
    enforcement communities. We are building stronger relationships with
    intelligence and enforcement agencies, such as the Federal Bureau of
    Investigation, the Central Intelligence Agency, the Transportation
    Security Agency, and the Coast Guard.
        With respect to our trading partners, FSIS is seeking to enter into
    bilateral agreements with several countries to share information that
    would help secure the food supply. Agreements are being developed with
    Canada, and similar discussions are beginning with Australia, Japan,
    Mexico, and New Zealand.
        Finally, it is vital that all food slaughter and processing
    establishments, as well as all import and export establishments, assess
    potential risks in their operations and take steps to ensure the
    security of their operations. With that in mind, FSIS has developed the
    ``Industry Self-Assessment Checklist for Food Security'' and is
    developing outreach efforts to distribute this document to regulated
    industry. This voluntary checklist provides establishments with a
    constructive tool to evaluate their security plans to prevent
    intentional contamination of their products, thus helping to further
    ensure food safety and security and protect public health.

    Risk Analysis
        FSIS is committed to emphasizing science in the development of food
    safety policies. A scientific approach to food safety that incorporates
    risk analysis is critical to FSIS' ability to combat the ever changing
    threats to public health. Thus, another priority is risk analysis,
    which includes risk assessment, risk management, and risk
    communication. In addition to providing regulatory agencies with a
    solid foundation for policy changes, science-based risk analysis is
    necessary to help the Agency better predict and respond to food safety
    threats by allowing us to focus Agency resources on hazards that pose
    the greatest threat to public health. Analysis of FSIS regulatory
    sampling data, as well as other sources of data, including baseline
    studies, helps us detect trends and identify connections between
    persistence, prevalence and other factors such as practices employed by
    plants, seasonal variations, and establishment size. With that in mind,
    the Agency will begin collecting samples in late Spring 2005, for a
    baseline study for beef trimmings in raw ground beef production.
    Planning for additional studies is underway.
        In recent years, the Agency has conducted a number of risk
    assessments, most notably those with regard to E. coli O157:H7 and
    Listeria monocytogenes. As I stated earlier in my testimony, we have
    seen marked reductions in both pathogens, thanks, in large part, to the
    risk assessments that provided the scientific framework for our E. coli
    and Listeria monocytogenes policies. In the coming year, FSIS plans to
    conduct a similar risk assessment for Salmonella in raw ground beef and
    raw poultry products. Just last month, the Agency held a public meeting
    about two draft risk assessments--one for Salmonella in ready-to-eat
    (RTE) and poultry products and one for Clostridium perfringens in both
    RTE and heat-treated products that are not RTE.
        To fully realize the benefits of risk analysis, however, FSIS must
    develop methods for anticipating or predicting risk through enhanced
    data integration. FSIS is engaged in developing innovative ways to
    anticipate hazards, so that it can act to ensure that those hazards do
    not manifest themselves as public health problems. The Agency is
    currently examining its regulatory data to identify conditions that
    consistently have foreshadowed the development of significant problems.
    By identifying such conditions, inspection personnel can utilize data
    to alert establishments so they can take corrective actions that may
    prevent a hazard.

    Management Controls and Efficiency
        FSIS is looking for ways to best achieve our operational goals and
    objectives. In order to better focus its resources, FSIS is
    establishing a more fully documented management control program.
    Management controls are operational checks and balances that safeguard
    policies, procedures and structures to ensure that tasks are completed
    in the most efficient and effective manner. With more fully documented
    proper management controls, authority, responsibility, and
    accountability are more clearly defined and delegated. In addition,
    program performance is routinely analyzed, policies, and procedures are
    regularly updated, management decisions are transparent and traceable,
    documentation is accurately maintained, and supervision is appropriate
    and continuous.

    Communications
        The Agency has also embarked on a comprehensive effort to ensure
    that all levels of communications are as efficient, effective, and
    rapid as possible. We recognize that as a public health regulatory
    agency, we are only as effective as our communication systems. Nowhere
    was this more evident than in the post-September 11th environment we
    find ourselves in as a country and as an Agency.
        It is vitally important that the Agency continue to receive the
    necessary funds to maintain and upgrade its information technology (IT)
    systems, which will improve efficiency and enhance communication
    between and among all FSIS employees. For FSIS, the use of databases to
    track inspection program personnel tasks is essential for food safety
    verification. It is a vital communication resource whereby inspectors
    can enter information about their daily food safety, security, and
    humane handling verification duties. With the vast and dispersed number
    of meat, poultry, and egg processing facilities scattered across the
    country and throughout the world, our geographically dispersed
    workforce needs the ability to send, receive, analyze, and react to
    information gathered at any one of these potential hot-points, because
    it is critical to the protection of public health. As an Agency we are
    striving to ensure that our IT systems operate in a ``realtime data
    exchange'' environment. In addition, managers at the district level and
    at headquarters can make crucial management decisions based on tracking
    progress and analyzing the performance of their employees, as well as
    the establishments for which they are responsible. A more rapid
    exchange of information with the field enables FSIS supervisors and
    managers to make better informed decisions on food safety and security
    issues, thus better protecting public health.
        I have made it a very high priority to ensure that our numerous
    data gathering and storage systems operate in a seamless and
    cooperative fashion across the Agency and with our partners. We
    appreciate the support this committee has provided in the past to allow
    us to improve and update our communications systems.
        To be a successful public health Agency, our employees need the
    right information to do their jobs. Information needs to be
    communicated quickly and accurately; ensuring public health will be
    protected through safe and secure meat, poultry, and egg products. That
    is why the Agency has put together an Internal Communications Board and
    charged them with developing ways to enhance the flow of communication
    laterally and vertically within FSIS. This board is engaged in many
    projects to best meet the communication needs of our employees. One
    major activity is the new FSIS Intranet. The Intranet will be one-stop-
    shopping for all internal FSIS needs, providing access to notices,
    directives, regulations, policies, career tools, and up-to-date news
    and information about the Agency. The board has also been challenged
    with working on our Agency's image and message. It is crucial that all
    employees and stakeholders recognize and understand the critical public
    health mission of FSIS.
        We continue to strive to improve our communications both internally
    with our workforce and externally with stakeholders and our public
    health partners. As one partner in the U.S. food safety effort, FSIS
    strives to maintain a strong working relationship with its sister
    public health agencies. Cooperation, communication, and coordination
    are absolutely essential if we are to be effective in addressing public
    health issues. We made great strides in this area when we dealt with
    the BSE-positive cow discovered in December 2003, and as we implemented
    the new interim regulations this year. Moreover, we have been involved
    in discussions on establishing data sharing systems with other
    agencies, such as APHIS and CDC. Maintaining information technology
    support will allow for a collaborative effort between State and Federal
    agencies by fully integrating currently duplicative processes and data
    collection, such as surveillance and monitoring activities for human
    and animal diseases.

    The Continued Evolution of Inspection and Enforcement
        Another Agency priority is to continue the evolution of inspection
    and enforcement. A risk based approach, encompassing all we do and
    combined with the Agency's scientific commitment, will facilitate FSIS'
    ability to combat ever changing threats to public health.
        Today, we have a much better reaction to the hazard landscape. Our
    ability to target resources for food safety and security verification
    systems has greatly improved. FSIS has refined its risk-based approach
    from a fairly static environment to one that is more fluid and can
    better react to food safety challenges that exist, and those that may
    arise, in order to further improve public health.
        Specifically, our Agency works interdependently to assess data from
    FoodNet, other Federal agencies, and State public health agencies, as
    well as the FSIS Consumer Complaint Monitoring System (CCMS), to
    investigate hazards by identifying sources, conducting food safety
    assessments in regulated facilities, and conducting investigations in
    associated transportation, distribution, and storage facilities. In
    addition, food security monitoring procedures have been incorporated
    into inspection verification methodology at all domestic and import
    establishments. In-plant regulatory control actions as well as
    effective administrative and criminal proceedings have been and
    continue to be effective deterrents to violations of law.
        As we approach the completion of the first decade under HACCP, FSIS
    is determined to take a risk-based approach to food safety and security
    verification in order to realize the next dynamic in food safety. With
    recent developments in science and risk analysis, it is clear that
    there are enhancements that can be made to HACCP that offer a more
    complete approach to inspection and ensuring public health. This
    enhanced risk-based system builds on the strong foundation provided by
    the HACCP/Pathogen Reduction regulations and allows the FSIS workforce
    to more effectively utilize their expertise in assuring the safety and
    security of America's meat, poultry, and egg products.
        To meet its goal of protecting public health, FSIS will continue to
    review policies and regulations and work with interested parties to
    modernize and further enhance its inspection and food safety and
    security verification efforts, including the verification of humane
    slaughter and handling. It is clear that progress has been made, but
    through the continued evolution of inspection and enforcement, in our
    risk based system, FSIS intends to make the world's safest food supply
    even safer.

                        FISCAL YEAR 2006 BUDGET REQUEST

        I appreciate having the opportunity to discuss a number of FSIS'
    accomplishments with you. Now, I would like to present an overview of
    the fiscal year 2006 budget request for FSIS.
        Implementation of these budget initiatives is imperative to helping
    us attain FSIS' public health mission. In fiscal year 2006, FSIS is
    requesting an appropriation of $849.7 million, a net increase of about
    $32.5 million from the enacted level for fiscal year 2005, which
    includes $139 million to be derived from proposed new user fees from
    the industry.

    Food and Agriculture Defense Initiative
        The fiscal year 2006 budget also requests an increase of $19.5
    million for FSIS to support a food and agriculture defense initiative
    in partnership with other USDA agencies, the Department of Health and
    Human Services and the Department of Homeland Security. Food
    contamination and animal and plant diseases can have catastrophic
    effects on human health and the economy. The three Federal departments
    involved are working together to create a comprehensive food and
    agriculture policy that will improve the government's ability to
    respond to the dangers of disease, pests, and poisons, whether natural
    or intentionally introduced. Our food and agriculture defense
    initiative has five components:
      --The Food Emergency Response Network (FERN);
      --Data systems to support FERN;
      --Enhancing FSIS laboratory capabilities;
      --Biosurveillance; and
      --Follow-up bio-security training.
        For FERN we are seeking an increase of $13 million; for FERN data
    systems we are asking for an increase of $2.5 million; for enhancing
    laboratory capabilities we are requesting $2.5 million; for
    biosurveillance we are requesting an increase of $417,000; and for bio-
    security training we are seeking an increase of $1 million.
        The first component of the food and agriculture defense initiative
    is FERN, a coordinated initiative between FSIS and the Department of
    Health and Human Services' Food and Drug Administration (FDA) to
    develop an integrated network of Federal, State, and local
    laboratories. FERN is an integrated laboratory network capable of
    providing ongoing surveillance and monitoring of the food supply, as
    well as conducting the extensive testing necessary in the event of a
    terrorist attack on the food supply. The FSIS fiscal year 2006 budget
    request for FERN seeks an increase of $13 million from fiscal year 2005
    which will enable the Agency to manage, maintain, and expand on the
    existing group of FERN labs. These funds will improve the Agency's
    ability to handle the greatly increased number of samples that would be
    required to be tested in the event of a terrorist attack on the meat,
    poultry or egg products supply. These State and local laboratories in
    the FERN network would play an essential role in conducting this
    expanded testing.
        The second and third components of the food and agriculture defense
    initiative provide further support to FERN. The electronic laboratory
    exchange network (eLEXNET) is a national, web-based, electronic data
    reporting system that allows analytical laboratories to rapidly report
    and exchange standardized data. The fiscal year 2006 budget request
    would provide funding needed to make eLEXNET available to additional
    FERN and other food-testing laboratories nationwide. In turn, the
    budget request would enhance FSIS' laboratory capabilities in order to
    detect new bioterror-associated agents, and to ensure FSIS' capability
    and capacity to perform the toxin and chemical testing that will be
    standardized across all FERN laboratories.
        Fourth, the food and agriculture defense initiative will allow FSIS
    to participate in an interagency biosurveillance initiative that would
    improve the Federal Government's ability to rapidly identify and
    characterize a potential bioterrorist attack. Funding this initiative
    will improve Federal surveillance capabilities and enable FSIS to
    integrate with DHS to compile FSIS surveillance information rapidly
    with threat information. This funding would also allow FSIS to focus
    its resources on the vulnerable products and processes identified
    during the Agency's vulnerability assessments of imported and domestic
    products and establish a Foodborne Disease Surveillance Communication
    system to coordinate with DHS systems.
        Because the realm of biosecurity is ever changing, FSIS must
    provide its workforce with the most up-to-date information possible to
    ensure that meat, poultry, and egg products are protected from
    intentional contamination. Therefore, the final component of the food
    and agriculture defense initiative is follow-up biosecurity training of
    the workforce. This additional training is essential as part of the
    ongoing effort to protect the public by educating the workforce
    regarding the latest Agency policies, threat agents, and
    countermeasures to those agents.

    Public Health Training
        The maturation of HACCP has widened the scope of all front-line
    inspection duties. While slaughter line inspectors have largely
    retained their traditional tasks, other front-line personnel have
    acquired more complex responsibilities related to public health,
    including food safety assessments, food security, and documentation and
    analysis to support detentions, recalls, or other enforcement actions.
        Further integrating front-line inspection and science will allow
    scientifically-trained FSIS personnel to most effectively utilize their
    expertise. For instance, FSIS intends to fully employ the scientific
    skills of its Public Health Veterinarians--systems analysis,
    epidemiology, biostatistics, microbiology, pathology, and toxicology--
    to safeguard public health. Accordingly, FSIS has been revising
    veterinary work assignments so that PHVs spend 25 percent of their time
    on public health assessment and assurance. As part of the fiscal year
    2006 budget request, FSIS is requesting an increase of $2.2 million for
    relief positions so that the Agency can take full advantage of the
    training, experience, and responsibilities of these highly-trained
    PHVs. The Agency and the public will benefit from more effective
    utilization of the technical knowledge and skills of our veterinarians
    through their expanded public health activities.

    Supporting FSIS' Basic Mission
        The FSIS budget request for fiscal year 2006 supports the Agency's
    basic mission of ensuring that the Nation's commercial supply of meat,
    poultry, and egg products is safe, wholesome, and correctly labeled and
    packaged.
        In order to fulfill the Agency's statutory obligations to provide
    continuous inspection of meat, poultry, and egg products, the budget
    requests an increase of $13.9 million for the FSIS inspection program
    to provide for the 2.3 percent pay raise for FSIS employees in fiscal
    year 2006 and to assure that the Agency is provided sufficient funds to
    maintain programs without disruption to industry operations.

    User Fee Proposal
        In fiscal year 2006, FSIS estimates it will collect $122.9 million
    in existing annual user fees to recover the costs of overtime, holiday,
    and voluntary inspection. Of the $849.7 million requested in the fiscal
    year 2006 budget, $139 million is proposed to be derived from a new
    user fee that would recover the costs of providing inspection services
    beyond an approved 8-hour primary shift. A legislative proposal
    authorizing this new fee will soon be submitted to Congress. This will
    result in significant savings for the American taxpayer.

                                    CLOSING

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

        Senator Bennett. Thank you.

                             FOOD STAMP ERROR RATE

        Mr. Bost, you talked about the failure rate, food stamp?
        Mr. Bost. Yes, sir.
        Senator Bennett. And you are delighted that it is at 6
    percent, which you say is a significant decrease? Help me
    understand----
        Mr. Bost. Yes. It is a 25 percent decrease over the course
    of the last 4 years, which is the lowest that it has ever been
    in the history of the Food Stamp Program. We anticipate that
    when we release the results, probably in June of this year, for
    last year, it will be even lower.
        Senator Bennett. Well, help me understand what it means.
        Mr. Bost. Essentially, the error rate is a measure of an
    inaccurate determination of benefits. For example, an error can
    occur when a person goes into an office, in Sandy, Utah, and
    applies for food stamps. It is an error if they get either too
    much or too little. If it is just right, then it is perfect.
        Senator Bennett. I see. So the error rate has to do with an
    improper amount being given out?
        Mr. Bost. That is correct. An improper payment. The
    interesting thing is the fact that we are one of the few
    Federal programs where improper payments are measured, and
    reported every year.
        Senator Bennett. Okay. Good. I just hadn't understood what
    that meant before, and I----
        Mr. Bost. Well, it is something that we are very proud of
    in terms of working with our State partners. It demonstrates to
    everyone how seriously we take this, and it ensures that there
    is integrity in the program and that there is an accurate
    determination of benefits for people that come in to apply.

                            FOOD STAMP PARTICIPATION

        Senator Bennett. Can you explain the increase in
    participants?
        Mr. Bost. Well, I think there are probably three major
    reasons. First and foremost, provisions we implemented as a
    direct result of the farm bill, and the Food Stamp Program
    being reauthorized. Second, Congress made it easier for
    eligible persons to enroll in the program, and made it easier
    for the States to implement it. Also, we have seen the results
    of our outreach efforts, in terms of enrolling eligibles.
        Last, but not least, the beauty of the Food Stamp Program
    is that it responds to the changing tides of the economy. When
    the economy is not doing so well, you see an increase in the
    number of enrollees. When the economy is doing great, you see a
    decrease. Those are the three main reasons that we have seen an
    increase in terms of participation in the Food Stamp Program.
        Senator Bennett. Well, the economy is doing better, but you
    are still increasing?
        Mr. Bost. Right. But there tends to be a lag----
        Senator Bennett. I see.
        Mr. Bost [continuing]. In terms of when the economy goes up
    and participation declines. Interestingly enough, this month,
    was the first month, and while I am not ready to say that it is
    a trend yet, that participation didn't go up. It stayed the
    same and started to decrease, which would indicate to us--and
    like I said, I want to make this point that I am not ready to
    say it is a trend yet--that participation is on the decline.
        Senator Bennett. Okay. Well----
        Mr. Bost. The economy may be catching up with it.
        Senator Bennett. In the economy as a whole, the
    unemployment rate is a lagging indicator?
        Mr. Bost. That is correct.

                         WIC PARTICIPATION AND FUNDING

        Senator Bennett. And this lags the unemployment rate. Okay.
    Let us talk about WIC for a minute. We had a lot of angst about
    WIC last year because we had to add about half a billion
    dollars just to stay even as a result of the increase in milk
    prices.
        Mr. Bost. Yes, sir.
        Senator Bennett. Now you are asking for another $275
    million. What does that represent?
        Mr. Bost. Well, right now, we are serving about 8.2 million
    persons in the Women, Infants, and Children Program. We
    anticipate that rate going up to about 8.5 million persons, and
    these funds would fully support the expected participation
    rate.
        We believe that based on these numbers, we will be able to
    meet the needs of those persons that are eligible to
    participate in the program who seek services. We are also
    asking for a contingency fund of $125 million just in case our
    numbers are off.
        I want to add two points I think are very important. The
    issue of WIC and its associated costs are tied to two things.
    It is not only participation, but as you said, the cost of the
    WIC food package. When we saw a significant increase in dairy
    prices last year, I saw a significant increase in my overall
    WIC food costs.

                                 WIC FOOD COSTS

        Senator Bennett. Now do you have any forecast as to what is
    going to happen to food costs this year? Are we going to have
    another challenge as we get close to the final passage of the
    bill in September, where we are going to have to find some
    more, several hundred million dollars more?
        Mr. Bost. No. The preliminary numbers we have at this point
    would lead us to believe that we should not see a significant
    increase in those costs. But it is unpredictable. We are
    guessing in terms of looking into the future and trying to
    anticipate it.
        We have put some cost containment measures in place. We
    have been working with the States to ensure we are as efficient
    in the administration of this program as possible. That is one
    reason that we looked at the WIC-only stores in California and
    around the country. That increased our cost by an additional
    $30 million.
        We are looking at everything that we can possibly do to not
    deter eligible persons from participating in the program. I am
    working with the States to ensure that, one, we hold them
    accountable and, two, this program is operated just as
    efficiently and as effectively as possible.
        Senator Bennett. You will remember we took a great interest
    in WIC-only stores in the bill last year, and that interest
    continues.
        Mr. Bost. Well, it is something that we are very interested
    in also, Mr. Chairman. I wrote not only to California, but to
    every State in the country where there are WIC-only stores and
    encourage them to look at some cost containment measures.
        I want to make this point. We are not interested, we are
    not motivated in putting the WIC-only stores out of business.
    What I am interested in is controlling the costs.
        Senator Bennett. Yes. Yes, so are we. And we encourage you
    in that.
        Mr. Bost. Thank you.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        Senator Bennett. Secretary Hawks, national animal
    identification. You have asked for $33 million to continue the
    program, and that is in addition to some $18 million to $19
    million that was transferred from the Commodity Credit
    Corporation, and another $33 million that was appropriated last
    year. Can you give us a status on where this is and where you
    think it is going?
        Mr. Hawks. Yes, sir. I would be quite happy to.
        We did transfer $18.8 million from CCC last year. With
    those funds, we started cooperative agreements with 43 States
    and 16 tribes that we are working with. We held a series of
    animal ID listening sessions around the country. I personally
    attended every one of those. There were 16 of them, from one
    end of this country to the other.
        The consistent message that we were hearing from the
    countryside, and I felt it was very important to get out to
    where the real cowboys are, if you will----
        Senator Bennett. Yes.
        Mr. Hawks [continuing]. To get a good understanding of what
    was going on out there, was confidentiality of information, and
    the ability to be flexible as well as to have a system that
    would perform appropriately.
        Last October, the Administration submitted legislation, to
    address the issue of confidentiality. We will be resubmitting
    that. We had identified premise registration as the first order
    of business. We have accomplished that now. We have 45 States
    that are fully operational. We hope to have the rest of the
    States fully operational in the near future. We will start,
    hopefully by July, to issue actual animal identification
    numbers, individual numbers.
        Of the $33 million requested and appropriated in our 2005
    budget, we will take approximately $19 million and move forward
    with additional cooperative agreements. It is very important
    that as we move forward with this, we move forward in a manner
    that it does what we want to do. And I think there is a lot of
    misunderstanding about animal identification. The fact is we
    are looking at it from a disease control standpoint using the
    authority provided in the Animal Health Protection Act.
        And we only need a very small bit of information. We are
    looking at various technologies. Radio frequency identification
    is one of them. Retinal scans is one. DNA is one. So we are
    trying to, with these cooperative agreements, test multiple
    ways of doing this to make sure that we have a system that is
    economical and functional, and that the confidentiality issues
    are addressed.
        Senator Bennett. Very good. I am looking for a completion
    date. We start in July?
        Mr. Hawks. We will be able to issue those individual
    numbers in July. We actually are looking at a fully functional,
    potentially mandatory system by 2009. But we feel it is very
    important to move forward with this in a systematic manner.
        The last thing that I want to do or I think you want me to
    do is to be out there with a system that is not functional. We
    are doing this very cooperatively. We are preparing to publish
    in the very near future a current thinking paper, a strategic
    plan with timelines and dates, and get input back on that. So
    we feel like it has got to be a cooperative arrangement that we
    go forward with and that we not have something that won't be
    functional when we get through with it.

                               OVERSEAS PROGRAMS

        Senator Bennett. Okay. Tell me about your APHIS offices
    overseas. I understand you are talking about new offices in
    Brazil, Thailand, India, Italy, and West Africa?
        Mr. Hawks. Yes, sir.
        Senator Bennett. What do we expect to get out of that?
        Mr. Hawks. One of the things that I said in my opening
    statement is the fact that I want to see us put some sanity
    back in sanitary and phytosanitary trade issues. It seems that
    over the last few years, sanitary and phytosanitary issues have
    become the trade distorting practices of choice around the
    world. We only have to look at the situation with Japan right
    now and our beef, and not being able to open that market.
        But it is important to have, from a technical perspective,
    those people that can address these issues. As I said, we did
    112 of those SPS issues last year that allowed for $5 billion
    of trade to occur. So it is important to have those types of
    offices, the personnel there that can address these from a
    technical perspective, to maintain those markets, to open those
    markets and address those issues.
        That is the reason we have been increasing resources. And
    we have to constantly look at the areas and re-evaluate where
    those resources need to be because it is very important that we
    are prudent with our dollars, with your tax dollars.
        Senator Bennett. Sure. Sure.

                        FOOD EMERGENCY RESPONSE NETWORK

        Dr. Pierson, let us talk about FERN. You have requested a
    $13 million increase for the Food Emergency Response Network,
    and you say this will allow USDA to establish 100 laboratories
    that will be able to exchange data, inform the public, and so
    on.
        Why do we need 100 laboratories? How many do you have now?
    And I assume these are all existing labs with whom you will
    contract, rather than standing up brand-new ones. But let us
    understand where you are now, and 100 sounds like pretty
    ambitious. That is two a week. That is quite an administrative
    task to undertake.
        Dr. Pierson. Correct. As you correctly described, FERN
    would be the Food Emergency Response Network. As you know, FERN
    is a laboratory system that was put together in cooperation
    with the Food and Drug Administration and other partners to
    provide a system whereby we could have an immediate response if
    there is, in fact, a food-related emergency event, such as an
    intentional widespread contamination of foods.
        We feel it is much better to be prepared and to have a
    system in place that can respond immediately to provide that
    immediate result that is needed through analysis, rather than
    approaching it in a piecemeal way or more of a reactive way.
        What we are doing is to build upon existing resources. We
    are not asking to build new facilities or new laboratories.
    Throughout the United States, we have many very, very capable
    State laboratories and local laboratories. And our goal, yes,
    is to bring into the fold up to 100 laboratories.
        What we are working towards is to provide standard
    methodologies, and standard protocols that can be shared by
    these laboratories, so that we have a commonality of
    understanding as to how to approach and analyze the samples. It
    is very, very important that we have uniformity so we don't get
    some differences in response.
        Senator Bennett. Yes, I understand that. But you are
    talking two per State. Is that how it is going to be allocated,
    or is it going to be one per State and then the rest bunched
    some place?
        Dr. Pierson. We are looking towards adding about 15
    laboratories initially, and our ultimate goal is 100. This is a
    building process that we are going through, and we are
    establishing this infrastructure and then building upon that
    over a period of time.
        Senator Bennett. Will you have at least one per State?
        Dr. Pierson. That is eventually what we are looking for, at
    least one per State. Then, of course, there would eventually be
    more.
        I know I personally presented this proposal 2 years ago
    before the Association of Food and Drug officials, the
    consortium of State laboratories, and at that time, we were
    working with them to conceptually buy into this concept. We
    have a very good response, and so we are then looking to
    incrementally bring those labs online.
        Senator Bennett. Okay. Thank you very much.
        Senator Kohl.
        Senator Kohl. Thank you, Senator Bennett.

                          MILWAUKEE HUNGER TASK FORCE

        Mr. Bost, the Hunger Task Force based in Milwaukee was
    established in 1974 to work toward making sure that Milwaukee's
    young people received breakfast at school. Since then, their
    mission has been expanded, and now they advocate public
    policies that we hope will eventually stamp out hunger.
        Until this larger mission is accomplished, however, they
    serve nearly 45,000 people a month at their pantries, and
    nearly half are children. And they provide more than 60,000
    meals each month at their homeless shelters and meal programs.
    I think you are familiar with this.
        Organizations such as this one, local groups that work on
    the ground and actually carry out both public and private
    feeding programs, I believe have much to offer in the way of
    shaping good public policy, providing suggestions on how to
    improve what we are currently doing.
        I know that USDA has worked with the Hunger Task Force in
    the past and is currently working with them on their mozzarella
    cheese effort that I spoke of on Tuesday. I also know that they
    have many other ideas that I believe that we should hear and
    take into consideration.
        Mr. Bost, perhaps the best way to appreciate a group like
    this and the way they carry out what appears to be at times a
    very difficult task is to visit them in person and watch them
    in action. I know you have met with representatives of the task
    force on hunger for Milwaukee here in Washington.
        Mr. Bost. Yes, I have.
        Senator Kohl. And I wonder if I might prevail upon you at
    some point to get out there and see what they are doing on the
    ground and listen to them and have an opportunity to appreciate
    and to perhaps learn a little on how important their work is.
        Mr. Bost. Well, interestingly enough, Senator Kohl, I was
    scheduled to visit Milwaukee and had an opportunity to do that,
    except that I had a hearing.
        Senator Kohl. Today?
        Mr. Bost. No, it wasn't today. It was in the House. And so,
    yes, it was already scheduled. We are looking for an
    opportunity to have it rescheduled.
        Senator Kohl. I didn't know that. I think that is terrific.
        Mr. Bost. Yes. It was already scheduled. We had an
    opportunity to meet with the executive director not too long
    ago, and so there has been some correspondence. We are working
    on scheduling a trip for me to visit with them.
        Senator Kohl. I do thank you so much. That is a surprise,
    and I think it is great.
        Mr. Bost. Well, I don't know why you would be surprised. I
    told her that I was coming.
        Senator Kohl. Yes.
        Mr. Bost. It was a question of being able to get it
    scheduled.
        Senator Kohl. I thank you.
        Mr. Bost. You are quite welcome.

             PRIVACY PROTECTION OF CERTAIN SELLERS OF FARM PRODUCTS

        Senator Kohl. Secretary Hawks, last year, I inserted a
    provision--General Provision 776--to modernize the law
    governing agricultural lien central filing systems, to do it in
    a way that protects farmers from identity theft that could
    occur if their Social Security numbers were widely distributed.
        What has been done to implement this change, and can we
    expect at some point to have it completed?
        Mr. Hawks. Yes, sure. You actually threw me off with that
    question, Senator Kohl. I was not prepared to respond to that
    question. And so, I will have to get back with you on that.
        I know that in GIPSA, there's central filing. And so, I
    will have to say I am not prepared to give you an absolute as
    to where we are on that process.
        [The information follows:]

                                  Clear Title

        Section 1324 of the Food Security Act of 1985 (Act) authorized the
    Secretary of Agriculture to approve and certify central filing systems
    operated at the State level for farm products and to approve amendments
    to such certified central filing systems that have been proposed by a
    Secretary of State, provided that the proposed central filing systems,
    or amendments thereof, conform with the Act, as amended. Section 776 of
    the Consolidated Appropriations Act of 2005 allows a Secretary of State
    to propose the use of a unique identifier to be used in lieu of a
    social security number and allows the Secretary of Agriculture to
    approve proposed unique identifiers.
        The Grain Inspection, Packers and Stockyards Administration (GIPSA)
    is responsible for the administration of the Act. GIPSA posted on its
    web page a copy of the amended Act. GIPSA is in the process of updating
    the regulations and will be completed within one year. Section 776 does
    not provide GIPSA with the authority to create a selection system or
    method by which unique identifiers are produced. GIPSA will review any
    system proposed by a Secretary of State's office. Upon thorough review,
    GIPSA will determine whether to approve the selection system or method
    proposed.

        Senator Kohl. All right. I thank you, and we will----
        Mr. Hawks. Honesty is one of the things you will find from
    me. And I have already visited you in Wisconsin, too.
        Senator Kohl. Yes, I remember. At least on one occasion, we
    met at the airport on your way through.
        Mr. Hawks. We sure did.

                    TWENTY-FIVE PERCENT CAP OF WIC NSA FUNDS

        Senator Kohl. Secretary Bost, the budget request includes
    language to limit the funding for nutrition services and
    administrative expenses of the WIC program to no more than 25
    percent of the total amount provided. This will reduce funding
    available for nutrition services and administration, but more
    importantly, it changes the structure providing these very
    important dollars.
        On the surface, this may sound like only a reduction in
    administrative expenses. But there is more to it, as you know,
    than this what appears to be a more superficial explanation.
    This funding isn't just lights and office expenses, as you
    know. It includes nutrition education, obesity prevention,
    breast feeding support and promotion, prenatal and pediatric
    health care referrals, spouse and child abuse referral, and
    other vital services.
        Further, this request, by changing the way administrative
    funding is provided, will actually create a disincentive for
    food costs containment. In the past, administrative dollars
    were tied to the number of people you served. So you would keep
    food costs low, serve more people, and receive more
    administrative money.
        In this proposal, however, your administrative money is not
    tied to the number of people you serve. It is tied to the total
    amount you spend on food. So if you keep food costs low, you
    are not rewarded. You actually lose administrative dollars. And
    over time, this could actually drive WIC costs up.
        I think we agree that the WIC program provides more than
    only food. This request is more than just a cutback on lights
    and office. It will reduce essential services provided through
    the WIC program, and so I think it deserves some serious
    reconsideration.
        Do you have some thoughts that you would like to express?
        Mr. Bost. Yes, Senator Kohl. A couple of things. If you
    recall in my opening comments, we are always interested in
    ensuring that all of the programs that I am responsible for,
    are managed just as efficiently as possible. We believe that
    this proposal will cause, hopefully, in cooperation with us,
    some State agencies to seek ways to be much more efficient. We
    do not believe that it will compromise those core services that
    they are directly responsible for. That is the first point.
        The second point is that I had an opportunity to meet with
    the WIC groups when they were in town not too long ago. The
    commitment that I made to them is that we would be willing to
    sit down with them and entertain ideas in terms of the best way
    to get to the 25 percent cap that would not compromise their
    ability to provide the level of services that we are interested
    in providing.
        And last, but not least--and I am going to read this
    because I want to make sure that it is right--the percentage of
    total funds available for States for grants in 2005 is about 26
    percent. We are looking at bringing that down to 25 percent,
    which is only 1.5 percent. In addition to that, the funding
    available in fiscal year 2006 is about $1.3 billion, and for
    2005, it was a little bit less. So, it is another way that we
    believe we can work with our State partners, to say to them,
    ``What can we do to make this program as efficient as we
    possibly can, given the fact that we just don't have endless
    dollars available to run it?''
        No decision has been made at this point in terms of what
    the allocation formula would be. That was a commitment that I
    made to the group, that we would be willing to sit down and
    work with them to get to the point of putting the cap of 25
    percent in place.
        Senator Kohl. Good. Thank you.

                           SHARING DISTRIBUTION LISTS

        Secretary Pierson, it is my understanding that USDA is
    considering a rule that will publicly disclose any retail
    outlets that may have received tainted meat. To me, it seems
    that this is an idea that should be acted upon.
        Is this proposed rule still being reviewed by OMB, and do
    you have any information regarding if and when we can expect
    this rule to be promulgated?
        Dr. Pierson. Thank you, Senator Kohl.
        Yes, FSIS did, in fact, prepare a proposed rule relative to
    the sharing of distribution lists. That rule has gone through
    departmental clearance at all levels. It had been forwarded to
    OMB, and it is at a pre-decisional stage so I cannot publicly
    discuss the details of what is there.
        OMB has had a number of questions that they sent back to
    us. We are looking at those questions. I don't have an exact
    timeline on OMB's decision, but we are now considering the
    issues between us and OMB.
        Senator Kohl. You don't know when this might, in fact, wind
    up being effectuated or what?
        Dr. Pierson. I do not know.
        Senator Kohl. Can you----
        Dr. Pierson. At this time, I don't know.
        Senator Kohl [continuing]. Keep me abreast as to what is
    happening, when it is going to get published? As I said, I
    believe it is a good idea. I think most people believe this is
    a good idea.
        Dr. Pierson. Sure. Certainly, we will keep you posted on
    the progress.

                       FOOD STAMP CATAGORICAL ELIGIBILITY

        Senator Kohl. Secretary Bost, last October, Economic
    Research Service reported 11.2 percent of U.S. households were
    ``food insecure,'' which means hungry, at least sometime during
    2003, the last year for which data is available. One of your
    stated goals is to decrease the percent of food insecure
    families down to 7.7 percent by 2006.
        This budget contains, however, provisions to restrict
    expanded categorical eligibility for the Food Stamp Program,
    and as you say in your statement, it is going to kick more than
    300,000 people off the food stamp roles. I have heard the
    administration's argument on this. Essentially, you say that
    all people have to do is ask about receiving TANF and just pick
    up a flyer, and they are automatically eligible for food
    stamps.
        However, let us be honest. These are not wealthy families
    that are coming in to seek Federal assistance. These are
    working families, families struggling to make ends meet, while
    housing, gas, child care, health care, and utility prices
    continue to rise.
        In Wisconsin, one of the hardest-hit States in your
    proposal, this is 19,000 people who depend on food stamps each
    month and who will be denied this basic benefit. In Wisconsin,
    this proposal will take away the automatic eligibility for
    children in these families to receive free lunches at school.
        So how do you respond to these concerns, and what advice do
    you have for these families who can no longer depend on the
    Government and are increasingly unable to depend on emergency
    food?
        Mr. Bost. Senator Kohl, I think there are several things
    that I would say. First and foremost, we have instituted and
    implemented one of the most comprehensive outreach programs
    over the course of the last 10 or 15 years in terms of reaching
    out and attempting to enroll eligible families in all of our
    nutrition programs. That is the first thing that I would say.
        The second thing that I would say to you is that for those
    persons that are affected by this proposal, if they still
    believe that they are eligible to participate in the Food Stamp
    Program, they can still go and apply. What we are interested in
    accomplishing here is to ensure that we target those families
    that are in the greatest of need in terms of meeting their
    nutritional well-being.
        Last, but not least, we have seen, as the Chairman noted,
    that the food stamp roles in this country have significantly
    increased over the course of the last several years. Right now,
    we are serving over 25, almost 25.5 million people in the Food
    Stamp Program. I am continuing to do outreach in terms of
    ensuring that eligible people are enrolled. We have radio ads.
    We have a major campaign. We spent money in terms of access and
    participation grants.
        So, for people that believe that they are still eligible,
    we want them to come and to apply. This provision is there to
    specifically target those that are in the greatest need in
    terms of meeting their nutritional needs and providing food for
    children and their families. If they believe that they are
    still eligible to apply, they should go apply.
        Senator Kohl. Thank you, Mr. Chairman.
        Senator Bennett. Senator Burns.
        Senator Burns. Welcome, gentlemen. Nice to have you here,
    and I have only got a couple of questions. That will probably
    lead to another one, but you know how it is.
        We have pretty well gone over the BSE thing. I think Mr.
    Hawks probably got sick and tired of me in December a couple of
    years ago. I looked over my phone log, and you were on there a
    lot.
        Mr. Hawks. I never get tired of you.
        Senator Burns. But first of all, I thank you for the hard
    work that you did. I think we had a real problem on the first
    announcement of the cow in Washington State, and we did succeed
    in maintaining the consumer confidence in our beef that was
    here. And we took a little dip in the market, but it didn't
    last very long, and I think it was handled the best way I know
    how in as far as a bureaucracy is concerned.
        You know, I always worry about it. Every time I see a
    camel, I look at it and said, ``He had to be put together by a
    committee.'' Because nobody could come up with a conglomeration
    of that and make it work.

                      ANIMAL AND DAMAGE CONTROL IN MONTANA

        But nonetheless, I have got a couple of questions. In our
    country out there, Mr. Hawks, could you tell me, provide me
    with some details of the current status of the Animal and Plant
    Health Inspection Service and what we can expect? We have some
    concerns with that. We have some new problems and challenges on
    the horizon. Well, not on the horizon. They are here.
        And could you give me some kind of an idea of where you
    think that agency is going and some details on it?
        Mr. Hawks. Yes, sure. I would be quite happy to do that. I
    have actually visited your State quite a bit and actually
    have----
        Senator Burns. A lot of predators around, wasn't there?
        Mr. Hawks. There are a lot of predators around.
        Senator Burns. Two-legged ones.
        Mr. Hawks. And yes, sure, they are out there. No doubt
    about it.
        But that is a program that is obviously very important to
    an area like yours. Obviously, you have got a lot of different
    predators. I know that the wolves are an issue for your sheep
    producers, your cattle producers out there. We have
    consistently worked with the States and with your producers.
    And as I have said, I have personally been out there.
        So I think that program is online from where it needs to
    be. But a commitment that I will make to you right here is that
    we will work with you. You know, my favorite statement is
    ``working together works.'' So I am prepared to work with you
    if there are specific issues that we need to address there.
        Senator Burns. That cooperation is okay until it comes to
    the coyote and the wolf. You know, I can remember it was said,
    well, they will stay in the park, too, you know? But they found
    out that the wolves couldn't read the park signs. They fell
    down or.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        I know that the Chairman here has asked you a little bit
    about the national ID, and you have got some pilot projects
    that are out there now. And I understand there are some people
    in the private sector that are also working on this situation.
    Are we making any progress on a national ID?
        Now I will tell you that a national ID is not met with a
    lot of enthusiasm from some of us, me being one of those
    people. But nonetheless, I also know what reality is. And can
    you give me an update? And when do you think that you are going
    to make a decision on what this Department of Agriculture wants
    to do, or how do you read Congress on what Congress wants to
    do?
        Mr. Hawks. Senator, as you well know, I have been
    personally engaged in the animal ID. We held the listening
    session right there in Billings. I heard from quite a few of
    your producers out there what their interests were.
        You asked a question about the private sector. Obviously,
    there is a role for the private sector as well as the public
    sector here. We have got to work cooperatively.
        We will be publishing very soon in the Federal Register
    what we are calling a current thinking or a strategic plan to
    try to get input to make sure that this system that we put
    together is functional. The thing that we don't want is we
    don't want to have a lot of duplicative systems out there. We
    want something that will work.
        And you have got some unique situations out West with the
    brand States. So part of the goal of these cooperative
    agreements is to work to test things out there to make sure
    that it will work.
        You know, we have a diverse country. And when you go from
    Florida to the State of Washington, the agriculture is
    different. The livestock industry is a lot different. So we
    feel like we are making good progress. We have got 45 States
    now that are registering premises. We are going to be ready to
    do individual animal numbers, hopefully, by mid July.
        So I think at one of my listening sessions, a gentleman
    summed it up pretty good. He said, ``I think you are at a
    yellow light.'' He said, ``When you approach a yellow light,
    you have got a decision to make. You can either mash on the gas
    and speed up, or you can throw on the brakes. Either way, you
    may cause an accident.''
        So I think we are at that yellow light. And we hear a lot
    from a lot of circles that are saying ``mash on the gas.'' A
    lot of other circles are saying ``throw on the brakes.'' I
    think it is prudent that we do neither one rapidly, but that we
    make sure that we negotiate this intersection safely.
        Senator Burns. And I agree with that. I would say if this
    is one place where we are trying to write a national law that
    ``one size fits all'', that will be very difficult. And that is
    why I recommended early on that states, all you have to do is
    understand their system and certify it, and then you kind of
    step out of the way and let the States do it because usually
    they have the best handle, especially in animal health. They
    have got the best handle on where they are and the condition.
        Of course, we have got a brand law in Montana, and that
    helps us a little bit. But the hot brand is not the total
    answer, as you well know. But nonetheless, I still think the
    records, the owners, and their method of identification should
    be kept within the State borders.
        I think each State has got to do that in some way or other,
    through some sort of a reimbursement or whatever. Because I
    just don't think you can run a law like this that one size fits
    all. I just don't think you can do it.
        It is just like trying to write a farm bill that applies to
    Iowa and applies to the Golden Triangle in Montana. By gosh, it
    don't work. It just don't work because it don't rain at the
    same time. It don't freeze at the same time. There are just a
    lot of variables that makes it almost impossible to manage from
    Washington, D.C., from this place that I call 17 square miles
    of logic-free environment.
        And so, we deal with these issues that have real people
    involved, real faces. And I would say as you go down that line
    on identification that you look very, very hard and let the
    States handle it because we have a livestock department that is
    very efficient, understands it.
        Also we have a brand law in the same department, so we kind
    of know where these things go and where they come from. And I
    appreciate your patience on that.
        Mr. Hawks. Now, Senator, you are right. As I have already
    alluded, there is a lot of diversity in this country. And we
    are working very closely with the State animal health
    officials. And you are right. You have a very good----
        Senator Burns. Those records have got to be kept in those
    States. They cannot come back here.
        Mr. Hawks. Well, we want to work with you to make sure that
    we have a system that is functional. I hear what you are
    saying, but I am committed to having a good, functional system
    to----
        Senator Burns. I won't fund it. I won't fund it. Let us
    keep it in the States. That is where the records ought to be
    kept, okay? Strong letter to follow.
        Thank you very much.
        Mr. Hawks. Thank you.
        Senator Bennett. Senator Kohl, do you have any additional
    questions?
        Senator Kohl. Just one.
        Senator Bennett. Yes.

                            FSIS IMPORT INSPECTIONS

        Senator Kohl. Secretary Pierson, this committee has
    included report language for the past several years regarding
    FSIS import inspections. Specifically, the language instructs
    USDA to be especially vigilant in countries where a significant
    number of plants fail inspection.
        However, I understand that USDA has not been continuously
    vigilant, specifically in regard to Mexican plants. Of the nine
    audits USDA has conducted since the spring of 1999, in Mexico,
    more than one-fourth of the plants audited failed six of those
    times, and no comprehensive audit has ever been conducted. This
    appears to be a very high number of failing plants and no
    increased scrutiny.
        Does the USDA have any plans to increase audits in Mexico,
    considering their high failure rate? Or is it USDA's opinion
    that the current level is adequate to ensure that the plants
    exporting to this country actually meet the same standards on a
    continuous basis as plants in the United States?
        Dr. Pierson. Thank you. I do very much appreciate your
    remarks, and might I take you right up to today?
        We are actually getting a lot of criticism for being overly
    tough, which is an interesting statement. And I think what has
    happened is that we have implemented a rigorous system to
    ensure equivalency that countries exporting meat, poultry, and
    egg products to the United States, in fact, meet our
    equivalency requirements.
        We schedule, at least annually, audits of countries that
    export to the United States. We can, in fact, and do audit more
    frequently when countries are, let us say presenting problems
    and issues.

                ENFORCEMENT AUDIT OF MEXICO'S INSPECTION SYSTEM

        Specifically, Mexico, at one time, did have very serious
    difficulties. We worked very closely with Mexico, and we let
    them know very seriously that they needed to pay very close
    attention to their inspection system. It has to be an
    independent inspection system, one where the plants don't pay
    the inspectors, for example. That is a no-no for us. They have
    to be paid by their government, and they have to be government
    employees.
        We then make sure that we audit that system--the inspection
    infrastructure. The other part is we then audit plants, and I
    can say that fairly recently, within the past year, we have
    done a comprehensive audit of Mexico; and as a matter of fact,
    they have made vast improvements. I believe, Dr. Masters, we
    did not have any delistments of plants in that inspection, did
    we?
        Dr. Masters. It was an enforcement audit, and we can get
    the exact details of that audit.
        Dr. Pierson. Sure. We can present that to you. The outcome
    of that audit was, I would say, very positive. Mexico did work
    very hard to come up to speed to our equivalency requirements,
    and we were pleased with the work that they had done.
        So I can assure you that our audits are very thorough, and
    they are very rigorous. We expect countries to meet the same
    requirements that we have for our domestic suppliers or
    producers.
        [The information follows:]

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Kohl. I thank you.
        I thank you, Mr. Chairman.
        The Subcommittee will submit some additional questions from
    Members for your response.
        [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

                         LOW PATHOGENIC AVIAN INFLUENZA

        Question. The funding level for the Low Pathogenic Avian Influenza
    program was increased from $994,000 in fiscal year 2004 to $23 million
    for fiscal year 2005. The increase was provided to indemnify producers
    for losses and to increase surveillance activities. Can you provide an
    update on the status of the fiscal year 2005 funding and when we should
    expect this program to be fully implemented?
        Answer. This program has two components: the commercial poultry
    industry and the live bird marketing system (LBMS). The LPAI program
    will be fully operational when a regulation is passed for the
    commercial component of the program.
        The breakout of the funding is as follows:
      --$12,000,000 for Indemnities.--These funds will cover the indemnity
            and euthanasia, disposal, cleaning and disinfection costs of
            flocks that test positive for LPAI and need to be depopulated.
            Because this is a new program, we are in the process of
            developing a regulation that is specific to indemnities
            associated with LPAI outbreaks in both the LBMS and the
            commercial poultry industry. Fortunately, we have had no LPAI
            outbreaks this fiscal year and have not yet needed to use these
            funds.
      --$3,871,547 for Surveillance Activities.--Funds have been devoted to
            cooperative agreements with States that have significant LBMS
            activities, as well as State laboratories participating in the
            NPIP LPAI program. States are using these funds to provide
            personnel to inspect and collect samples within the LBMS, to
            conduct trace backs and trace forwards, and to support the
            additional laboratory activities associated with the NPIP
            program for the commercial poultry industry. Currently, 10
            States have established cooperative agreements and 11
            additional States have shown interest in joining the program by
            the end of this fiscal year.
      --$932,285 for Reagents and Costs of Administering Tests.--These
            funds have been provided to the National Veterinary Services
            Laboratory (NVSL) for the processing of samples submitted. NVSL
            has developed the agreement to contract out the production and
            distribution of test reagents. These test reagents have been
            distributed to State and industry laboratories approved to
            participate in the NPIP.
      --$4,326,693 for Salaries, Benefits and Staff Support.--These funds
            provided for the hiring of Federal personnel to assist with the
            implementation of the national program, and to support the
            States in managing and preventing LPAI infections. To date, we
            have hired 17 people and are in the process of hiring an
            additional 29 employees (i.e., veterinary medical officers,
            epidemiologists, animal health technicians, laboratory
            technicians, etc.).
      --$600,000 for the Center for Veterinary Biologics (CVB).--These
            funds have been used for the expansion of an Avian Influenza
            vaccine bank through a contract with a biologics company. While
            vaccines are not routinely used to prevent infections, vaccines
            still have a potential role in controlling the spread of an
            outbreak or in a situation where depopulation of infected
            flocks is not possible or feasible. APHIS anticipates that the
            Statement of Work (SOW) for this contract will be completed by
            the end of May 2005. The SOW will be submitted with a
            requisition, and the solicitation for bids will be prepared and
            published. APHIS anticipates signing this contract by September
            2005.
      --$513,575 for Education and Outreach Initiatives.--These funds are
            being used to train all newly hired veterinary medical officers
            and animal health technicians, and all LBMS participants in the
            recognition of avian influenza and the enhancement of
            biosecurity practices in live bird markets, auctions,
            wholesalers, distributors, dealers and producer facilities.
      --$555,900 for Information and Technology Support.--These funds are
            supporting the cost of certifying, accrediting, refining and
            securing an information technology system. The funds will also
            be used to purchase or enhance communications technology to
            support basic surveillance functions such as data collection,
            evaluation, and interpretation. This system is currently under
            development and is expected to be ready to implement by the end
            of the calendar year.

                       WEB-BASED SUPPLY CHAIN MANAGEMENT

        Question. The fiscal year 2006 budget request $10 million to
    develop a Web-based Supply Chain Management System (WBSCM). This system
    would replace the current system and allow for more efficiency in the
    purchasing and tracking of commodities for nutrition programs.
        Can you briefly describe the need for this new web-based program?
        Answer. The Web-based Supply Chain Management System (WBSCM) would
    replace the Department's Processed Commodity Inventory Management
    System (PCIMS). WBSCM is designed to improve management of USDA's
    domestic and international food assistance programs for a seamless,
    transparent, and efficient flow of food products throughout the supply
    chain process. PCIMS does not efficiently and effectively support e-
    government approaches to dealing with program clientele. It is based on
    1980's technology and its architecture is extremely inflexible and
    costly to maintain. In contrast, WBSCM's design uses proven commercial-
    off-the-shelf software that incorporates commercial best business
    practices in an open, flexible architecture to meet functional,
    operational and compliance requirements.
        The anticipated benefits of WBSCM include reduced costs for
    commodities, transportation, inventory and warehousing, which will
    benefit both customers and vendors. WBSCM offers improved reporting
    capabilities and more timely delivery of commodities, a shortened
    processing cycle, and improved collaboration and integration between
    associated programs within the Department.

               USDA AND DEPARTMENT OF HOMELAND SECURITY EMPLOYEES

        Question. The Department of Agriculture has transferred a number of
    employees to the Department of Homeland Security. Please update us on
    the current relationship between USDA and the Department of Homeland
    Security? More importantly, do you have any concerns with the current
    arrangement that this Subcommittee should be aware of?
        Answer. USDA and the Department of Homeland Security (DHS) continue
    to work cooperatively to ensure quality agriculture research and
    inspections remain a high priority. Scientists from the USDA's
    Agricultural Research Agency (ARS) are co-located with DHS scientists
    at the Plum Island Animal Disease Center, which houses the ARS research
    program and APHIS foreign animal disease testing. The relationship
    between these programs and the DHS testing and evaluation program has
    been defined in a plan which lays out respective agency roles in
    protecting American livestock from acts of bioterrism. This formal
    definition of roles facilitates cooperation between the departments.
    Additionally, APHIS and DHS' Customs and Border Protection (CBP) have
    established a joint quality assurance program to ensure that the
    quality of agricultural inspections is maintained and to facilitate an
    appropriate level of communications between CBP and APHIS. Additional
    details of these two endeavors follow.
        Agricultural Quarantine Inspections.--APHIS and CBP operations
    officials are meeting twice monthly to carry out quality assurance
    program activities and address ongoing operational issues at ports of
    entry. As part of the program, APHIS and CBP have conducted a pilot
    joint inspection blitz at the port of Detroit and joint reviews of
    operations at the ports of Philadelphia and Miami. Reviews of
    operations at the maritime ports of Long Beach, California; Port
    Elizabeth, New Jersey; and Seattle, Washington are planned for summer
    2005.
        APHIS Administrator DeHaven and CBP Commissioner Bonner met in
    early April 2005 to discuss agricultural inspection operations at U.S.
    ports of entry. In addition to continuing to implement the joint
    quality assurance program to evaluate operations at ports of entry, Dr.
    DeHaven and Commissioner Bonner have established a series of meetings
    at various administrative and operational levels to ensure that any
    problems with the inspection program are addressed by the appropriate
    officials. Operational managers are already meeting several times a
    month in conjunction with the quality assurance program, and Dr.
    DeHaven and Commissioner Bonner agreed to hold quarterly meetings to
    address any issues that cannot be resolved at the operational level.
    APHIS' Deputy Administrator for the Plant Protection and Quarantine
    Program and CBP's Assistant Commissioner will also meet on a monthly
    basis.
        APHIS and CBP officials are also continuing to address the large
    number of vacancies at ports of entry. With the transfer of the port
    inspection portion of the agriculture quarantine inspection function to
    CBP in fiscal year 2003, APHIS transferred 363 fully-funded vacant
    inspector positions from Agricultural Quarantine Inspection. This
    number has increased significantly through attrition in the last 2
    years. While progress has been made in filling many positions, APHIS
    encourages CBP to continue an aggressive recruitment and hiring
    program. APHIS assists CBP in recruiting by distributing vacancy
    announcements to a large pool of qualified candidates and expeditiously
    training those hired. Following the April 2005 meeting between Dr.
    DeHaven and Assistant CBP Commissioner Ahern, APHIS is enhancing its
    recruitment program for CBP vacancies through promoting the jobs to
    qualified candidates at job fairs and on college campuses. APHIS'
    Professional Development Center has 14 classes scheduled for incoming
    agricultural specialists (with space for 36 new inspectors in each
    class).
        Progress has been made in other areas, such as APHIS access to
    CBP's data systems. In March 2005, APHIS and CBP reached an agreement
    to allow APHIS users to access CBP's Automated Targeting System (ATS),
    which will allow APHIS to review incoming cargo manifests
    electronically and determine which should be targeted for agricultural
    inspections. At this time, 14 APHIS users are approved to access ATS,
    with 6 more in the approval process. APHIS is also placing two
    agricultural specialists in CBP's National Targeting Center to develop
    criteria for determining which incoming shipments to target for
    agricultural inspections.
        APHIS and CBP officials are working cooperatively to address
    operational inspection issues through the quality assurance program,
    which includes quarterly data reviews and port of entry evaluations.
    APHIS and CBP officials will continue cooperating through these
    channels to manage the agricultural inspection program. However, APHIS
    officials remain concerned about the large number of vacancies for
    agricultural inspectors at CBP.
        Plum Island Animal Disease Center.--The relationship between DHS
    and USDA is defined administratively by an annually renewed interagency
    agreement. The agreement provides for a local council at Plum Island to
    manage day-to-day resource issues. The agreement also provides for a
    Board of Directors of Agency Heads to manage the overall programmatic
    relationship at the Plum Island Animal Disease Center.
        The current arrangements are working. As programs change and ARS
    maintains a primary focus on protecting livestock from exotic diseases
    and DHS focuses on terrorism countermeasures, there may be a divergence
    in issues for each agency that could place stress on resources
    available for research and testing and evaluation. The Board of
    Governors' approach to dealing with programmatic issues will serve as a
    forum to resolve those issues.
                                     ______

                  Questions Submitted by Senator Conrad Burns

                           COUNTRY OF ORIGIN LABELING

        Question. Country of Origin Labeling is a hot issue in Montana. In
    order for producers to be ready to comply with the law when it takes
    effect on Sept. 30, 2006, they will need to know what's expected of
    them. USDA has already published the proposed rule, and taken all the
    public comment on beef labeling. Why not publish the rule now, and give
    producers advance notice of what they will need to do to comply, to
    minimize the burden?
        Answer. The Agency believes it is prudent to monitor the fish and
    shellfish industry's compliance with the interim final rule for
    mandatory country of origin labeling of fish and shellfish for an
    appropriate period of time prior to finalizing the regulation for the
    other covered commodities to determine whether there are any provisions
    that should be modified prior to implementation for the remaining
    affected industries. AMS published the interim final rule for mandatory
    country of origin labeling of fish and shellfish in the October 5,
    2004, Federal Register, and the regulations became effective April 4,
    2005. This rule provides for an active enforcement program to begin in
    October 2005, during which time the agency will focus its resources on
    education and outreach.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        Question. Can you give us an update on the Department's actions on
    Animal ID? In particular, can you address how USDA plans to address
    data confidentiality and cost to the producer?
        Answer. The National Animal Identification System (NAIS) will
    contain only information necessary for animal health officials to be
    able to track suspect animals and identify any other animals that may
    have been exposed to a disease. To ensure that officials have
    immediate, reliable, and uninterrupted access to this information in
    the event of a disease concern, certain basic data must be readily
    available to the Federal Government.
        Animal identification and tracking systems maintained by the States
    or regional alliances will be an integral part of the overall NAIS
    information infrastructure. The State and regional systems will be able
    to collect and maintain more information than is required for NAIS, yet
    only the required data need to be available for the national animal
    records repository.
        In order to secure full participation from livestock producers, the
    USDA is pursuing legislation to establish a system for withholding or
    disclosing information obtained through the animal identification
    system established by the Secretary of the USDA.
        APHIS understands that there is no ``one-size-fits-all''
    identification technology. Many methods are currently on the market,
    such as branding, radio frequency identification devices, and retinal
    scans. It is likely that some technologies will work better for certain
    animal species than others. Rather than focus on a specific technology,
    APHIS will focus on the design of the identification data system; what
    information should be collected; and, when the data should be collected
    and reported. Once the identification system is designed, the market
    will determine which technologies will be the most appropriate to meet
    the needs of the system. As specific technologies are determined, the
    standards for those technologies will be established to ensure
    compatibility across all sectors of the industry. For example, the
    cattle industry is recommending radio frequency identification eartags,
    using the international standards for radio frequency identification of
    animals.
        The NAIS must allow producers to use NAIS in coordination with
    production management systems, marketing incentives, etc., allowing for
    the transition to a ``one number--one animal'' system for disease
    control programs and other industry-administered programs. While
    animals must be identified prior to being moved from their current
    premises, producers can decide whether to identify their stock at birth
    or during other management practices.
        The integration of existing branding procedures into NAIS, while
    integrating animal identification technology standards (electronic
    identification, retinal scan, DNA, etc.) will be determined by industry
    to ensure the most practical and cost effective options are implemented
    and that new ones can easily be incorporated into NAIS.
        Question. USDA has funded a number of pilot projects to explore
    methods for implementing a national animal ID. What is the status of
    these projects? Is the Department providing these projects with clear
    guidance and expectations?
        Answer. Pilot projects for the NAIS are currently being conducted
    via cooperative agreements with States and tribes. Cooperative
    agreement funds are used to obtain resources to support data collection
    or the integration of data from existing systems. In July 2004, the
    first-round of awarding cooperative agreement funds through a
    competitive application process resulted in 29 project agreements. In
    October 2004, $1.5 million that had been previously reserved for other
    expenses became available for establishing 13 additional cooperative
    agreements.
        Most of the projects became ``active'' late in 2004 following the
    preparation and approval of each cooperators work plan. The application
    provided the States with specific objectives and the expected outcomes
    of each project. Cooperators are responsible for providing quarterly
    reports describing achievements in relationship to the original
    approved plan using specific performance measures required by the
    Department. Such measures include the number and percent of premises
    registered, the number of stakeholders reached through outreach, and
    the cost of attaining each of these measures. In States that have pilot
    projects, specific reports on the progress of the project are also
    required.
        Question. How do you plan to connect the results of all these pilot
    projects together into a national framework? Are there any industry
    models for bringing all these pieces together?
        Answer. The results of the pilot projects will be summarized to
    provide more direction on how the industry can most effectively collect
    animal identification and movement data. While there have been various
    projects in the past that provide valuable information, there remains a
    need to evaluate the practicality of data collection reflective of the
    vast diversification of the U.S. livestock industry. As more animals
    enter the voluntary system, the ability to collect and transmit the
    information from various production points and through service
    providers will continue to advance.
        Each of the pilot projects were selected for funding based on the
    merits of the project proposal. The criteria were broad based,
    soliciting projects that would demonstrate the adaptability of new
    technology, the coordination and integration of existing databases that
    may contain premises information, and the solutions to problems faced
    in certain regions of the country, such as brand inspection states. At
    the conclusion of the pilot projects, APHIS will evaluate the results
    using staff resources. We will determine what questions have been
    answered, what questions remain unanswered, and what new questions
    arose as a result of the projects.

                            BLUETONGUE RESTRICTIONS

        Question. As the Department works to harmonize trade regulations
    and scientific protocols with Canada, is the issue of bluetongue being
    addressed? How close are we to eliminating bluetongue restrictions that
    serve as a barrier to trade?
        Answer. The Canadian Food Inspection Agency (CFIA) and the USDA's
    Animal and Plant Health Inspection Service (APHIS) have expressed a
    commitment to work together toward harmonizing disease management
    policies. Both Agencies have initiated discussions regarding health
    status recognition for anaplasmosis, bluetongue, brucellosis, and
    tuberculosis that may be applied against additional categories of
    cattle and other livestock.
        Most of our trading partners have imposed some restrictions on the
    importation of U.S. cattle, goats, and sheep due to the presence of
    bluetongue viruses in the United States. USDA does not expect total
    elimination of these restrictions. Yet, the Department continues to
    work towards minimizing restrictions based on scientific evaluation of
    the disease presence in the United States. APHIS is continuously
    negotiating with country officials to eliminate or reduce restrictions
    not fully justified by the available science. For example, APHIS
    provided disease surveillance data to compel Canada to modify its
    restrictions in March 2004. The CFIA removed bluetongue testing and
    treatment requirements for U.S. feeder cattle imported from 39 States
    considered to have a low incidence of bluetongue. Feeder cattle from
    the remaining 11 States, which are considered to have a high incidence
    of bluetongue, are also not required to be tested provided they reside
    for at least 60 days prior to import in a low incidence state. These
    States include Alabama, Arizona, Arkansas, California, Florida,
    Georgia, Louisiana, Mississippi, Nevada, South Carolina, and Texas.
    Testing is still an option and should the feeder cattle be found free
    of bluetongue, the 60-day period will be waived. Historically, these
    high incidence states have not exported significant numbers of feeder
    cattle to Canada.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                          AMS NATIONAL ORGANIC PROGRAM

        Question. Mr. Hawks, for the past 2 years, language has been
    included in the Senate report strongly encouraging USDA to hire an
    Executive Director for the National Organic Standards Board, and to
    create an on-going Peer Review Panel to oversee and give advice to the
    Secretary regarding the process for accrediting organic certifiers. Can
    you please give me an update on USDA's response to these directives?
        Answer. AMS has drafted a position announcement for an Executive
    Director after gathering input from the National Organic Standards
    Board (NOSB) regarding expertise and other qualifications required for
    the position. We expect the announcement to be posted by early June.
    The National Organic Program (NOP) is also working with the NOSB to
    formalize an ongoing Peer Review procedure and is awaiting input from
    the NOSB on the frequency, timing, and technical expert assistance
    needed to address peer review. The results of an AMS-initiated peer-
    review audit of the NOP accreditation process by the American National
    Standards Institute (ANSI) were posted on the NOP website in January
    2005.
        Question. If they have not already been implemented, can you please
    provide me with a date by which this will be completed?
        Answer. An executive director is expected to be hired later this
    summer. A peer review process is awaiting further input pending the
    upcoming NOSB meeting in August 2005.
        Question. Last April, USDA published and then rescinded four
    documents regarding organic standards and enforcement. It is my
    understanding that this caused significant confusion within the organic
    community, and that last October at a National Organic Standards Board
    meeting, USDA committed to publishing clarifications on the National
    Organic Program website in order to resolve this confusion. However,
    these clarifications have not yet been published. Can you provide me
    with a timeline for publishing these clarifications?
        Answer. The clarifications were posted on the NOP website on April
    22, 2005.

                              GIPSA IDENTITY THEFT

        Question. Mr. Hawks, last year I inserted a provision (General
    Provision 776) to modernize the law governing agricultural lien central
    filing systems and to do so in a way that protects farmers from
    identity theft that could occur if their social security numbers are
    widely distributed. Please provide me with information regarding what
    has been done to implement this change, and when we can expect it to be
    complete.
        Answer. Section 1324 of the Food Security Act of 1985 (Act)
    authorized the Secretary of Agriculture to approve and certify central
    filing systems operated at the State level for farm products and to
    approve amendments to such certified central filing systems that have
    been proposed by a Secretary of State, provided that the proposed
    central filing systems, or amendments thereof, conform with the Act, as
    amended. Section 776 of the Consolidated Appropriations Act of 2005
    allows a Secretary of State to propose the use of a unique identifier
    to be used in lieu of a social security number and allows the Secretary
    of Agriculture to approve proposed unique identifiers.
        The Grain Inspection, Packers and Stockyards Administration (GIPSA)
    is responsible for the administration of the Act. GIPSA posted on its
    web page a copy of the amended Act. GIPSA is in the process of updating
    the regulations and will be completed within 1 year. Section 776 does
    not provide GIPSA with the authority to create a selection system or
    method by which unique identifiers are produced. GIPSA will review any
    system proposed by a Secretary of State's office. Upon thorough review,
    GIPSA will determine whether to approve the selection system or method
    proposed.

                         AGRICULTURE BORDER INSPECTIONS

        Question. When Secretary Johanns appeared here this week, I asked
    him about a recent GAO report on Agro-Terrorism and, in particular, the
    problem that agriculture border inspections have decreased since that
    responsibility was transferred to the Department of Homeland Security.
        The Secretary mentioned a lot of the things the States are doing to
    protect the farm sector, but we need to know more about why the number
    of Federal agriculture inspections has declined over the past 2 years.
    The GAO report says that during that period, agricultural inspections
    at ports of entry, the first line of defense, have declined while
    imports have increased. According to DHS's own data, there were 40.9
    million agriculture import inspections in 2002 and that number dropped
    to 37.5 million in 2004. According to GAO, neither USDA or DHS can
    explain why this has happened.
        I realize that you could easily say this is DHS's problem, but
    protection of U.S. agriculture is your problem and if DHS is not doing
    its job, somebody had better raise some red flags. I would hope that
    somebody would be USDA. What kind of specific procedures do you use to
    coordinate with DHS on animal and plant health issues?
        Answer. APHIS is responsible for setting agricultural import policy
    and communicating any policy changes to DHS' Customs and Border
    Protection (CBP) officials. Agency officials notify CBP of any changes
    through designated points of contact. CBP has agreed to send time-
    sensitive pest alerts, issued when APHIS officials determine that a
    particular product poses a serious pest risk, to all field locations
    within 24 hours of receiving them. APHIS also has a series of
    comprehensive manuals that detail inspection procedures to be used at
    various types of locations and for specific types of cargo. APHIS
    officials update the manuals on a regular basis and notify their
    counterparts at CBP when changes have been made. All manuals are
    available to CBP and the public on APHIS' Web site.
        APHIS and CBP officials are also continuing to address the large
    number of vacancies at ports of entry. With the transfer of the port
    inspection portion of the agriculture quarantine inspection function to
    CBP in fiscal year 2003, APHIS transferred 363 fully-funded vacant
    inspector positions from Agricultural Quarantine Inspection. This
    number has increased significantly through attrition in the last 2
    years. While progress has been made in filling many positions, APHIS
    encourages CBP to continue an aggressive recruitment and hiring
    program. APHIS assists CBP in recruiting by distributing vacancy
    announcements to a large pool of qualified candidates and expeditiously
    training those hired. Following the April 2005 meeting between Dr.
    DeHaven and Assistant CBP Commissioner Ahern, APHIS is enhancing its
    recruitment program for CBP vacancies through promoting the jobs to
    qualified candidates at job fairs and on college campuses. APHIS'
    Professional Development Center has 14 classes scheduled for incoming
    agricultural specialists (with space for 36 new inspectors in each
    class).
        To ensure that the quality of inspections is maintained and to
    facilitate an appropriate level of communication between the two
    agencies, APHIS and CBP recently established a joint quality assurance
    program. Officials from both Agencies are conducting a series of port
    evaluations as part of the program. Additionally, APHIS conducts
    quarterly reviews of data collected by CBP through the inspection
    process for consistency and completeness. When APHIS officials notice
    anomalies in the data, they request that CBP investigate the issues and
    make any necessary corrections.
        Question. GAO says that DHS inspectors don't always get timely
    information about the arrival of high-risk cargo, but were you aware of
    such cargo when you were responsible for inspections?
        Answer. Prior to the transfer of the inspection program to DHS,
    APHIS officials accessed the U.S. Customs Service's automated targeting
    system (ATS) and automated manifest system to review incoming cargo
    shipments and determine which to target for specific levels of
    inspection. APHIS' port operations manuals also detail what types of
    incoming cargo should undergo specialized inspections.
        In March 2005, APHIS and CBP reached an agreement to allow APHIS
    users to access CBP's ATS, which will allow us to resume reviewing
    incoming cargo manifests electronically. At this time, 14 APHIS users
    are approved to access ATS, with 6 more in the approval process. APHIS
    is also placing two agricultural specialists in CBP's National
    Targeting Center to develop criteria for determining which incoming
    shipments to target for agricultural inspections.
        Question. Do you have information you need to be sharing with DHS?
        Answer. APHIS believes that all pertinent information regarding
    agricultural imports is being shared. APHIS officials communicate
    regularly with their counterparts at CBP and notify them of all policy
    changes. APHIS and CBP are working together through the joint quality
    assurance program to ensure that the two agencies are sharing all
    necessary information and effectively managing the agricultural
    quarantine inspection program.
        Question. I know there are some who suspect the reduced number of
    agriculture inspections is because DHS is assigning inspectors to other
    non-agriculture cargos. I hope that is not the case. But either way, I
    think that someone needs to hold DHS accountable to make sure that
    safeguards for the Agriculture sector are, at least, as strong as they
    were 2 years ago. Do you have, or do you think you should have, some
    way to ensure that plant and animal pests and diseases are being
    properly stopped at the border? After all, if they get past the border,
    spread, and get established, your job will be a lot harder and a lot
    more expensive. Don't you agree?
        Answer. APHIS officials believe that, if followed properly, the
    inspection protocols and procedures detailed in our port operations
    manuals should stop high-risk cargo at the borders for inspection.
    However, new pests and diseases could still be introduced through
    smuggling and means of natural spread.
        APHIS places a high priority on preventing the entry of
    agricultural pests and diseases through its pest and disease exclusion
    programs. These include regulatory activities and border inspections as
    well as off-shore risk reduction programs such as the international
    cooperative efforts to eradicate Mediterranean fruit fly from Central
    America and foot-and-mouth disease from Central and South America.
    APHIS also maintains emergency response capabilities to deal with pests
    and diseases that inevitably slip through our borders with the enormous
    volume of international travel and trade.
        Question. The Office of Inspector General is issuing a report dated
    April 14, 2005, on the subject of the transition and coordination of
    border inspection activities between USDA and DHS. In summary, the
    report includes the following observations:
      --Border inspection responsibilities were transferred from APHIS to
            DHS in March of 2003.
      --2,500 front line inspectors were transferred from APHIS to DHS.
      --APHIS could not assure that the DHS process for agriculture
            inspection operations contains adequate controls to safeguard
            U.S. Agriculture against entry of foreign pests and disease.
      --There was a reported 32 percent drop in the number of pest
            inspections following the transfer to DHS.
      --DHS has denied APHIS access to port locations even when access was
            requested, even to perform duties for which APHIS still has
            regulatory responsibility.
      --APHIS does not have a process to periodically review the extent and
            results of attention given to critical inspection areas.
      --APHIS and FSIS do not require DHS to notify FSIS of all incoming
            shipments, which could allow the shipments to bypass FSIS re-
            inspection.
      --APHIS has been unable to effectively evaluate or provide advice to
            DHS on agriculture inspection activities.
      --DHS has not provided adequate data on staffing levels and
            deployment of agriculture inspectors to APHIS for evaluation.
      --APHIS officials continue to express concern about how DHS is using
            inspection user fees.
      --APHIS needs to establish a more effective way to coordinate with
            DHS.
        Would you please respond to the findings of this report?
        Answer. APHIS is currently preparing its response to the findings
    of the report, which we must provide to OIG by June 6, 2005. In
    response to the observations that OIG pointed out, much progress has
    been made on many of the issues. As APHIS and CBP officials continue to
    work cooperatively through the quality assurance program, we will
    resolve many of the issues identified in the OIG's report, such as
    APHIS officials' ability to evaluate operations at ports of entry. For
    example, APHIS and CBP developed protocols recently that provide access
    to ports of entry for APHIS' port veterinarians.
        Additionally, APHIS Administrator DeHaven and CBP Commissioner
    Bonner met in early April 2005 to discuss joint management of
    agricultural inspection operations at U.S. ports of entry. In addition
    to continuing to implement the quality assurance program to evaluate
    operations at ports of entry, Dr. DeHaven and Commissioner Bonner have
    established a series of meetings at various administrative and
    operational levels to ensure that any problems with the inspection
    program are addressed by the appropriate officials. Operational
    managers are already meeting several times a month in conjunction with
    the quality assurance program, and Dr. DeHaven and Commissioner Bonner
    agreed to hold quarterly meetings to address any issues that cannot be
    resolved at the operational level. APHIS' Deputy Administrator for the
    Plant Protection and Quarantine Program and CBP's Assistant
    Commissioner will also meet on a monthly basis.

                        HIGH PATHOGENIC AVIAN INFLUENZA

        Question. Would you please provide information regarding actions
    taken by the Department to work with other countries on the containment
    of high pathogen avian influenza and steps being taken to avoid its
    introduction into the United States?
        Answer. APHIS participates in several international organizations
    that address animal health issues such as avian influenza. For example,
    issues pertaining to surveillance, and control and eradication of the
    high pathogen avian influenza (HPAI) strain H5N1 in Asia, are being
    directly addressed by the World Health Organization (WHO), the Asia
    Pacific Economic Cooperation (APEC), the United Nation's Food and
    Agriculture Organization (FAO) and the World Organization for Animal
    Health (OIE). APHIS has been an active participant in the OIE, has
    attended Expert Meetings at FAO, and has assisted in planning and
    leading FAO interventions (Rome and Bangkok, February 2004; Bangkok,
    July 2004; Rome, October 2004; Ho Chi Minh City, Vietnam, February
    2005).
        APHIS also takes steps to prevent the introduction of animal
    diseases by sharing knowledge and expertise with counterparts in
    foreign countries. For example, in September 2004, APHIS provided
    personal protective equipment supplies to the Philippines and
    coordinated a 3-day training course on AI and exotic Newcastle disease
    (END) to 40 Bureau of Animal Health employees in Quezon City, in the
    Philippines.
        USDA Deputy Undersecretary Lambert has proposed a conference among
    Asia-Pacific Economic Cooperation members designed to improve
    coordination between States and international organizations over AI-
    related issues, and to discuss the affects of AI on trade and other
    sectors. The USDA Foreign Agricultural Service, in coordination with
    OIE and FAO, is currently organizing this 2-day meeting scheduled for
    July 28-29, 2005 in San Francisco, California.
        As a primary safeguard against the introduction of HPAI (H5N1) into
    the United States, APHIS maintains scientifically-based trade
    restrictions on the importation of poultry and poultry products from
    affected countries. In many of these countries, APHIS had prior poultry
    and poultry product import restrictions in place because they were also
    known to have END. The import restrictions targeted against the
    introduction of END also effectively mitigate the risk of HPAI. These
    restrictions include:
      --Prohibiting the importation of live birds and hatching eggs from
            H5N1 affected countries;
      --Requiring imports of poultry products from East-and Southeast-Asia
            be processed or cooked in accordance with a USDA permit prior
            to importation;
      --Requiring all imported birds be quarantined at a USDA bird
            quarantine facility and tested for the avian influenza virus
            before entering the country; which now includes returning U.S.
            origin pet birds;
      --Developing a risk assessment that specifically considers the threat
            to the United States of HPAI introduction from Southeast Asia.
            This assessment is helping APHIS to identify and closely
            monitor pathways that are vulnerable to potential HPAI (H5N1)
            introduction. APHIS has also alerted the U.S. Department of
            Homeland Security to be especially vigilant in performing
            agricultural inspections for prohibited products at U.S. ports
            of entry handling passengers and cargo from Asia. In addition,
            APHIS is also increasing its monitoring of domestic commercial
            markets for illegally smuggled poultry and poultry products;
      --APHIS is working closely with international organizations like OIE,
            FAO, and WHO to assist HPAI affected countries and other
            neighboring Asian-Pacific countries with disease prevention,
            management, and eradication activities. By helping these
            countries prepare for, manage, or eradicate HPAI (H5N1)
            outbreaks, APHIS can reduce the risk of the disease spreading
            from overseas to the United States.
        USDA agricultural attaches are closely monitoring the HPAI
    situation in Asia and routinely report new developments.
        APHIS reviewed and provided input to the U.S. Department of Health
    and Human Services' Centers for Disease Control and Prevention (CDC) on
    its Pandemic Influenza Response and Preparedness Plan. APHIS provided
    guidance concerning its role in animal health and wildlife disease
    management. APHIS also collaborated with the CDC to draft
    recommendations to help prevent the transmission of HPAI (H5N1) to
    animal disease outbreak response workers.
        APHIS is conducting a multi-level outreach and education campaign
    called ``Biosecurity is For the Birds'' to provide disease and
    biosecurity information to backyard poultry producers. The campaign
    also encourages producers to report sick birds, thereby increasing
    APHIS' poultry foreign animal disease surveillance opportunities.
        USDA, Agriculture Research Service (ARS) supports APHIS and poultry
    industry action programs with epidemiology, molecular virology, and
    pathogenesis research on avian influenza. ARS has been/is:
      --Evaluating new AI viruses as they occur around the world and will
            continue to assist infected countries and agencies.
      --Currently classifying AI viruses received recently from the United
            States, Hong Kong, Italy, El Salvador, Chile, Netherlands,
            Indonesia, Vietnam, and South Korea for disease-causing
            potential.
      --Conducting research studies including: molecular characterization
            related to the lethality of the viruses; the search for genetic
            markers for this lethality, and investigating the epidemiology
            and spread of the viruses. Also, pathogenic potential of the
            viruses is being assessed in disease--free chickens held in
            biocontainment facilities.
      --Developing and evaluating techniques to predict which mild forms of
            virus will change to more deadly forms of the AI virus.
        In January 2005, APHIS initiated a $5 million, 3 year Coordinated
    Agricultural Project for the ``Prevention and Control of Avian
    Influenza in the United States.'' Seventeen States are working together
    to develop critical diagnostic tests and vaccines for detection and
    control. They are also working in live bird markets in California,
    Minnesota, and New York to study transmission risk factors and provide
    educational and outreach programs. For the first time, we will be
    conducting influenza surveillance in waterfowl of the four major
    flyways over the United States. The group is also studying how
    influenza emerges in domestic chickens and turkeys. Stakeholder and
    Scientific Advisory Boards include industry, other Federal and State
    agencies, and renowned avian influenza experts. This activity is also
    tightly coordinated with the Department of Homeland Security ``National
    Center for Foreign Animal and Zoonotic Disease Defense'' that includes
    work on four diseases, one of which is AI.

                         LOW PATHOGENIC AVIAN INFLUENZA

        Question. The Congress provided nearly $23 million in fiscal year
    2005 for pest and disease management activities relating to low
    pathogenic avian influenza. This represented a very substantial
    increase above the fiscal year 2004 level. The President proposes a
    slight increase for fiscal year 2006.
        Please provide information on how these funds are being used in
    fiscal year 2005 and how those purposes will differ with the use of
    fiscal year 2006 funds.
        Answer. This program has two components: the commercial poultry
    industry and the live bird marketing system (LBMS). The low pathogenic
    avian influenza program (LPAI) will be fully operational when a
    regulation is passed for the commercial component of the program. The
    use of funds in fiscal year 2006 will not significantly differ from the
    use of funds in fiscal year 2005 because States who signed their
    cooperative agreements in the last quarter of fiscal year 2004 will
    continue to participate in fiscal year 2005 and fiscal year 2006. Other
    States have been provided information to indicate their interest and,
    to date, 11 other States have shown an interest in joining the program.
        The breakout of the funding is as follows:
      --$12,000,000 for Indemnities.--These funds will cover the indemnity
            and euthanasia, disposal, cleaning and disinfection cost of
            flocks that test positive and need to be depopulated due to
            LPAI. Because this is a new program, we are in the process of
            developing a regulation that is specific to indemnities
            associated with LPAI outbreaks in both the LBMS and the
            commercial poultry industry. Fortunately, we have had no LPAI
            outbreaks this fiscal year and have not yet expended any of the
            indemnity funds.
      --$3,871,547 for Surveillance Activities.--Funds have been devoted to
            cooperative agreements with States in both the Eastern and
            Western regions that have significant LBMS activities, as well
            as State laboratories participating in the National Poultry
            Improvement Plan (NPIP) program. States are using these funds
            to provide personnel to inspect and collect samples within the
            live bird marketing system, do trace backs and trace forwards,
            and to support the additional laboratory activities associated
            with the NPIP program for the commercial poultry industry. For
            the LBMS program 10 States currently have cooperative
            agreements. There are 11 additional States that have shown
            interest in joining the program by the end of this fiscal year.
            The amount shown also includes travel costs and transportation
            of needed items.
      --$932,285 for Reagents and Costs of Administering Tests.--All of
            these funds have been provided to the National Veterinary
            Services Laboratory (NVSL) for the processing of samples. NVSL
            has developed and contracted out the production of these test
            reagents that have been distributed at no charge to State and
            industry laboratories approved to participate in the NPIP.
      --$4,326,693 for Salaries, Benefits and Staff Support.--These funds
            provided for increased Federal personnel in both the Eastern
            and Western Area and Regional offices and activities for
            implementation and compliance with program requirements to
            support the States in managing and preventing LPAI infections.
            Seventeen Federal personnel have been hired and the funds are
            being used for salaries, benefits, and staff support. We are in
            the process of hiring an additional 29 Federal personnel (i.e.,
            veterinary medical officers, epidemiologists, animal health
            technicians, laboratory technicians, etc.) to further support
            implementation of the program.
      --$600,000 for the Center for Veterinary Biologics (CVB).--Funds have
            been used for the expansion of an AI vaccine bank through a
            contract with a biologics company. While vaccines are not used
            routinely to prevent H5 and H7 infections, vaccines still have
            a potential role for assisting in the control of a large
            outbreak or in a situation where depopulation of infected
            flocks infested with avian influenza (AI) is not possible or
            feasible. APHIS anticipates completion of the Statement of Work
            (SOW) for this contract will be completed by the end of May
            2005. The SOW will be submitted to with a requisition and the
            solicitation for bids will be prepared and published. A
            contract will be signed this fiscal year.
      --$513,575 for Education and Outreach Initiatives.--Funds are being
            used for training all newly hired Federal personnel as well as
            all LBMS participants in the recognition of AI, and for the
            enhancement of biosecurity practices in live bird markets,
            auctions, wholesalers, distributors, dealers and producer
            facilities. APHIS continues to provide training courses, and to
            produce and distribute educational materials for the LBMS
            personnel and participants.
      --$555,900 for Information and Technology Support.--These funds are
            supporting the cost of certifying, accrediting, refining and
            securing an information technology system to collect AI data
            and acquiring the communications technology needed for carrying
            out the LPAI program. The system is currently under development
            and is expected to be ready to implement by the end of the
            calendar year.
        In addition to appropriated funding, on May 12, 2004, $13,700,000
    was transferred from the Commodity Credit Corporation (CCC) for use by
    the LPAI program. APHIS distributed $2.7 million to pay for Federal and
    State (Texas) personnel and supplies necessary to conduct the
    depopulation, surveillance and laboratory activities associated with
    this outbreak. Indemnity was also paid to the producer to cover bird
    losses and disposal, and, cleaning and disinfection. Of the remaining
    $11 million allocated to begin the LPAI program, $6 million was held in
    reserve to cover future indemnities and emergency costs is the case of
    future outbreaks. There was another outbreak in Texas in June 2004 and
    payment amounts are currently being finalized. APHIS distributed $2.2
    million in the form of cooperative agreements with States, particularly
    in the northeast, to support surveillance activities in the live bird
    marketing system. The Agency provided $1 million to NVSL to support the
    production and distribution of AI reagents to State and industry labs
    approved within the NPIP program. APHIS also provided: $600,000 to hire
    and support additional Federal field personnel, primarily in the
    Eastern Region; $500,000 to support the development of an AI vaccine
    antigen bank through a competitive contract with a biologics producer;
    and $300,000 to support laboratory activities in Delaware and Maryland
    where an outbreak of LPAI occurred in February 2004.

                            CHRONIC WASTING DISEASE

        Question. Chronic wasting disease has been present in the United
    States for a number of years and has been present in the State of
    Wisconsin. Now, it has been reported that this disease has been located
    in New York State. Obviously, the disease is continuing to spread.
    Please provide information on how funds for chronic wasting disease
    have been used in fiscal year 2005 and how the Department plans to use
    funds proposed for fiscal year 2006.
        Answer. Aside from congressionally directed funds, the total
    appropriated Chronic Wasting Disease (CWD) line item is divided equally
    between the farmed/captive cervid and the free-ranging deer and elk
    programs. Activities conducted as part of the farmed cervid program
    include laboratory testing; and the appraisal, indemnity, depopulation
    and disposal of voluntarily depopulated animals. Activities conducted
    as part of the wildlife program include establishing cooperative
    agreements with State wildlife agencies and Tribes, evaluating new
    testing technologies, and supporting methods development at APHIS'
    National Wildlife Research Center.
        The fiscal year 2006 President's budget proposes a 10 percent
    reduction in the CWD line item funding. This will result in various
    reductions, particularly in the areas of indemnities and cooperative
    agreements. With the recent detection of CWD in wild deer in New York,
    APHIS will continue to work with the International Association of Fish
    and Wildlife Agencies to revise the formula used for determining the
    amount provided for cooperative agreements with State wildlife
    agencies.
        Question. Please provide information on the problem of the
    continuing spread of this disease. Do you think current efforts by USDA
    and the States is effective in the control of this disease or is a
    different approach warranted?
        Answer. It is not entirely clear whether the disease is spreading,
    or whether our enhanced surveillance efforts are detecting disease that
    has been present in the cervid population for some time. Furthermore,
    much is still unknown about the modes of transmission for CWD, and the
    control measures currently in place may need to be adjusted as our
    knowledge improves. There is evidence of direct horizontal transmission
    from animal to animal and some degree of transmission through means of
    environmental contamination.
        APHIS is proposing a rule that will limit interstate movement of
    participating farmed cervids and identify contaminated properties where
    CWD is found, thus reducing the potential for disease spread. This rule
    should allow the industry to move well-monitored and low risk animals
    while detecting, and hopefully eliminating, CWD-positive herds through
    increased surveillance testing, indemnity and depopulation. If it
    becomes clear that transmission is occurring through the movement of
    cervid carcasses, products, or other materials, regulations could be
    promulgated to address that concern.
        Control of CWD in wild deer and elk is a much greater problem. Due
    to the complexity of authorities and jurisdictional responsibilities
    for wildlife management that are divided between States, Tribes and
    other Federal agencies, APHIS has worked diligently to develop a
    variety of management approaches that are currently being utilized in
    the monitoring and surveillance of CWD in wild populations. Because of
    this cooperative effort, the information gathered through wildlife
    surveillance continues to increase our understanding of this disease.

                                SUDDEN OAK DEATH

        Question. The President's budget includes a significant decrease in
    APHIS funding for sudden oak death. However, there have been concerns
    that this disease might be spreading to other States and regions of the
    country. Please provide an update on surveillance and other activities
    to detect, monitor, and control sudden oak death, including a
    description of areas where it has been located and the rate at which
    the disease has spread.
        Answer. APHIS is working with the U.S. Forest Service (USFS) and
    State cooperators to prevent the introduction of the pathogen
    Phytophthora ramorum (PR), which causes SOD, and prevent SOD
    development in new areas. To accomplish these goals, we are destroying
    plants with PR in nurseries, enforcing quarantines to contain PR,
    executing a 50-State national survey of high-risk nurseries, and
    tracking the origin and destination of infected plant material. These
    activities help determine the extent of PR migration, while minimizing
    its impact on commerce and the environment. Through these activities,
    we are protecting the Nation's landscape, the complex ecosystems that
    native oaks support, and the economic livelihood of several
    industries--such as forest products--from potentially huge losses.
        In January 2005, we implemented an Emergency Federal Order that
    requires all nurseries in California, Oregon, and Washington to have
    their nurseries found free of PR before they are shipped interstate.
    These actions are critical because some nurseries in these States have
    been responsible for widespread movement of PR, and because PR's host
    range is not yet fully defined. The Order has helped prevent further PR
    spread through nursery shipments, while still allowing the interstate
    movement of healthy plants. If PR is detected in the environment
    outside the West Coast, APHIS would implement an Incident Command
    System and initiate a rapid eradication or management response.
        When APHIS initiated SOD regulations in fiscal year 2002, PR was
    established in 10 California counties and one county in Oregon.
    Currently, PR is established in 14 California counties and one county
    in Oregon. It has not become established in any other State, or in any
    forested area outside the 15 counties. However, it has been detected in
    nursery stock in 21 States: Alabama, Arkansas, Arizona, California,
    Colorado, Connecticut, Florida, Georgia, Louisiana, Maryland, North
    Carolina, New Jersey, New Mexico, Oklahoma, Oregon, Pennsylvania, South
    Carolina, Tennessee, Texas, Virginia, and Washington.

                                JOHNE'S DISEASE

        Question. The President's budget includes a very substantial
    decrease in funding for Johne's disease. Please provide information on
    activities of the Department, including those in conjunction with the
    States, during fiscal year 2005 for control of this disease.
        Answer. The Johne's program is voluntary in nature and managed
    using a Federal, State and industry cooperative approach. It has been
    developed in cooperation with the National Johne's Working Group and
    the Johne's Committee of the U.S. Animal Health Association, State
    Veterinarians, and industry representatives. Each State has a Johne's
    Disease Group (comprised of producer, university, laboratory,
    regulatory and veterinary practitioner representatives) to assist the
    State with program development. In October 2004, APHIS, in conjunction
    with States, affected industries, and producers, developed a national
    Johne's disease strategic plan to help reduce the prevalence of the
    disease in the United States. The strategic plan includes the Voluntary
    Bovine Johne's Disease Control Program, which provides testing
    guidelines for States to use to identify cattle herds at low risk for
    Johne's disease infection and best management practices associated with
    controlling Johne's disease on infected farms. APHIS has established a
    National Demonstration Herd Project with the primary objective to
    validate the long term use of these best management practices on the
    control of Johne's disease. Secondary objectives include the creation
    of additional training materials for producers and veterinarians and
    evaluate testing and monitoring strategies to control Johne's disease.
    Currently, APHIS is completing the second year with 60 dairy herds and
    16 beef herds enrolled in the project. The project will provide more
    economic data for the costs of managing the disease and the costs
    versus benefits of control measures in the future. This demonstration
    herd project is a 5 year project, and interpretation of project results
    will start to become available in 2006.
        APHIS is continuing to look for greater sensitivity and specificity
    of diagnostic tests and testing strategies (such as validating pooled
    fecal culturing or environmental sampling as a way to screen herds to
    determine infection status). More sensitive tests could lead to earlier
    identification of infected animals, allowing for quicker disease
    containment actions.
        Question. Please provide information regarding the rate and extent
    of spread of this disease and the economic consequences it poses to the
    United States dairy industry.
        Answer. APHIS estimates that Johne's disease is present in
    approximately 22 percent of all dairy herds and 8 percent of all beef
    herds in the United States. Economic losses, associated with the
    disease resulting in reduced milk production and premature culling, are
    estimated to cost the U.S. dairy industry between $200 and $250 million
    per year.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        Question. The fiscal year 2005 Agriculture Appropriations bill
    included a number of provisions related to animal livestock
    identification programs, including the Wisconsin Livestock
    Identification Consortium. Please provide an update on how these
    programs have been coordinating their activities and explain to what
    extent these programs are contributing to a National Animal
    Identification program.
        Answer. The Wisconsin Livestock Identification Consortium (WLIC),
    through a cooperative agreement administered by APHIS, has developed a
    premises registration system that served as the prototype for a
    national Standardized Premises Registration System (SPRS) that APHIS
    now offers to any State wishing to use the system. Through the
    cooperation of many, the WLIC is working with Federal, State, and
    industry leaders to generate the public support necessary so that
    premises registration will become mandatory. The WLIC has also been
    able to build consensus on a variety of other issues including what
    pilot projects to support in the State, and how to implement the next
    phases of NAIS. From this experience, USDA has proposed in the draft
    program standard for NAIS that each State forms a similar animal
    identification coordinating committee composed of State, Federal, and
    industry stakeholders as part of the Stage I requirements.
        Another project, also funded as a cooperative agreement
    administered by APHIS, is the Farm Animal Identification and Records
    (F.A.I.R.) project. This project continues to demonstrate the value of
    automatic data collection at key locations in the United States. The
    Radio Frequency Identification (RFID) automatic readers in livestock
    markets and slaughter establishments in the original pilot States of
    New York, Pennsylvania, Wisconsin and California have demonstrated the
    ability of capturing animal identification associated with key
    movements and/or events. The project was also used to help manage the
    movement of cattle in Michigan to support the Bovine Tuberculosis
    eradication program in that State. Over 125,000 animal movements have
    been recorded using this system. Several other States are looking at
    the F.A.I.R. system to track animal movement. As this data collection
    infrastructure is utilized, it will provide a highly beneficial
    contribution to the implementation of the animal tracking phase of
    NAIS.
        Question. Please provide information regarding the types of
    technologies the Department is considering for use in implementing a
    National Animal Identification program.
        Answer. APHIS understands that there is no ``one-size-fits-all''
    identification technology. Many methods are currently on the market,
    such as branding, radio frequency identification devices and retinal
    scans. It is likely that some technologies will work better for certain
    animal species than others. The integration of animal identification
    technology standards (electronic identification, retinal scan, DNA,
    etc.) will be determined by industry to ensure the most practical
    options are implemented and that new ones can easily be incorporated
    into the National Animal Identification System. As specific
    technologies are determined, the standards for those technologies will
    be established to ensure compatibility across all sectors of the
    industry. For example, the cattle industry is recommending radio
    frequency identification eartags, using the international standards for
    Radio Frequency Identification of animals. When the industry widely
    adopts a technology, USDA will take the necessary steps to recognize
    the methods through regulatory changes.

                               WILDLIFE SERVICES

        Question. Please provide an update on activities relating to wolf
    predation measures in the Upper Midwest.
        Answer. Wolves continue to colonize much of the northern and
    central forest regions of Wisconsin. The gray wolf population continues
    to increase each year by an average of 12 percent. The number of wolf
    complaints that APHIS investigates each year has increased
    proportionally to the increase in the gray wolf population. Since 2000,
    the number of wolf complaints has increased by 231 percent. During
    2004, APHIS investigated 126 wolf damage complaints. Wolf depredation
    on livestock has steadily increased from 2001 to 2004. The increase in
    wolf complaints and damage is likely to continue until the gray wolf
    population levels off. APHIS responds to all wolf damage complaints in
    Wisconsin and utilizes a variety of techniques to resolve damage issues
    which include the use of non-lethal techniques such as electronic
    guards and visual deterrents.
        In Minnesota, depredation by wolves on livestock and poultry is a
    problem for some producers. While only a small percentage of the farms
    in the wolf range are affected annually, some of these farms will
    suffer substantial monetary loss in a given year. From 1976 through
    2004, the number of farms suffering verified wolf depredations ranged
    from 9 to 99 per year out of about 8,000. APHIS captured an average of
    135 wolves through Wildlife Services depredation control programs
    during the past 5 years. Minnesota's wolf population currently has
    stabilized at about 3,000 wolves. Sarcoptic mange, also known as
    scabies, had a noticeable impact on Minnesota wolves during 2000-2004.
    It is expected that wolves will continue to colonize more agricultural
    areas of the State and will cause increasing conflicts with livestock.
    Consequently, it will become necessary for APHIS personnel to resolve
    wolf damage problems at a growing number of farms scattered across an
    expanding wolf range. As depredation control actions increase, the
    number of wolves taken each year is also likely to increase.
        Question. Please provide information relating to beaver management
    in State of Wisconsin.
        Answer. Beavers continue to cause major damage to valued resources
    in Wisconsin. Since the population explosion in the mid 1980s, beavers
    have caused millions of dollars worth of damage to many resources
    including trout stream habitats, roads, timber, wild rice, and other
    sensitive habitats. In 1988, APHIS implemented a beaver damage
    management program in northern Wisconsin to assist cooperators in
    resolving beaver conflicts/damage. Currently, APHIS cooperates with the
    Wisconsin Department of Agriculture, Trout Unlimited, and the U.S.
    Forest Service in northern Wisconsin to protect over 1,200 miles of
    high quality trout streams. However, this represents only 10 percent of
    the trout stream miles in the State. APHIS also cooperates with nine
    county highway and forestry departments and over 50 local townships to
    protect roads and timber resources from beaver damage. APHIS resolves
    over 400 of these resource conflicts annually. The APHIS beaver damage
    management program is a cost-share program with cooperative funding
    coming from State and county governments and private entities. This
    cooperative program saves cooperators a potential loss of over $1
    million annually.
        Question. Please provide information relating to crane operations
    in the State of Wisconsin.
        Answer. The sandhill crane has experienced dramatic population
    increases over the last 20 years to the point that they are often
    implicated in agricultural crop damage situations throughout Wisconsin.
    In 2004, one potato grower alone reported over $37,000 in damages to
    his crop from feeding sandhill cranes. APHIS conducts site visits to
    assess damage and recommends abatement options to alleviate the
    problem. APHIS provides harassment devices, such as propane cannons and
    pyrotechnics, to make the birds uncomfortable in crop fields. Many crop
    owners get frustrated and often request a Federal depredation permit to
    lethally remove sandhill cranes that become accustomed to the
    harassment techniques. In 2004, APHIS received 55 reports of
    agricultural damage from crop owners who wanted to attempt to lethally
    remove cranes in Wisconsin. In the past, many crop owners were able to
    successfully deter sandhill cranes by using a corn seed treatment that
    was removed from the market in 2004 with no replacement pesticide. This
    will increase the pressure on APHIS to provide services.
        In addition, sandhill cranes can pose safety hazards at airports
    throughout the State. Several airports in Wisconsin have contacted
    APHIS to request recommendations and permits to remove or reduce the
    hazards caused by sandhill cranes using airport property. Sandhill
    cranes weigh on average 8-10 pounds, creating an extremely hazardous
    situation when encountered by aircraft while in flight. In 2004, APHIS
    was contacted by five airports who requested Federal depredation
    permits to lethally remove sandhill cranes that posed a risk to human
    health and safety and aircraft. In 2005, eight airports have requested
    these services.
                                     ______

                Questions Submitted by Senator Mary L. Landrieu

                               WILDLIFE SERVICES

        Question. What Wildlife Service methods development efforts are
    underway to reduce blackbird damage to the rice industry?
        Answer. In fiscal year 2005, APHIS' Wildlife Services Methods
    Development efforts to reduce blackbird damage to the rice industry
    include investigating non-lethal solutions. These include development
    of chemical bird repellents and baits to deter blackbirds from seeded
    and ripening rice, and improving methodology for reducing depredating
    blackbird populations on rice farms in Louisiana, Arkansas, Texas and
    Missouri.
        Question. What resources are allocated to this effort, and what
    additional resources would be required to accelerate methods
    development to reduce blackbird depredations on rice?
        Answer. In fiscal year 2005, APHIS allocated $313,998 ($289,998 for
    personnel and $24,000 operating expenses) to work on this problem,
    including two research biologists and two technicians. APHIS projects
    that an additional $400,000 is required to accelerate laboratory and
    field research efforts to develop and register a repellent for
    protecting seeded and ripening rice; to develop an improved lethal bait
    for reducing depredating blackbird populations; and to evaluate
    alternative management strategies on rice farms to reduce blackbird
    damage to rice in Louisiana, Arkansas, Texas and Missouri.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                                  SOYBEAN RUST

        Question. Over the last few months, since the finding of soybean
    rust in Louisiana, a lot of work has been undertaken to establish an
    extensive surveillance and monitoring program to track the progress of
    soybean rust. Officials from USDA hosted a workshop in Indianapolis in
    early February to lay out their plans to establish a network of
    sentinel plots in cooperation with State governments and private
    groups. Soybeans were planted more than a month ago in the southern-
    most growing regions in the United States, and soon will be planted
    across our Nation. It is critical to have an early warning system in
    place to alert producers to treat their fields. I wrote to you on
    January 27, 2005 to urge you to allocate funds from the Commodity
    Credit Corporation to launch this early warning system against soybean
    rust, and I understand that this recommendation was endorsed by career
    USDA staff. What action has the Department taken to create this system?
        Answer. USDA's coordinated framework for the soybean rust (SBR)
    response includes five components: (1) monitoring and surveillance; (2)
    predictive modeling; (3) web-based dissemination of information; (4)
    decision criteria for fungicide application; and (5) outreach. The
    activities under these components build on our efforts to prepare for
    the arrival of the disease, which include cooperating with the soybean
    industry on a range of educational and awareness efforts and sponsoring
    the development of a predictive modeling system for SBR. The predictive
    modeling system is already functioning, and APHIS and cooperating
    officials are entering survey data into the system as it becomes
    available. Survey data is available on USDA's comprehensive SBR
    website, which also provides detection and identification tips,
    information on fungicide use, and local extension agents' contact
    information, among other things.
        APHIS is releasing $1.19 million from the Agency's contingency fund
    to support the monitoring and surveillance network with State
    cooperators and continued maintenance of USDA's comprehensive SBR
    website. APHIS is providing $800,000 of these funds to State
    cooperators through the Cooperative Agricultural Pest Survey (CAPS)
    network to establish sentinel plots for surveillance. APHIS officials
    have completed many of the CAPS agreements and are working diligently
    to complete the remaining agreements. State cooperators have already
    established sentinel plots in many areas, especially in southern
    States, and the results of surveys are already displayed on USDA's SBR
    website. APHIS is using $180,000 of the contingency funds to establish
    five mobile monitoring teams to provide timely support for the
    detection network. The remaining funds will support continued
    development and maintenance of USDA's SBR website and modeling system.

                           ORGANIC COST-SHARE FUNDING

        Question. Section 10606 of the 2002 farm bill created a national
    organic cost-share program to offset the cost of certification under
    the National Organic Program for organic producers and handlers. Five
    million dollars was provided for this program, to be available until
    expended. At this time, it appears there is roughly $1.5 million left
    for cost-share funding. It is unclear how long these funds will remain
    available for producers and handlers before running out.
        How long does USDA/AMS perceive the remaining roughly $1.5 million
    in cost-share funding will last before running out?
        Answer. AMS has obligated essentially all of the initial $5,000,000
    provided for cost-share funding. Of the total, $30,000 has been
    retained to cover unexpected spikes in utilization by the States.
        Question. Will sufficient funds last throughout fiscal year 2006?
    How much in additional funding would AMS need to keep this program
    active until the next farm bill?
        Answer. Based on current utilization patterns, we anticipate that
    the initial funding will be fully exhausted by the States by the third
    quarter of fiscal year 2006. It should be noted, however, that the use
    of funds by the States, in terms of amounts and timing, can be highly
    variable. We estimate that the States would require $1,200,000 in
    additional funding to keep the program active between the third quarter
    of fiscal year 2006 and passage of the next farm bill.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        Question. As USDA moves forward with implementation of a national
    animal identification system, it still remains unclear exactly where
    data will be kept as it is submitted by producers from across the
    United States. Does USDA plan to maintain and control a central
    database for all species of animals? Or, does USDA plan to maintain and
    control regional databases as a repository for all or certain selected
    species?
        Answer. The primary information system components of the National
    Animal Identification System (NAIS) would include the National Premises
    System and National Animal Identification and Tracking System. The two
    main NAIS information repositories would be maintained and centrally
    managed by APHIS. The overall system would allow for the identification
    of each premises and the recording and reporting of animal
    identification and animal movement data. Additionally, the system would
    associate or link the animal identification data to each premises where
    the animal or group was located and the specific dates on which the
    animal(s) was at the premises. Only information essential to the
    enhancement of animal disease surveillance and monitoring would be
    stored in a Federally-managed database under the NAIS.
        Premises registration systems for all species are currently
    maintained and operated by the States or regional alliances or third
    parties, and essential data is forwarded to the National Premises
    Information Repository. USDA is in the process of building a National
    Animal Identification and Tracking System and a National Animal Records
    Repository. Once participating State/regional and third-party systems
    have been evaluated for data compliance, APHIS would support the
    establishment of interfaces between these systems and the national
    repositories. The State/regional systems or third-party systems would
    be able to collect and maintain more information than is required for
    NAIS, but only the federally required data would need to be sent to the
    national repositories. NAIS data would be kept confidential to the
    extent allowed by law, and routine access would be restricted to State
    and Federal animal health officials when information is required to
    perform their responsibilities for maintaining the health of the U.S.
    herd.
        Question. Exactly who will house the data?
        Answer. The premises information and animal records repository will
    be maintained by APHIS at the Centers for Epidemiology and Animal
    Health facility in Fort Collins, Colorado. In the future, the system
    will be housed at the National Technology Information Center in Kansas
    City, Missouri. This move will give NAIS a more robust hardware
    infrastructure will full system security and 24/7 surveillance for
    system operation.
        Question. If private firms maintain the data how will USDA have
    control of and have access to that information?
        Answer. To ensure that animal heath officials would have immediate,
    reliable, and uninterrupted access to essential National Animal
    Identification System information in the event of a disease concern,
    certain basic data would be maintained at the Federal level.
    Accordingly, the two main NAIS information repositories, the National
    Premises Information Repository and the National Animal Records
    Repository, would be maintained and managed by APHIS. If data that is
    required by animal health officials to perform their duties is held
    privately, the same degree of access must be assured.

                            CONCLUSIONS OF HEARINGS

        Senator Bennett. Thank you very much, Senator Kohl.
        I have no further questions. Gentlemen, thank you for your
    service to the country and to the department.
        The hearing is recessed.
        [Whereupon, at 2:56 p.m., Thursday, April 14, the hearings
    were concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

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

                                  ----------

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

        MATERIAL SUBMITTED BY AGENCIES NOT APPEARING FOR FORMAL HEARINGS

        [Clerk's Note.--The following agencies of the Subcommittee
    on Agriculture, Rural Development, and Related Agencies did not
    appear before the subcommittee this year. Chairman Bennett
    requested these agencies to submit testimony in support of
    their fiscal year 2006 budget request. Those statements
    submitted by the chairman follow:]

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

         Prepared Statement of Lester M. Crawford, DVM, Ph.D., Acting
                                  Commissioner

                                  INTRODUCTION

        Mr. Chairman, members of the Committee, I am honored to testify on
    FDA's fiscal year 2006 President's budget request. I'd like to begin by
    conveying my appreciation to the Subcommittee members for providing the
    Food and Drug Administration (FDA) with several key increases in the
    fiscal year 2005 appropriation. We received increases for food defense,
    medical device review, Bovine Spongiform Encephalopathy, medical
    countermeasures, and the FDA consolidation project at White Oak. These
    increases will allow FDA to continue to meet the expanding range of
    challenging public health issues that we face. I can assure you that
    FDA will continue to spend these resources wisely. I believe that the
    American people would be impressed if they really knew how much return
    on investment they get from FDA.
        I am fully aware of the difficult funding decisions you face in the
    current session, and I believe that every dollar invested in FDA's
    programs can have a major positive impact--from the consumer to the
    farmer to the drug and medical device manufacturer and beyond. FDA
    plays a lead role in protecting and advancing the public health of the
    United States.
        Our mission is to ensure that U.S. consumers continue to enjoy the
    safest food, and the most effective medical supplies in the world, and
    that we continue to foster medical product innovation. We have a good
    track record of accomplishment. Near the beginning of fiscal year 2004,
    we unveiled a comprehensive strategic action plan to ``protect and
    advance America's health'' in the 21st century. Our plan outlined a
    series of specific steps to combat the increasingly complex public
    health challenges we face as a Nation--and to capitalize on the myriad
    health innovations occurring each day--in order to help U.S. consumers
    live longer, healthier, and happier lives.

                     FDA'S 2006 PRESIDENT'S BUDGET REQUEST

        Our fiscal year 2006 Budget request maximizes the performance of
    our on-board assets--the greatest of which is our scientific staff--and
    focuses additional requests on the areas of highest risk and highest
    yield. Overall, our fiscal year 2006 request is for $1.50 billion in
    budget authority, a $50 million increase above fiscal year 2005. Total
    funding, including user fees, is $1.881 billion, $81 million above
    fiscal year 2005. Key budget authority increases include: $30.074
    million for Food Defense, $5.996 million for Medical Device Review,
    $5.0 million for the Office of Drug Safety ($6.5 million including user
    fees), $4.1 for rental costs, and $7.0 million for Buildings and
    Facilities. The proposed budget allows FDA to continue to work towards
    meeting statutory regulatory responsibilities while initiating new
    efforts to address challenges that fall within our mission. Now I'd
    like to tell you more about these proposed increase requests.

                                  FOOD DEFENSE

        In the post 9/11 environment, FDA has made fundamental changes in
    how we implement our mission of protecting the food supply. We are
    doing this so that all U.S. consumers can have confidence that their
    food is not only safe, but also secure. We are requesting a $30 million
    increase for food defense, to build upon gains achieved with food
    defense funds appropriated in fiscal year 2005. Funds requested
    directly support Homeland Security Presidential Directive-9, which
    established the national policy to protect the Nation's food and
    agriculture system from terrorist attacks. FDA and the USDA, in
    conjunction with the White House Homeland Security Council, have
    continued to coordinate efforts to protect the agricultural and food
    sectors.
        FDA is responsible for ensuring the safety of approximately 80
    percent of the Nation's food supply. The possibility of food products
    being used as a vehicle for attack is a major concern. The direct
    effects on public health, adverse impacts on public confidence in the
    U.S. food supply, and economic impacts on the food industry are all
    potentially devastating. Over the past year we have implemented major
    enhancements to our food safety and security program.
        Shortly after 9/11, FDA focused its Food Security resources on
    traditional tools to bolster the security of the Nation's food supply.
    Since then, FDA has conducted classified assessments of strengths and
    vulnerabilities in the U.S. food system, and has structured its Food
    Defense plans accordingly. This risk-based strategy deals with the
    risks of contamination of both imports and domestically produced and
    processed foods. FDA has also instituted new systems that give advance
    notice of upcoming food imports, improving FDA's ability to target
    inspections.
        Implementing FDA's strategy is an Administration priority for which
    an increase of $30 million is requested. Within the $30 million
    increase, $20 million will support a national network known as the Food
    Emergency Response Network (FERN). FERN will increase our analytic
    surge capacity in the event of terrorist attack by developing adequate
    laboratory testing capacity for biological, chemical and radiological
    threats and targeted food defense research efforts. This will enable us
    to test thousands of food samples within a matter of days in the event
    of an act of terror, or other emergency, and quickly determine what
    food is safe, and what food is not. This network will be complemented
    by a strong research program to develop effective protection strategies
    to shield the food supply from terrorist threats. FDA seeks to detect
    contaminants more quickly, and, where possible, modify food processing
    in ways that would neutralize pathogens before they caused harm. An
    additional $5.6 million is requested for targeted food defense research
    on prevention technologies, methods development, determination of
    infectious dose for certain agents when ingested with food, and agent
    characteristics within specified foods. A $3.0 million increase is
    requested to improve coordination and continue integrating our food
    defense capabilities with the Department of Homeland Security's, as
    part of the government-wide Bio-Surveillance Initiative. Finally, $1.5
    million is requested to upgrade our crisis management capabilities so
    that we are prepared to minimize the impacts of potential problems with
    the food supply.

                             MEDICAL DEVICE REVIEW

        To provide more timely and cost-effective review of new medical
    devices, we have worked to implement the 2002 Medical Device User Fee
    and Modernization Act (MDUFMA), which allows us to collect user fees
    from companies that submit medical device applications. In fiscal year
    2006, we are requesting an increase of $5.996 million to continue to
    meet the fiscal year 2006 performance and funding expectations in
    MDUFMA. In fiscal year 2006, we expect to complement the FDA-wide
    device review program with $40.3 million in medical device user fees,
    which is an increase of $6.362 million over fiscal year 2005.
        These additional funds will be used to hire more staff and to
    develop better systems to support more effective and timely review. The
    law requires us to pursue a complex and comprehensive set of review
    goals. Each year brings additional goals, and the goals become more
    aggressive. We must report on performance relative to the specified
    goals at the end of each year.
        We have also committed to two ambitious long-term goals for
    reducing average total approval time for medical device premarket
    applications, and have already achieved one of these goals, even though
    it was targeted for fiscal years 2005-2007. It is for a 30-day
    reduction in average approval time for premarket applications given
    expedited approval, which is similar to priority approval for drugs and
    biologics. We have already achieved that goal--a 33 day reduction in
    average approval time compared with the baseline of fiscal years 1999-
    2001.

                             OFFICE OF DRUG SAFETY

        FDA approves medical products after a sponsor demonstrates that
    they are safe and effective. However, the full magnitude of potential
    risks does not always emerge during the clinical trials that are
    conducted to evaluate safety and effectiveness. Monitoring the safety
    of marketed products requires close collaboration between our clinical
    reviewers and safety staff to evaluate and respond to adverse events
    identified in ongoing clinical trials or reported to us by physicians
    and their patients.
        Ensuring drug product safety is a mission-critical function of
    FDA's Center for Drug Evaluation and Research (CDER), and is an
    important component of both the premarket and postmarket review
    process. FDA is requesting a $6.5 million increase to strengthen the
    drug safety functions within CDER's Office of Drug Safety (ODS), of
    which $5.0 million is in budget authority and $1.5 million increase is
    in PDUFA user fees. One of ODS' primary roles is to provide expertise
    in the review of postmarketing safety data and to maintain and
    coordinate CDER's postmarketing surveillance and risk assessment
    program. ODS plays a significant role in the CDER drug safety mission,
    however, their role is only a small subset of the total effort expended
    and resources spent by CDER on drug safety.
        This increase will allow us to hire additional staff to manage and
    lead safety reviews, provide further expertise in critical areas such
    as risk management, risk communication, epidemiology, and to increase
    access to a wide range of clinical, pharmaceutical and administrative
    databases. It will also help increase transparency by sharing drug
    safety information sooner and more broadly and strengthening FDA's
    post-market surveillance capacity, using a network of information
    sources to analyze postmarket drug safety information. The requested
    increase will also support patient safety initiatives and extend
    partnerships with the Centers for Medicare and Medicaid Services, the
    Agency for Health Research Quality and other HHS agencies.

                                 WHITE OAK MOVE

        FDA is continuing the White Oak Consolidation project, which upon
    completion will house over 7,700 staff in 2.3 million square feet of
    space. By the end of fiscal year 2005, the campus will have almost
    700,000 square feet completed with 1,850 staff on site. The new
    buildings will eventually replace all 40 of the existing fragmented
    facilities in 16 locations which support the Office of the
    Commissioner, and all of our Centers and the Field headquarters, except
    the Center for Food Safety and Applied Nutrition and the National
    Center for Toxicological Research. This project will allow FDA to
    standardize and modernize document handling, provide shared use
    facilities such as libraries and conference areas, further reduce
    redundancies in administrative tasks and allow conversion to a single
    computer network. In fiscal year 2005, over 1,700 review staff are
    moving to White Oak, so a significant portion of costs are being
    financed by PDUFA fees. Fiscal year 2006 costs need to be financed
    through budget authority; as a result, FDA requests an increase of
    $4.128 million in additional budget authority, to provide the needed
    infrastructure and to move the staff to the CDRH Engineering/Physics
    Laboratory and a portion of FDA's shared use data center facilities.

                                   RENT COSTS

        In prior years, FDA's rent costs were budgeted separately from the
    programs that used the space. To facilitate management improvement,
    FDA's fiscal year 2006 budget proposes to move funding for rent to the
    program lines. This will place accountability for rental and other
    associated costs within the operating programs, and eliminate the need
    to transfer funds between budget lines when program space needs change.
    The FDA program lines include increases of $6.0 million to cover
    projected increases in rent charges; of this, $4.1 million is requested
    in budget authority and $1.9 million in user fees.

                            BUILDINGS AND FACILITIES

        In fiscal year 2005, FDA did not request funding to repair and
    maintain our building and facilities in order to fund other priority
    initiatives, but we are now challenged to continue to sustain these
    buildings, some of which are over 50 years old, in poor condition, and
    have severely deferred maintenance. The requested $7 million increase
    for buildings and facilities will help cover the cost of greatly needed
    repairs and improvements to existing owned or leased facilities that
    FDA occupies in 49 States and in the District of Columbia and Puerto
    Rico.

                            MANAGEMENT EFFICIENCIES

        FDA is continually working to create a stronger, more unified
    Agency. The increasing complexity of our regulatory mission requires
    that we look for new ways to create efficiency, standardize processes,
    enhance infrastructure and improve planning. FDA has made significant
    improvements to its business practices that support the agency's
    mission-critical activities through the implementation of the
    President's Management Agenda. In fiscal year 2006, proposed management
    savings will result in a $1.554 million reduction in administrative
    costs. In the area of Information Technology (IT), we are developing a
    roadmap to better align key technologies to our policy goals and
    objectives, which will better integrate enterprise architecture,
    capital planning and investment management, and project management into
    a more comprehensive investment review and governance process. We are
    consolidating IT functions across the Agency, which allows us to
    realize our goals and objectives while reducing spending. In fiscal
    year 2006, we are expecting an IT savings of over $5.1 million.
        FDA has redesigned the way we deliver various administrative and
    information technology services using the shared services model. This
    model aligns our administrative resources into a customer focused
    organization, providing more efficient services in a cost effective
    manner without jeopardizing our mission. This model also allows us to
    provide services in a way that maintains close ties to customers
    through negotiated service level agreements that specify the level of
    service to be delivered and the costs that will be charged to the
    customer. FDA has also competed and won all six of the commercial
    activities studied for competitive sourcing in fiscal year 2003 and
    2004, generating millions of dollars in efficiencies. FDA is pleased to
    announce it just won the seventh competition for clerical support
    services functions, which when implemented will result in a major
    change in the way we conduct our clerical support service functions.
        In the area of financial management, we received our seventh
    consecutive ``unqualified'' or clean audit opinion in January 2005 on
    our financial statements from the Department's Office of Inspector
    General. This achievement reflects our ability to produce credible
    financial statements in a timely manner despite the fact that our
    existing systems are not fully compliant with today's financial
    standards. We are pleased to announce that in fiscal year 2005 we will
    implement the new Unified Financial Management System, which will
    replace our old accounting system. This system used across the
    Department, will satisfy financial requirements, and provide timely
    financial information to executives and managers for better decision
    making. We have also integrated performance information into the
    traditional budget presentation, providing better linkages between the
    resource request and its performance goals.

                               USER FEE INCREASES

        We are also requesting an increase of $31.320 million for user fees
    that support prescription drug review, medical device review, animal
    drug review, mammography inspections, export certification, and color
    certification fees. All of these requested fee increases are authorized
    under current law.

                   PROTECTING THE HOMELAND--COUNTERTERRORISM

        Since September 11, 2001, public awareness of terrorist threats has
    changed and has underscored the importance of FDA's consumer protection
    mission. Because our regulatory authority and responsibility cut across
    critical elements of counterterrorism efforts, we must assess and
    respond to a broad range of terrorist related health and safety
    threats. One example of this coordinated effort is the establishment of
    the Food Emergency Response Network (FERN), which will enable us to
    test thousands of food samples within a matter of days in the event of
    an act of terror or other emergency.
        Additionally, I would like to highlight our progress in ensuring
    the safety of food imports as we continue to direct resources to where
    they are needed most. Import food field exams, along with laboratory
    analyses, were FDA's major tools to physically monitor imports prior to
    the Bioterrorism Act. One of the new approaches under the Act is the
    implementation of the risk based Prior Notice system as a basis for
    triaging and prioritizing the examination of imported food shipments
    that may pose the greatest risk to U.S. consumers. Our fiscal year 2006
    food defense request contains priorities (FERN, research,
    biosurveillance and crisis management) that Congress funded in fiscal
    year 2005. This will allow us to take advantage of new authorities
    provided in the Bioterrorism Act to further our use of risk-based
    monitoring of food imports.
        FDA is also focusing its efforts on medical countermeasures to
    strengthen our preparedness and response capabilities and to help the
    Agency remain vigilant against potential threats to the public's health
    and security. FDA regulated products, such as human and animal drugs,
    vaccines, blood, and other products, will play a crucial role in
    countering the effects of a terrorist attack. We are working with
    industry to develop medical countermeasures using state-of-the-art
    science, and collaborating with other agencies and organizations to
    identify existing products that may be useful as medical
    countermeasures.
        One example is Prussian Blue, which has been approved as
    Radiogardase for the treatment of contamination with radioactive cesium
    or non-radioactive thallium, released from a ``dirty bomb.'' The
    product has been used since the 1960s as an investigational drug to
    enhance excretion of cesium and thallium from the body. To encourage
    manufacturers to submit marketing applications for the approval of this
    important medical countermeasure, FDA carefully reviewed the available
    data and literature, determined that the product would be found safe
    and effective, and published this finding, along with draft labeling.
    In fiscal year 2004, FDA approved two other drugs, pentetate calcium
    trisodium injection and pentetate zinc trisodium injection, for
    treating certain kinds of radiation contamination. And this February,
    FDA announced the approval of Vaccinia Immune Gobulin Intravenous, the
    first intravenous human plasma derived product available to treat
    certain rare complications of the smallpox vaccination. Approval of
    these countermeasure products was facilitated by FDA guidance documents
    as part of an ongoing effort to provide the public with the best
    available protection against nuclear accidents and terrorist threats.
        We frequently collaborate with the Centers for Disease Control and
    Prevention, the Department of Homeland Security, the Department of
    Defense, and other government agencies to support the availability of
    essential products in case of a terrorist event. FDA helps to assure
    the safety and efficacy of the countermeasures held in the Strategic
    National Stockpile (SNS) that will be used in response to national
    emergencies. The SNS is a stockpile of critical medical products that
    includes antibiotics (to treat threats such as anthrax); antitoxins;
    vaccines (including enough smallpox vaccine for every person in the
    United States); medical supplies; medications; surgical items; and,
    other drugs (including treatments for radiation poisoning and chemical
    agent exposure). The Agency has also conducted vulnerability and needs
    assessments by reviewing information on available medical
    countermeasures as well as promising products under development.

                   PATIENT AND CONSUMER SAFETY AND PROTECTION

        We continually strive to improve our mechanisms for assuring that
    patients and consumers are protected from product risks by improving
    our post-marketing monitoring, analysis, communication and regulatory
    activities. By partnering with healthcare providers, healthcare
    institutions and other government agencies, FDA will be able to quickly
    identify and understand the risks associated with FDA regulated
    products and effectively communicate concerns and prevention
    strategies. We also collaborate with foreign government counterparts to
    share vital information, coordinate enforcement actions, and to
    leverage our resources, so we can expand FDA's protective functions
    even more broadly.
        FDA grants approval to medical products only after a sponsor
    demonstrates they are both safe and effective. Unfortunately all
    approved products pose some level of risk. Unless a new product's
    demonstrated benefit outweighs its known risk for an intended
    population, FDA will not approve the product. However, the full scope
    of risks does not always emerge during the mandatory clinical trials
    conducted before approval. Occasionally, serious adverse effects are
    identified after approval either in post-marketing clinical trials
    being conducted for unapproved indications, or through spontaneous
    reporting of adverse events. Such reactions can range from a minor,
    unpleasant reaction to a product, to an event that is life-threatening
    or deadly. An adverse reaction may also result from errors in
    prescribing, dispensing or use. The issue of how to detect and limit
    adverse reactions is challenging. How to weigh the impact of an adverse
    reaction against the benefit of a product to a patient and the public
    health is multifaceted and complex, involving scientific as well as
    public policy issues. FDA often relies on input from over thirty
    advisory committees to provide advice and guidance during and after the
    review process.
        The number of serious adverse drug events reported to the FDA grew
    more than four-fold between 1992 and 2003. About 45 percent of these
    adverse events are caused by medication errors that occur in dispensing
    or administration. These troubling statistics demonstrates why Congress
    has supported FDA in creating a post-market safety program designed to
    assess these postmarket adverse events. This complements the pre-market
    safety reviews required for approval of medical products in the United
    States.
        There is evidence that spontaneous reporting systems alone do not
    allow for adequate characterization of the true safety profile of a
    regulated product. We have been working with Federal, State and private
    organizations to identify useful sources of data using adverse event
    monitoring systems such as MedSun, which is a post-market reporting
    system that serves as an advance warning system and provides two-way
    communications to report adverse events associated medical devices. A
    primary focus involves identifying particular risks in specific
    populations such as children, elderly, and patients from particular
    demographic groups who may be associated with different risks.
        The most recent patient safety issue has involved the drug Vioxx
    (rofecoxib) which illustrates the vital importance of both the ongoing
    assessment of the safety of an approved product once it is in
    widespread use and the effective communication of newly discovered
    risks to patients and medical providers. FDA has taken a number of
    steps to improve our drug safety system and thereby better protect the
    public health. FDA is sponsoring an Institute of Medicine (IOM) study
    that will make an assessment of FDA's drug safety system and its
    effectiveness in safeguarding U.S. consumers. This study will focus on
    the postmarketing phase of FDA's oversight, and assess what additional
    steps can be taken to improve it. While this IOM process proceeds, FDA
    will institute a number of steps designed to foster greater
    independence and transparency in postmarketing safety deliberations.
        On February 15, 2005, Health and Human Services Secretary Leavitt
    and I unveiled a new emboldened vision for FDA that will promote a
    culture of openness and enhanced oversight within the Agency. As part
    of this vision, FDA will create a new, independent, Drug Safety
    Oversight Board to oversee the management of drug safety issues, and
    will provide emerging information to health providers and patients
    about the risks and benefits of medicines. This Board will oversee the
    management of important drug safety issues within CDER. The Board will
    be comprised of medical experts from FDA and other HHS agencies and
    government departments (e.g., Department of Veterans Affairs), and will
    consult with other medical experts and representatives of patient and
    consumer groups.
        FDA will also increase the transparency of our decision-making
    process by establishing new and expanding existing communication
    channels to provide targeted drug safety information to the public.
    These channels will help ensure that established and emerging drug
    safety data are quickly available in an easily accessible form. The
    increased openness will enable patients and their healthcare
    professionals to make better-informed decisions about individual
    treatment options. The Agency is also proposing a new ``Drug Watch''
    Web page for emerging data and risk information and increased use of
    consumer-friendly information written especially for healthcare
    professionals and patients.
        As FDA develops these communications formats, we will solicit
    public input on how FDA should manage potential concerns associated
    with disseminating emerging information prior to regulatory action. The
    Agency will issue draft guidance on procedures and criteria for
    identifying drugs and information for the Drug Watch page. In addition,
    we will actively seek feedback from healthcare professionals and
    patients on how best to make this information available to them.
        As one effort to help prevent medical administration errors, FDA
    has issued a rule requiring bar codes on the labels of thousands of
    human drugs and biological products. This measure will help protect
    patients from preventable medication errors, reduce the cost of
    healthcare and harness information technology to promote higher quality
    care. Monitoring the safety of marketed products requires close
    collaboration between our clinical reviewers and safety staff to
    evaluate and respond to adverse events identified in ongoing clinical
    trials or reported to us by physicians and their patients.
        Children are a particularly vulnerable population. Until recently,
    they have not usually benefited from the knowledge that is gained by
    studying the products that are being used to treat them. Utilizing the
    tools Congress gave FDA in the Modernization Act, the Best
    Pharmaceuticals for Children Act (BPCA) and in the Pediatric Research
    Equity Act (PREA), we have made enormous progress in obtaining
    information about the safety and efficacy on over 100 products that are
    prescribed to children. Of these, 87 have new labeling information for
    children. From these studies, it was determined that almost one in four
    of the products did not work, had a pediatric safety issue or required
    a change in dose. Almost all of the information that was developed
    concerning the safety of Selective Serotonin Reuptake Inhibitors
    (SSRIs) and their use in pediatrics came from studies FDA requested
    using these new tools.
        BPCA contains important, new disclosure requirements. Under BPCA, a
    summary of FDA's medical and clinical pharmacology reviews of pediatric
    studies is publicly available regardless of the action taken on the
    application. Since 2002, FDA has posted the summaries of 41 product
    reviews on FDA's website at: http://www.fda.gov/cder/pediatric/
    Summaryreview.htm. This information provides a rich source of valuable
    safety information to allow pediatricians to make more informed
    decisions about whether and how to use these drugs in their patients.
        After a year of hard work by our dedicated staff, I am pleased to
    report that we have made significant progress in achieving our goals
    for protecting and advancing America's health and safety. We have
    empowered consumers to improve their own health through better
    information about the foods they eat and the medicines they consume.
    The Agency introduced a national education campaign to give consumers
    advice on how to safely use over-the-counter pain relief products like
    non-steroidal anti-inflammatory drugs (including aspirin and ibuprofen)
    and acetaminophen. In addition, FDA, FDA is asking the manufacturers of
    all OTC non-steroidal anti-inflammatory drugs (NSAIDs) to revise their
    labels to include more specific information about potential
    cardiovascular and gastrointestinal risks as well as information to
    assist consumers in the safe use of such drugs. This effort on OTC
    NSAIDs is consistent with FDA's efforts to address similar concerns
    about prescription NSAIDs.
        I am also proud to report that one of FDA's top priorities is the
    implementation of the the Food Allergen Labeling and Consumer
    Protection Act. Beginning in 2006, the Agency plans to ensure that
    manufacturers provide improved food labeling information that will help
    the millions of consumers who suffer from food allergies. The act
    specifically requires food labels to identify in plain English if the
    product contains any of the eight major food allergens--milk, eggs,
    fish, crustacean shellfish, peanuts, tree nuts, wheat and soybeans. The
    new labeling will be especially helpful in teaching children who suffer
    from food allergies to recognize the presence of substances they need
    to avoid.
        The final rule prohibiting the sale of dietary supplements that
    contain ephedra, went into effect in April 2004, paving the way for
    greater consumer protection and removal of risky products from the
    market. FDA has developed a four-pronged approach for ensuring the
    safety of dietary supplements, including supplements promoted for
    weight loss. This approach includes guidance on assuring the safety of
    new dietary ingredients, development of good manufacturing practices
    guidelines for dietary supplements, guidance on the scientific evidence
    needed to substantiate label claims on dietary supplements, and
    diligent enforcement.
        We are also working collaboratively with Federal and other partners
    to develop the scientific evidentiary base FDA will use to make safety
    and enforcement decisions on dietary supplements that contain ephedra.
    Partners in this effort include, FDA's Center for Food Safety and
    Applied Nutrition, National Center for Toxicological Research, the
    National Institutes of Health's Office of Dietary Supplements and
    National Center for Complementary and Alternative Medicine, and the
    National Toxicology Program in the Department of Health and Human
    Services. We are also partnering with the University of Mississippi's
    National Center for Natural Products Research, as well as others, on
    dietary supplement issues.
        I am also pleased to report that a training program was also
    developed for health educators to help teach food safety to pregnant
    women and women who might become pregnant. In January of this year the
    HHS, in conjunction with USDA released the ``Dietary Guidelines for
    Americans 2005'', an update of the Federal Government's science-based
    advice to promote health and reduce risk of chronic diseases through
    nutrition and physical activity. FDA was instrumental in developing the
    Dietary Guidelines. However, FDA will continue to confront complex
    challenges in fiscal year 2006.
        As you can see, FDA is further protecting the public health by
    constantly exploring new ideas, modernizing our rules, streamlining our
    procedures and carrying out ground-breaking reforms, which began with
    the FDA Modernization Act. We are experiencing one of our greatest
    periods of innovation. The strategies we are putting to work are
    designed to deliver optimum health gains for each tax dollar while
    easing regulatory burden on industry and removing obstacles in the path
    of product innovation across all industries in the FDA's purview.
        The FDA strives to be a respected steward of the public's trust and
    ensures that benefits outweigh the risks of regulated products. We will
    keep the promise of the FDA mission by putting in place more rigorous
    oversight and by collecting and sharing important and emerging
    information about product safety and effectiveness. The 21st Century
    has brought unprecedented new challenges to patient and consumer safety
    and FDA is aggressively moving ahead on a number of important
    protections, old and new.

                     USING RISK BASED MANAGEMENT PRACTICES

        Our mission has become much more complicated as public health
    protection continues to entail a wide range of unprecedented challenges
    and threats. The number of medical products that we regulate now
    exceeds 150,000, and the products are becoming increasingly more
    complex. Access to this rapidly growing range of products offers
    opportunities for improving health, improving lives, and enhancing
    lifestyles, but it also creates new kinds of vulnerabilities and risks
    to the public health.
        FDA has identified efficient risk management as the primary way to
    make the most effective use of resources to address the growing number
    of FDA regulated products on the market and the increased complexity of
    many of these products. The Agency has initiated a critical,
    comprehensive review of its practices related to planning and
    prioritizing its inspections, conducting inspections as effectively and
    efficiently as possible, and, achieving compliance with the Federal
    Food, Drug and Cosmetics Act.
        FDA accomplishes these goals through rigorous analysis to
    consistently identify the most important risks and the use of a quality
    system approach to designing and conducting our core business
    processes. Another integral component in the risk-based management
    strategy is the use of risk-based Current Good Manufacturing Practices
    (cGMP), to provide a greater focus on product quality. This was
    initiated under FDA's Good Manufacturing Practices for the 21st Century
    initiative. The objectives of risk-based GMPs will encourage industry
    to adopt new technological advances early in the process; to facilitate
    application of modern quality management techniques, including
    implementation of quality systems approaches, to all aspects of
    pharmaceutical production and quality assurance; and, to implement
    risk-based approaches that focus industry and Agency attention on
    critical areas. This new approach will also ensure that regulatory
    review and inspection policies are based on state-of-the-art
    pharmaceutical science and will also enhance the consistency and
    coordination of FDA's drug quality regulatory programs, in part, by
    integrating enhanced quality systems approaches into our business
    processes and regulatory policies concerning review and inspection
    activities.
        These strategies have resulted in an inspection and enforcement
    program that provides the foundation for a strong, robust Agency
    centered on the protection of public health. An example of an
    innovation stemming from the FDA's recent GMP initiative is the
    Pharmaceutical Inspectorate, which created a cadre of highly-trained
    field investigators that focuses on conducting inspections of highly
    complex or high-risk drug products and processes. Given the environment
    of fiscal restraint, the Agency must make informed decisions on how the
    workload can be best accomplished, while still safely monitoring
    regulated products. This is being accomplished by covering the highest
    risks in regulated products.
        An example of efficient and effective use of risk management in our
    operations is the Prior-Notice Import Security Reviews conducted at the
    Prior Notice Center. These reviews are just one example of the expanded
    targeting and follow through on potentially high risk import entries
    that FDA is developing to complement the import field exam. Nearly 20
    percent of all imports into the United States are food and food
    products consumed daily by the public, making imported foods potential
    vehicles to carry out terrorist attacks in the United States by
    contamination of our food supply. The Prior-Notice system requires food
    importers to provide the FDA with advance notice of human and animal
    food shipments imported or offered for import into the United States.
        By requiring advance notice for imported foods, we gain critical
    new tools that could help identify shipments containing potentially
    dangerous foods and prevent them from entering the country. For example
    FDA would know in advance, when and where specific food shipments will
    enter the United States, what those shipments will contain, from where
    and from whom they are imported, and the facility where the food was
    manufactured. This advance information, along with other information
    from the intelligence community, allows FDA to more effectively target
    inspections and ensure the safety of imported foods.
        FDA receives on average, 27,000 notifications about incoming food
    shipments each day, and works closely with the Customs and Border
    Protection (CBP) at the prior-notice Center which is co-located with
    CBP's National Targeting Center to ensure that the Prior-Notice
    regulations promote a coordinated strategy for border protection. Using
    the electronic data required under those regulations, the science-based
    knowledge of the Agency, and a sophisticated automated targeting
    system, FDA works side-by-side with CBP while making decisions about
    food shipments that could pose a potential threat to the United States.
    Those identified as potential threats will be subject to thorough
    inspections upon arrival at our ports. This integrated risk-management
    process increases our security and facilitates the movement of
    legitimate commerce.
        FDA is also helping vaccine manufacturers overcome challenges such
    as the problems Chiron is experiencing. Under the Good Manufacturing
    Practices for the 21st Century Initiative, we are working with industry
    to encourage use of advanced technologies as well as quality systems
    and risk-based approaches that build quality into the manufacturing
    process. We are also increasing our surveillance of influenza vaccine
    manufacturers and have expanded our ability to communicate with our
    foreign regulatory counterparts on critical public health issues.

                                    CLOSING

        We at the Food and Drug Administration are working hard to address
    key challenges in fulfilling our public health mission. Our goal is to
    maximize the benefits and minimize the risks from the products we
    regulate. We work to provide high quality and consistent oversight in
    an environment of changing public health risks, new technologies and
    global market dynamics. We recognize that our responsibilities are
    growing in scope and complexity, and we are responding by focusing on
    our core public health mission, by making high-yield investments and by
    seeking effective collaborations and partnerships.
        Our vision for the future of FDA is one of transformation,
    requiring the broad use of new technology and new ways of thinking,
    developed in collaboration with a broad network of partners--public and
    private, United States and international. By capitalizing on 21st
    century information technology and regulatory process innovation, we
    will leverage public investment in FDA to yield an even greater level
    of public health protection, and lower barriers on the critical path to
    medical innovation. This will allow us to further implement a quality
    systems approach in all of our operations, improving regulatory
    business processes, increasing productivity, and promoting better
    health outcomes. We are committed to fostering increased predictability
    and transparency in every aspect of what we do.
        We would like to thank you for your continued support of the agency
    and its public health mission. This year is expected to be another
    exciting one for the Agency and we look forward to working with you
    throughout the 109th Congress.
                                     ______

                           DEPARTMENT OF AGRICULTURE

                        Office of the Inspector General

            Prepared Statement of Phyllis K. Fong, Inspector General

        Good morning, Mr. Chairman and Members of the Subcommittee. Thank
    you for inviting me to testify before you today to discuss the
    activities of the Office of Inspector General (OIG) and to provide you
    information from our work pertaining to the programs and operations of
    the U.S. Department of Agriculture (USDA).
        I would like to introduce the members of my senior management team
    who are here with me today: Joyce Fleischman, Deputy Inspector General;
    Robert Young, Assistant Inspector General for Audit; Mark Woods,
    Assistant Inspector General for Investigations; and Walt Kowal,
    Director of our Business Management and Procurement Division.
        I am pleased with the opportunity to provide the Subcommittee with
    some of the highlights of our audit and investigative activities over
    the past year, inform you about the results we achieved, and give you a
    preview of projects of interest that are pending or are planned for
    fiscal year 2005.
        To ensure that our audit and investigative resources are directed
    at the most important challenges facing USDA, we have begun planning,
    organizing, and budgeting our work according to three major objectives
    that define our priorities.
        My testimony today will be focused on our work directed towards the
    major challenges facing the Department in the areas of safety, security
    and public health, program integrity, and management of public
    resources.

                      SAFETY, SECURITY, AND PUBLIC HEALTH

        The highest priority for our audit and investigative work is to
    support USDA in the enhancement of effective safety and security
    measures to protect USDA and our Nation's agricultural resources.
    Food Safety: Improving USDA Oversight and Inspection Systems
        Ensuring a safe domestic food supply and providing an effective and
    reliable system of import safeguards for foreign-produced food products
    is a vital responsibility of the Department. Public and congressional
    concerns continue regarding the ramifications of Bovine Spongiform
    Encepholopathy (BSE) in Canada's cattle herd and its impact on the U.S.
    cattle market. We are continuing our work on the Department's
    surveillance efforts to detect and estimate the prevalence of BSE in
    the U.S. cattle herd. We are focusing our efforts on whether USDA has
    established effective management control processes over inspection-
    related activities, including animal disease surveillance programs. OIG
    will devote significant audit and investigative resources to BSE and
    other food safety issues in fiscal year 2005 to assist the Department
    as it addresses the challenging questions that have arisen.
    Investigating the USDA Response When BSE-Suspect Cattle Are Identified
        Last year, I advised the Subcommittee that OIG was investigating
    allegations surrounding the health status of the BSE-positive cow found
    in Washington State in December 2003. Allegations were raised in the
    media pertaining to the potential falsification of USDA inspection
    records that described the cow's condition before its BSE status was
    confirmed. OIG investigated whether any USDA personnel or private
    parties provided false information or engaged in any intentional
    misconduct. We also examined whether USDA personnel and employees of
    the beef processing facility followed proper procedures during the
    inspection of the BSE-positive cow and during their collection,
    handling, and delivery of tissue samples from the infected cow.
        In July 2004 testimony before a joint hearing of the House
    Agriculture and Government Reform Committees on BSE issues, I reported
    that we found no instances where USDA personnel knowingly conveyed
    false information or engaged in intentional misconduct. APHIS and the
    Canadian Food Inspection Agency (CFIA) concluded that they accurately
    identified the BSE-positive cow. We examined their work and agreed with
    their conclusion. OIG discovered no evidence that USDA personnel
    falsified any records pertaining to the condition of the BSE cow at the
    time of inspection. Our investigation also found that the former
    employee of the facility, who alleged that the BSE-positive cow was
    ambulatory and healthy when it arrived at the facility, described a
    different animal from the one that arrived in the same trailer and
    later tested BSE-positive.
        A second OIG investigation into the handling of a BSE-suspect cow
    by Department officials resulted from the premature condemnation of a
    cow in San Angelo, Texas. On May 4, 2004, the FSIS Acting Regional
    Director in Dallas, Texas, reported that a cow identified as having
    Central Nervous System (CNS) symptoms by an FSIS veterinarian at a beef
    processing facility in San Angelo, Texas, was not tested for BSE after
    it had been slaughtered. The initial decision by the FSIS Veterinary
    Medical Officer (VMO) on-site at the facility to test the cow for BSE
    was overturned by a senior APHIS official, and the cow's carcass was
    subsequently sent to a rendering plant.
        OIG investigated whether an APHIS official in Austin, Texas,
    provided a false statement to USDA/FSIS investigators during their
    inquiry into his decision not to test the animal at the facility. The
    OIG investigation found no evidence that any of the USDA officials
    responsible for the decision not to take brain tissue samples from the
    cow for BSE testing, or any other USDA personnel, provided false
    information or engaged in intentional misconduct. The cow did not enter
    the food supply; its carcass was disposed of at a local landfill in
    accordance with applicable environmental standards.
        After the incident, FSIS and APHIS Veterinary Services announced a
    new joint policy regarding BSE sampling of condemned cattle at
    slaughter plants. The policy establishes protocols for the agencies'
    responsibilities to obtain samples from condemned cattle exhibiting
    signs of CNS disorders, regardless of age.
    The USDA BSE Surveillance Plan and BSE Enforcement Issues
        The Department's testing of cattle for BSE had centered on high-
    risk cattle--those that exhibit a CNS disorder or died from unclear
    causes. After the discovery of a BSE-infected animal in Washington
    State in December 2003, APHIS expanded its surveillance program
    beginning June 1, 2004.
        As I testified last year, we initiated an audit to assess whether
    the surveillance program in place in December 2003 had been adequately
    implemented and whether the expanded program would accomplish its
    stated goal to determine if ``. . . BSE is actually present in the
    population and, if so, at what level.'' We concluded that several
    limitations inherent in the expanded sampling plan needed to be
    clarified to convey what the results of the testing actually imply.
    Among the major issues we identified were: sampling was not truly
    random because participation in the program is voluntary; APHIS could
    not obtain a statistically appropriate geographical representation of
    the U.S. cattle population, so the chances of detecting BSE, if it
    exists, would be reduced; and the projected maximum BSE prevalence rate
    may be unreliable.
        Our review also determined that cattle condemned at slaughter
    plants for CNS disorders were not always tested for BSE. The Department
    needed to increase testing of rabies-negative brain samples from
    animals that exhibit clinical signs not inconsistent with BSE. At the
    time of our review, a process for obtaining samples from cattle that
    ``died on the farm'' had not been developed. USDA also needed to
    standardize the age requirement for BSE testing.
        Based on our audit findings, we recommended that APHIS fully
    disclose the assumptions behind its sampling plan, clarify the
    limitations, and ensure that all high-risk animals are sampled and
    tested in accordance with USDA policy and the 2004 Surveillance Plan.
    We also recommended that APHIS expedite development of a new system to
    track and report accomplishments and implement performance measures and
    a continuous risk assessment. APHIS agreed with all of our
    recommendations and advised OIG it is moving to correct the weaknesses
    we identified.
        Currently, OIG has four audits in progress pertaining to BSE. In
    our BSE Surveillance Program--Phase II audit, OIG is monitoring the
    Department's implementation of its BSE-Expanded Surveillance Program,
    involving both APHIS and FSIS. This audit will evaluate the
    effectiveness of APHIS' expanded BSE Surveillance program; whether BSE
    laboratories are meeting their objectives and are in compliance with
    program policies and procedures for conducting tests on submitted BSE
    samples and reporting test results to APHIS and stakeholders; and if
    APHIS and FSIS took prompt and proper corrective actions in response to
    recommendations in the BSE Surveillance Program--Phase I audit report
    previously cited.
        In our Phase III review, we will evaluate whether the USDA
    enforcement of the ban on specified risk materials (SRMs) in meat
    products and controls to prevent central nervous system (CNS) tissue in
    advanced meat recovery (AMR) product have been effectively implemented.
    The review will also cover FSIS ante mortem condemnation procedures and
    procedures for obtaining brain tissue samples from condemned cattle for
    BSE testing. Our target date for completing these two efforts is early
    summer, 2005. This week, we released our audit of the Department's
    (APHIS, FSIS) Oversight of the Importation of Beef Products from
    Canada. In May 2003, USDA halted imports of live cattle, ruminants, and
    ruminant products from Canada after a Canadian cow tested positive for
    BSE. In August 2003, the Department announced that it would allow the
    importation of low-risk beef and other ruminant products from Canada.
    In response to congressional concerns, we evaluated APHIS' oversight of
    Canadian beef imports and whether proper controls were established to
    ensure that only low-risk product entered the United States. Among our
    key objectives were determining whether APHIS met existing regulatory
    and policy requirements regarding permits that allowed the importation
    of some Canadian beef products and whether APHIS properly considered
    and implemented risk-mitigation measures for animal and public health.
    We found that while APHIS allowed the import of beef products they
    considered low risk in an attempt to further trade, they did not
    publicly communicate or explain their actions to all interested
    parties. APHIS changed its policies relating to required risk
    mitigation measures to allow the import of low-risk product produced at
    facilities that also handled higher risk product, thereby increasing
    the potential risk for cross-contamination. OIG made a number of
    recommendations that would strengthen the USDA process for
    communicating such changes in policy and improve controls over Canadian
    beef product imports. The Department has generally agreed with our
    recommendations and has identified a number of positive actions to
    address these concerns. Finally, we are completing an audit to evaluate
    the adequacy of a recall of ineligible product from Canada and will be
    reporting our results to you.

    Food Contamination and Recall Activities
        In my testimony before the Subcommittee for the last 2 years, I
    discussed OIG work regarding FSIS recall operations that involved the
    adulteration of ground beef products by Escherichia coli (E. coli) in a
    Colorado plant. Our audit of the Colorado facility determined that the
    facility and FSIS had not fulfilled their responsibilities under the
    Hazard Analysis and Critical Control Point (HACCP) system. OIG made
    extensive recommendations to improve their inspection processes and
    recall procedures in this audit. As a result, FSIS directed plants to
    reassess their HACCP plans for raw ground beef products and issued a
    directive requiring inspectors to obtain processing plants' pathogen
    test results at least on a weekly basis. FSIS issued a second directive
    that clarified when trace-back' samples should be taken and that
    suppliers shall be notified of test results.
        At the time of my testimony last year, two audits on Listeria
    adulteration recalls were still underway. In two audit reports issued
    in June 2004, we determined that similar to the Colorado recall
    incident, weaknesses in FSIS' management control and oversight of the
    recall process were again evident. In response to our recommendations,
    FSIS issued a new directive on recall procedures, which implemented a
    process for selecting customers for effectiveness checks, and enhanced
    instructions to agency personnel for performing effectiveness checks on
    products distributed to the National School Lunch Program. We are still
    working with FSIS to address the development of a supportable
    methodology for determining the success, or failure, of a recall.
        Regarding our investigative work on incidents of food adulteration,
    we investigated the owner of a California food service management
    storage and distribution business for supplying 47 California school
    districts with poultry products containing rodent hair, feces, and
    signs of being gnawed by rodents. The owner and plant manager were
    convicted, placed on probation, and fined over $10,000.

    Controls Over Germplasm Storage Material and Genetically Engineered
            Organism Field Testing
        USDA plays a major role in regulating and monitoring genetically
    engineered organisms (GEOs), ranging from the storing of germplasm used
    to produce seeds for such crops, to approving field tests of
    genetically engineered crops, to monitoring the movement and import of
    GEO crops. In March 2004, we issued a report on the adequacy of USDA
    controls over the identification, accountability, and security of plant
    germplasm at USDA facilities. We found that guidance and policies were
    lacking and that inventory accountability and physical security needed
    improvement. The agencies responsible for storing germplasm and
    controlling its movement (ARS and APHIS) agreed to take action on our
    recommendations.
        Because of the sensitivity and potential impact biotechnology has
    on U.S. trade, we are continuing our work in this area. We have an
    audit that is nearing completion that will report our evaluation of
    USDA controls over field tests and movements of GEOs. We are examining
    APHIS' procedures for approving, controlling, and monitoring field
    tests of genetically engineered crops to prevent the inadvertent
    release of GEOs in the environment. Uncontrolled and inadvertent
    release of GEOs, particularly high-risk GEOs such as those containing
    pharmaceutical and industrial compounds, cannot only seriously impact
    the safety of the food supply, but adversely impact trade. Further, the
    genetic diversity of plant life can be compromised. We expect to issue
    a final report on our work by late spring.

    Homeland Security and Program Implementation
        We place a high priority on work that will assist USDA officials in
    strengthening the Department's defenses against threats to our Nation's
    food supply, production agriculture, and Federal facilities.
        We reviewed the Department's progress in addressing the specific
    security, inventory, and access deficiencies identified in a previous
    OIG report on USDA research laboratories and examined its
    implementation of new policies to improve controls on inventories and
    biosecurity. To do so, OIG made unannounced visits to 16 laboratories
    previously identified as having deficiencies. We found that while
    agency officials had made great progress to implement biosecurity
    measures, particularly for BSL-3 laboratories, further improvement is
    needed with respect to accountable records, internal reviews, and
    cybersecurity.
        Our work has shown that subjects of OIG investigations are also of
    interest to other members of the Federal Bureau of Investigation (FBI)
    Joint Terrorism Task Forces. This has led to several recent cases. OIG
    participated in the FBI's JTTF in Columbus, Ohio, and we assisted in
    the investigation of an individual for providing material support to
    the al Qaeda terrorist network. The individual pled guilty in the
    Eastern District of Virginia to one count of conspiracy to provide
    material support and resources to al Qaeda and one count of Providing
    Material Support and Resources to al Qaeda. He was sentenced to 20
    years in prison.
        OIG created a nationwide task force in order to coordinate with
    Federal, State, and local law enforcement agencies in identifying and
    prosecuting violators who steal infant formula from large chain stores.
    Stolen infant formula is a nationwide problem due to the resale value
    of the merchandise on the black market and the potential for overseas
    transfers of the illegal proceeds. OIG is particularly concerned with
    the health and wholesomeness of the stolen infant formula because
    previous investigation indicates it is often relabeled and resold in
    smaller grocery stores--often through the Women, Infants, and Children
    (WIC) program. We have found that expired, stolen infant formula is
    often relabeled with new expiration dates, and some of the relabeled
    formula does not contain the nutrients/ingredients listed on the label.
    Currently, we have 14 open investigations involving stolen infant
    formula. We are working with JTTFs in order to assist other Federal and
    local law enforcement agencies and to insure that this issue remains an
    investigative priority.

    Evaluation of the Implementation of the Listed Agent or Toxin
            Regulations
        Select agents or toxins are those biological agents listed by APHIS
    as having the potential to pose a severe threat to animal and plant
    health or to animal and plant products. APHIS is required by the Public
    Health Security and Bioterrorism Preparedness and Response Act to
    ensure that anyone possessing, using, or transferring these agents is
    registered with the Government.
        We are examining whether adequate controls are in place at APHIS
    headquarters to ensure that entities known to use or store listed
    agents or toxins are registered, that laboratory reported security
    measures are assessed, and that movement of select agents between
    scientists and laboratories can be documented and tracked. We are also
    participating in an Interagency Working Group reviewing the export
    licensing process for biological and chemical commodities. The
    Interagency Working Group is interested in the responsibilities and
    actions of APHIS concerning the possession, use, and transfer of
    biological agents and toxins and their relationship to export
    licensing.

    Homeland Security-Related Audit Work Planned in Fiscal Year 2005
        We have several security-related audits that we expect to begin
    work on in fiscal year 2005. OIG will conduct an audit on the
    Department's implementation of the Bioterrorism Act of 2002. This Act
    requires, in part, that warehouses and elevators that are used to store
    Government-owned commodities register with the Food and Drug
    Administration (FDA) and establish and maintain records that can be
    used to identify producers. We will assess whether USDA has properly
    verified or required FDA registration and compliance prior to entering
    into storage agreements with warehouse and elevator firms. We will also
    follow up on our prior audit of Forest Service (FS) security over
    explosives/munitions magazines located within the National Forest
    System (NFS). We will assess FS' action to implement our prior
    recommendations and determine if explosives/munitions magazines are
    adequately secured.

    Protecting the Safety of USDA Employees
        A fundamental duty of OIG is to expeditiously investigate any
    incidents of violence or threats of violence against USDA employees.
    USDA employees must be protected against harassment or intimidation as
    they discharge their duties, whether they are engaged in protecting
    public safety as food inspectors, or serving as law enforcement
    personnel in our national forests. Last fall, OIG helped secure a
    conviction for a crime that took the lives of two dedicated FSIS
    employees. In October 2004, after a 6-month jury trial in Alameda
    County, California, the owner of a sausage factory was convicted of
    homicide with special circumstances (first degree murder) for the
    murder of two FSIS Compliance Officers and one California Department of
    Food and Agriculture Investigator while they were on official business
    at his facility in June 2000. In January, the jury recommended that the
    owner be sentenced to death for this crime. An OIG Special Agent played
    a primary role in investigating the murders and assisting the
    prosecution's case. Sentencing by the judge is imminent.
        Last week, OIG submitted our statutorily mandated investigative
    report to Congress pertaining to the deaths of two FS employees who
    died fighting the Cramer Fire in the Salmon-Challis National Forest
    (Idaho). OIG found that certain FS personnel at the fire, primarily the
    Incident Commander, failed to comply with established FS firefighting
    policies and tactics. Our investigation found that the contract
    firefighting teams, who were brought in to assist FS firefighters,
    performed poorly. Therefore, we initiated a review of FS' use of
    private contract crews to determine the effectiveness of FS' procedures
    and oversight pertaining to the contract crews' readiness, training
    certifications, and communication proficiencies, among other issues.

    Reducing USDA Program Vulnerabilities and Enhancing Program Integrity
        OIG's second priority is to help USDA reduce vulnerabilities and
    ensure or restore integrity in the various benefit and entitlement
    programs of USDA, including a variety of programs that provide payments
    directly and indirectly to individuals or entities.

    Targeting Risk and Improper Payments Within USDA
        The Improper Payments Information Act of 2002 (IPIA) requires the
    head of each agency to annually review all programs and activities the
    agency administers to identify those that may be susceptible to
    significant improper payments. Once these programs are identified, the
    agencies must estimate the annual amount of improper payments, and, if
    the estimate is over $10 million and greater than 2.5 percent of
    program payments, report the estimate to Congress along with the
    actions the agency is taking to reduce those improper payments. The
    Department's farm programs and food and nutrition programs, which
    amounted to $34 billion and $46 billion, respectively, last year, are
    subject to this statute's requirements. Three primary agencies (the
    Risk Management Agency (RMA), the Farm Service Agency (FSA), and the
    Natural Resources Conservation Service (NRCS)) administer USDA's crop
    insurance, crop disaster, and conservation programs, respectively,
    while the feeding programs are administered by the Food and Nutrition
    Service (FNS). We audited implementation of the IPIA in these agencies.
    We found that FNS had available information from numerous sources to
    establish baseline information the agency could have used to establish
    error rates for feeding programs in response to OMB's data request for
    improper payment information. However, the agency did not believe the
    information was statistically valid and, therefore, could not be used
    to report on improper payments.
        Our review of IPIA implementation in FSA and NRCS disclosed little
    progress being made. The agencies did not take necessary action to
    comply with the Act and implement OMB's guidance. The agencies stated
    the guidance provided by OMB and the Department's Office of Chief
    Financial Office (OCFO) was unclear; and, therefore, they were unsure
    of what actions to take. Our audit of OCFO's implementation measures
    disclosed that OCFO's direction and guidance to the agencies needs to
    be strengthened in order to provide reasonable assurance that program
    areas vulnerable to improper payments are fully identified. We will
    continue to monitor the Department's implementation of the IPIA.
        We have initiated a multifaceted and comprehensive review of USDA's
    farm programs to identify improper payments and address fraud and
    abuse. This initiative is now focusing on crop insurance, disaster
    payments, and payment limitations but will be expanded to other USDA
    farm programs. Our audit and investigative staffs, which have extensive
    experience with these programs, are now reviewing previously conducted
    audits and investigations and are compiling data on program
    vulnerabilities and their causes. Efforts will then shift to the
    development of innovative solutions and the means to identify abuse.
    OIG is working with RMA this year to access and learn how to better use
    data mining tools that will help us proactively target crop insurance
    fraud by farmers, agents, and adjustors involving suspicious patterns
    of claims. Our computer forensics unit will play a major role in the
    latter phase, as it will use its recently enhanced capability to
    develop processes that will analyze, manipulate, and cross-match
    computer data in the various agencies' databases and detect those most
    likely to be involved in abuse. We were very successful in our initial
    development of computerized targeting of fraud in the Food Stamp
    Program and hope to achieve similar success with USDA's farm programs.
    We also plan to work with RMA to enhance our ability to use satellite
    imagery to strengthen the hard evidence used in crop insurance fraud
    cases.

    Food and Nutrition Programs
        OIG has continued to work with FNS to improve program integrity and
    to identify improvements in program administration. In fiscal year
    2004, we evaluated internal controls related to National School Lunch
    Program (NSLP) meal accountability, procurement, and accounting systems
    in six States. We identified control weaknesses in meal accountability
    procedures, including lack of proper edit checks, to ensure the
    accuracy of the daily meal counts and claims for reimbursement and
    procurement procedures. For instance, in the 2000 school year, the
    Philadelphia school district claimed reimbursement for 241,852 meals
    served in excess of students in attendance, 147,954 meals in the
    incorrect reimbursement category, and 109,778 more free and reduced-
    price meals than could be supported by approved applications and direct
    certifications. This resulted in excess reimbursements of over
    $800,000. In Chicago, nearly 27 percent of the 598 schools in the
    district submitted undetected inflated meal claims, over-claiming
    642,102 breakfasts and lunches in the period of October 2003-May 2004.
    Due to the school district's limited oversight, we questioned over $1.2
    million in program funds and recommended collection of over $650,000.
        In fiscal year 2004, FNS received about $5 million to enhance
    program integrity in Child Nutrition Programs by expanding assessment
    of certification accuracy in the school meals programs. FNS is using
    this funding to conduct a study aimed at providing a reliable, national
    estimate of over and under payments in the NSLP and the School
    Breakfast Program (SBP). The study will analyze data for school year
    2005-2006, and we will monitor the study results to assure it meets its
    intended purpose. Depending on the significance of the error rates that
    will be identified by the study, FNS should be better able to determine
    whether changes are needed in eligibility requirements for NSLP and SBP
    to reduce ineligible participation.
        OIG also conducted investigations involving over $1 million in
    false claims involving inflated meal claims for reimbursement from the
    NSLP and the Child and Adult Care Feeding Program. Through court
    actions, we have recovered $570,000 in California, Louisiana, and
    Wisconsin and have $1 million in claims pending in a New York case
    along with three persons sentenced from 6 to 30 months in prison.

    Food Stamp Program Investigations
        Illegal trafficking in Food Stamp Program (FSP) benefits, whether
    issued through electronic benefits transfers (EBT) systems or food
    coupons, continues to be a major area of concern. Over the last year,
    we spent approximately 20 percent of our investigative time on
    investigations of FSP fraud. The use of EBT systems to deliver FSP
    benefits, in addition to saving administrative program costs by
    eliminating costs of printing, issuing, and reconciling millions of
    paper food stamps every month, has also provided a wealth of electronic
    data of enormous benefit in detecting and investigating suspicious
    patterns of activity and in compiling evidence that is used to
    successfully prosecute corrupt retailers.
        Using the Computer Forensic Unit's (CFU) capabilities, we can
    analyze the EBT database and track recipient and store redemption
    patterns to prove fraud and determine the total amount of money
    involved. The investigation of an authorized store in Chicago
    illustrates how we are able to use the data. The subjects of the
    investigation had moved the authorized point of sale device to
    different locations in Chicago so they could exchange cash for EBT
    benefits away from the authorized store. We were able to analyze the
    EBT data to track recipient and store redemption patterns to prove the
    fraud, as well as determine the total amount of fraud involved in the
    case. For example, recipients redeemed benefits in two stores that were
    miles apart and physically impossible to travel to in the time
    indicated in the redemption data. Our work resulted in four individuals
    being sentenced to serve from 15 to 57 months in prison and ordered to
    pay $29.1 million in restitution.

    RMA: Reducing IT Security and Operations Vulnerabilities
        RMA administers the Federal Crop Insurance Corporation (FCIC) and
    oversees all programs authorized under the Federal Crop Insurance Act.
    RMA's fiscal year 2004 crop year potential liability exceeded $46
    billion. FCIC's 2004 crop year premium subsidy and producer-paid
    premiums are $2.5 billion and $1.6 billion, respectively. As of August
    30, 2004, insurance indemnities paid on the 2003 crop year were $3.2
    billion.
        We audited RMA's IT security and operations, which disclosed
    serious internal control weaknesses in the overall management and
    organizational structure for these activities. RMA's IT environment is
    highly vulnerable due, in part, to the overall control of IT operations
    by production managers who also control the financial commitments and
    outlays. This vulnerability resulted in material noncompliance with OMB
    and Presidential Decision Directives. Our electronic vulnerability
    scans of RMA's network revealed over 300 high- and medium-risk
    vulnerabilities, insufficient system policy settings, and serious and
    recurring access control weaknesses, compounded by inadequate firewalls
    and intrusion detection devices. Overall, RMA managers did not adhere
    to the Department's system development lifecycle methodology for
    software application development, installation, and/or maintenance.
        We recommended that RMA provide sufficient resources to its new
    Chief Information Officer to effectively oversee IT security and
    preclude undue influence by production managers. We additionally
    recommended that RMA include the noted material control weaknesses in
    its Federal Managers' Financial Integrity Act (FMFIA) report; take
    immediate action to eliminate the vulnerabilities noted; and establish
    appropriate policies, procedures, and controls for the agency's IT
    operations. We also recommended that RMA obtain background
    investigations for all IT contractor employees before access to
    systems, hardware, and facilities is authorized. RMA officials have
    indicated that they plan to take aggressive action by prioritizing the
    recommendations and acting first on those that will mitigate the FMFIA
    material internal control weakness. We will follow up to see that
    corrective actions will be taken.

    RMA: Investigations into Crop Insurance Payment Fraud
        We have a number of investigations ongoing into crop insurance
    fraud, as well as disaster payment fraud. Most of these investigations
    involve substantial dollar amounts. For example, in two of our cases,
    OIG investigated 9 persons who schemed to gain over $20 million in
    fraudulent RMA and FSA payments. The investigations have resulted in
    forfeiture of $13 million in cash and property to the Government in
    order to recoup some of these losses. One of the persons has been
    sentenced up to 60 months in prison, and the others pled guilty and are
    waiting to be sentenced.

    FSA: Investigations into Payment Limitation Fraud
        In addition to fraud cases involving crop insurance and disaster
    payments, we have a number of open investigations pursuing fraud
    involving payment limitations. Our investigations have found variations
    of a common scheme, such as: fraudulently including the names of
    individuals on farm operating plans who do not meet FSA's requirement
    that one be ``actively engaged in farming operations''; establishing
    farming partnerships where alleged partners do not actually share in
    the farming operation; failing to disclose that partners in one farming
    partnership have an interest in another farming operation; and
    falsifying documents to hide the fact that the financial accounts are
    actually commingled with those of another farming entity.
        As an example, OIG investigated a case of fraud committed by one of
    Mississippi's largest farmers and his brother. This resulted in both of
    them pleading guilty in June 2004 to conspiracy to defraud FSA of $11.2
    million in subsidy program payments, submitting false statements to
    FSA, wire fraud, mail fraud, money laundering, and witness tampering.
    The plea agreement included the criminal forfeiture of approximately
    400 acres and one of the farmer's houses that had been built with the
    proceeds from this scheme. The farmer's accountant actively
    participated in the conspiracy and also pled guilty. From 1999 through
    2001, the conspirators created 13 partnerships and 64 different
    corporations to fraudulently obtain payments from FSA and RMA. They
    recruited and paid individuals for the use of their names and Social
    Security numbers to secure enough stockholders for each entity and
    misrepresented those names to FSA to obtain the subsidy payments. The
    conspirators also attempted to persuade those individuals to testify
    falsely before a Federal grand jury and to OIG agents. The farmer was
    sentenced to 5 years imprisonment and ordered to repay $11.2 million to
    the Government in restitution. The brother was fined $5,000 and
    sentenced to 2 years probation. The accountant was sentenced to 7
    months imprisonment and fined $20,000.

    Natural Resources Conservation Service (NRCS)
        We are also evaluating the potential for improper payments in NRCS
    conservation programs, as well as determining the impact of any
    improper payments on other farm program payments. Under various
    conservation programs administered by NRCS, the Government pays
    landowners to take marginal agricultural land out of production and put
    it into environmentally friendly conservation uses. At the same time,
    FSA agricultural programs provide payments to eligible producers
    predicated on the number of crop-specific ``base acres'' on the farm
    used for agricultural activities, as determined by FSA. In general,
    producers are prohibited from receiving both an NRCS conservation
    easement payment and FSA agricultural program payments on the same base
    acres. Landowners are also paid for conservation easements based on
    agency appraisals. If appraised values are not properly established,
    significant overpayments can be made for conservation easements. We are
    finalizing our work and expect to release a report by late spring,
    2005.

    Forest Service
        Each year, wildfires destroy 2 to 7 million acres of resources in
    the United States, and the Forest Service (FS) faces significant
    challenges in utilizing its personnel and resources to suppress and
    control wildland fires and to protect the health of our public forests.
    OIG will conduct extensive audit work in fiscal year 2005 related to FS
    firefighting programs, activities, and management actions. We recently
    completed a review of FS' firefighting safety program. Our review found
    that while FS had excellent written firefighting safety policies and
    procedures, improvements were needed in the agency's overall fire
    safety program. OIG determined that FS had not fully implemented
    recommendations from past internal and external safety reviews and that
    the agency did not have documentation to support the qualifications of
    all its firefighters. OIG will monitor FS management actions to follow
    up on this audit and related issues that arose in our aforementioned
    Cramer Fire investigation.
        The accumulation of hazardous fuels has been one of the major
    contributors to the increase in large destructive wildfires. OIG will
    examine FS' Hazardous Fuels Reduction efforts to assess the agency's
    controls over the funds, activities, and effectiveness of reducing the
    accumulation of hazardous fuels. Our review of FS' National Fire Plan
    Large Fire Suppression Costs will assess FS' efforts to control,
    account for, and report its large fire suppression costs. FS' costs to
    fight fires now exceed an average of $1 billion per year. As part of
    our audit, we will assess the agency's implementation of
    recommendations from prior reviews, including FS' action plan, to
    determine whether FS has taken the necessary actions to reduce its fire
    suppression costs.
        OIG will also assess FS' use of Emergency Equipment Rental
    Agreements (EERAs) to rent equipment on a short-term basis to assist in
    fighting wildland fires and the agency's use of collaborative ventures
    and partnerships with non-Federal entities. FS' use of such
    partnerships has increased significantly, and our review will focus on
    whether they are well managed, meeting program objectives, and avoiding
    potential conflicts of interest. OIG will also review FS' management
    procedures pertaining to the control and potential elimination of
    invasive species, which cost more than $138 billion per year in damage,
    losses, and control efforts. Nonnative insects and diseases have
    infested over 3.5 million acres in the national forests, and
    approximately half the species on the endangered species list are at
    risk because of competition and loss of habitat traceable to invasive
    species.

                     USDA'S MANAGEMENT OF PUBLIC RESOURCES

        OIG conducts audits and investigations that focus on improved
    financial management and accountability, information technology
    security and management, protection of public assets, employee
    corruption, Forest Service resources, and rural development programs,
    among others.

    Financial Management and Accountability
        Both the Congress and the President's Management Agenda have placed
    emphasis on improving financial management in all Federal departments.
    Improvements made by the Department to its financial systems have
    allowed USDA to maintain an unqualified opinion on its consolidated
    financial statements for the third consecutive year. While this is a
    major achievement, the Department still needs to improve its financial
    management processes to correct internal control weaknesses. Strong
    financial management is required to ensure the availability of accurate
    and timely financial data needed to properly manage USDA programs.

    Information Technology (IT), Security, and Management
        In 2004, we assessed the adequacy of IT security in the Rural
    Development (RD) mission area; Risk Management Agency; APHIS; the
    Economic Research Service; the Grain Inspection, Packers and Stockyards
    Administration (GIPSA); the Office of Budget and Program Analysis; and
    the Office of the Chief Economist. Advances in technology have
    increased the Department's vulnerability to unlawful destruction and
    penetration by hackers and other individuals. USDA agencies manage
    multibillion dollar programs that are integral to homeland security,
    food safety, and critical infrastructure that must be protected. We
    found weaknesses in IT security programs due to inadequate
    implementation at each agency we reviewed. IT security improvements are
    still needed at USDA's second largest data center, the Office of the
    Chief Information Officer/National Information Technology Center's
    (OCIO/NITC). We recommended improvements in access controls, security
    plans, risk assessments, disaster recovery plans, and identification
    and correction of potential system vulnerabilities. OCIO stated that
    corrective action either has been taken or is underway to address each
    issue.

                        FISCAL YEAR 2006 BUDGET REQUEST

        We are very proud of the accomplishments of OIG and pleased to
    report that, in fiscal year 2004, we continued to more than pay our own
    way. In the investigations arena, OIG issued 425 investigative reports
    that resulted in 370 indictments and 350 convictions. These actions
    resulted in $292.9 million in fines, restitutions, other recoveries,
    and penalties during the year. In the audit arena, we issued 97 audit
    reports, and management made decisions based on 77 of the reports. Our
    audits resulted in questioned and unsupported costs of $15.2 million.
    Of this, management agreed to recover $9.2 million. In addition,
    management agreed to put another $748.2 million to better use. Equally
    as important, implementation of our recommendations by USDA managers
    will result in more efficient and effective operations of USDA
    programs.
        During the past year, we have continued to review and evaluate OIG
    activities and made changes as needed to provide the most effective
    support to the Department's programs and operations. One of our most
    critical efforts continues to be in our IT arena. With the essential
    funding provided by this Committee, we were able to continue rebuilding
    our crucial IT infrastructure. Specifically, the agency was able to
    continue improvements and updates to the network operating system and
    associated software. In addition, new servers were acquired for
    headquarters and each regional office. These servers include remote
    management capabilities, which should allow quicker resolution and more
    efficient use of resources. We have also successfully mirrored our
    program databases at two locations. This balances workload during
    normal operations and provides a real-time backup if a major outage or
    emergency would occur at one of the sites.
        We are continuing to see results through improvement in our audit
    processes and our investigative forensic efforts. The new IT equipment
    and specialized software has continued to help OIG complete its audits
    faster and target its analyses to the highest USDA risk areas. The
    reduced staff-time allows OIG to review additional high-risk or
    vulnerable programs and operations. As I mentioned earlier, we also
    plan to continue to increase our use of our IT capabilities to further
    our effort in the improper payments area.
        For example, we use automated data mining and analysis software to
    extract, sort, analyze, and summarize large volumes of financial and
    program data to support our opinions on USDA agency and consolidated
    financial audits. In contrast, in a manual environment, analysis of
    such large volumes of data would not be feasible for OIG due to
    resource constraints and mandatory audit deadlines.
        On the Investigations side, the IT funding has allowed our Computer
    Forensics Unit (CFU) to process cases utilizing the most up-to-date
    forensic hardware and software tools. The CFU has also designed and
    developed its own specialized software, for example, to analyze
    millions of food stamp EBT transactions in order to identify fraud in
    this program. An example of the CFU's capabilities was demonstrated
    during the investigation of a recent $3 million rural development
    business and industrial loan fraud investigation. During the execution
    of a search warrant, a laptop was seized, and the subjects stated that
    the laptop had been ``reformatted'' and that nothing would be found on
    the laptop. Through CFU analysis, a copy of Quick Books was found on
    the restored computer; once recovered, we were able to prove how the
    fraud was committed. Hardware and software used in the CFU allow
    servers and workstations to be restored in a forensics laboratory
    setting, meeting required professional and judicial standards in a
    manner that maintains the integrity of the data so that they can be
    used in a court of law.
        These forensic tools must be regularly upgraded and replaced in
    order to keep pace with the ever-changing IT hardware and software
    standards and investigative needs.
        Again, I want to especially thank the Committee for its support in
    this area.
        The President's fiscal year 2006 request of $81 million for OIG
    provides for an increase of $1.6 million for mandatory pay costs and
    $1.7 million for program changes. The program change increases are $1.1
    million to fund the Nationwide Emergency Response Program, $300,000 for
    continued improvements to the CFU, and $300,000 for secure IT
    communications at the ``secret'' level. The increase for the Emergency
    Response Program will allow OIG to staff, train, and equip specially
    trained, quick-response teams to investigate biohazard threats against
    American agriculture and, as mandated by Public Law 107-203, the duty-
    related deaths of FS firefighters. The increase for the CFU will be
    primarily for a storage network to efficiently store voluminous amounts
    of electronic evidence that can potentially translate to higher case
    convictions. The increase for secure communications will allow OIG to
    target IT investments to enable our special agents and auditors to
    access Homeland Security information at the ``secret'' level.
        I believe adequate funding for our OIG activities makes good sense.
    OIG audits and investigations save money for the taxpayers, help ensure
    the safety and wholesomeness of the Nation's food supply, promote USDA
    Homeland Security efforts, and ensure the integrity of USDA programs.
    As such, I support the President's budget request for OIG.
        This concludes my statement, Mr. Chairman. I appreciate the
    opportunity to appear before you today and would be pleased to respond
    to any questions you and the Committee may have at this time.
                                     ______

                         ADDITIONAL SUBMITTED QUESTIONS

                Questions Submitted by Senator Robert F. Bennett

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

                                MEDICAL DEVICES

        Question. I appreciate the Administration's request for nearly $6
    million for the Devices and Radiological Health program for fiscal year
    2006, which comes on top of the nearly $26 million the committee
    enacted in fiscal year 2005. These significant investments have been
    difficult in the current environment but are critical to ensure timely
    patient access to increasingly complex medical technologies, and are
    consistent with the appropriations targets contained in the Medical
    Device User Fee and Modernization Act (MDUFMA).
         Can you tell the committee the steps you are taking with these
    funds to improve the device review function in terms of hiring FTE's,
    making improvements in your IT infrastructure, and meeting performance
    goals?
        Answer. Medical device user fees, combined with appropriations,
    have made it possible for FDA to make substantial improvements to the
    process for the review of device applications.
        FDA has used the greatest portion of the resources made available
    by MDUFMA to hire additional staff to enhance the review process and to
    enable FDA to meet the MDUFMA performance goals. The following table
    shows the increase in staffing made possible by MDUFMA resources.
        [The information follows:]

                                      ADDITIONAL STAFF-YEARS ADDED TO DEVICE REVIEW
                                            [Compared with fiscal year 2002]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Fiscal year
                              FDA Component                             Fiscal year     Fiscal year    2005 (Current
                                                                           2003            2004          Estimate)
    ----------------------------------------------------------------------------------------------------------------
    CDRH............................................................              12              63             152
    CBER............................................................              14              25              36
    ORA.............................................................               5               6              10
                                                                     -----------------------------------------------
          Total.....................................................              31              91             198
    ----------------------------------------------------------------------------------------------------------------

        The increased staffing shown for fiscal year 2005 is the current
    planning estimate, assuming that Congress acts quickly to ensure that
    MDUFMA continues in effect with no changes other than modification of
    the appropriations trigger requirement to forgive the shortfall in
    appropriations for fiscal year 2003 and 2004.
        MDUFMA funds have also enabled FDA to strengthen the device review
    process by initiating a Medical Device Fellowship Program to make more
    use of expertise in academia and the private sector, and by expanding
    training and professional development for staff dedicated to device
    review.
        FDA has also undertaken several significant, ongoing projects to
    modernize its information technology infrastructure. These efforts are
    critical to meeting the performance goals under MDUFMA and they require
    continued funding to be completed or to remain viable. These projects
    include:
      --Establishing premarket database and tracking systems for ODE/OIVD,
            including specialized reports and tracking for each review
            division. These systems will help FDA better manage review
            times and processes.
      --Developing of assignment tracking systems for the Office of
            Compliance, including integration with ODE/OIVD systems.
      --Developing of a streamlined pre-approval inspection program, with
            clear timeframes and monitoring systems.
      --Establishing Turbo 510(k) to provide for rapid review and clearance
            of in vitro diagnostic products.
      --Establishing the eConsult Pilot to make reviews more efficient.
      --Scheduling, systematic upgrading of reviewer PCs (on a 3-year
            cycle) to ensure data security, compatibility with industry
            submissions, and more efficient operating systems and program.
      --Upgrading hardware and software for the CDRH document imaging,
            storage, and retrieval system.
      --Issuing new guidances to implement MDUFMA and establishing a
            guidance tracking system to prioritize guidance development and
            revision.
        Modernized infrastructure will help FDA meet the demands placed on
    it while ensuring continued high quality reviews.
        FDA has made excellent, substained progress towards meeting
    MDUFMA's performance goals. We are confident that our performance for
    fiscal year 2005 will reflect the time and effort we are investing in
    improving our device review processes and in making the other
    improvements called for by MDUFMA. The goals for fiscal year 2006 and
    fiscal year 2007 are even more challenging, and will require a
    sustained commitment by FDA if they are to be met. Our actions and
    performance to date provide a sound foundation on which we will
    continue to build.
        Our performance during fiscal year 2003 and fiscal year 2004 and
    the first quarter of fiscal year 2005 shows we are on track to meet the
    goals for fiscal year 2005 and later years; we have attached FDA's
    performance reports for fiscal year 2003 and fiscal year 2004. Although
    it is too early to provide precise forecasts for fiscal year 2005, we
    are pleased with our progress to date and we would be glad to provide
    you an update later in the year.
        During fiscal year 2005, FDA is focusing on building our capacity
    to conduct the high-quality reviews expected by Congress, the
    Administration, and our stakeholders, including:
      --Providing new and updated guidance to industry,
      --Making our review processes more efficient, more predictable, and
            more interactive,
      --Developing innovative review processes such as modular and
            expedited reviews,
      --Recruiting scientific, engineering, and medical experts, and making
            greater use of experts outside FDA, to improve the scope and
            timeliness of our review processes, and
      --Modernizing our data systems and IT infrastructure to ensure the
            sound management and accountability of our review programs.
        This Committee enacted a nearly $26 million increase for the device
    program in fiscal year 2005 and the President has proposed a nearly $6
    million increase for fiscal year 2006, putting appropriations on the
    trajectory contained in MDUFMA. However, these appropriations increases
    will not keep the program viable beyond this fiscal year without a
    change to the MDUFMA law that would forgive the appropriated shortfall
    amount for those years when the Administration did not request enough
    funding to meet the appropriations target.
        Question. Does FDA still intend to request that the Authorizing
    Committees make this change to the MDUFMA law? If so, when will the
    change need to be enacted in order to keep the program from
    terminating? What is FDA required to do with the MDUFMA fees and staff
    if this legislative fix is not enacted?
        Answer. On October 29, 2003, OMB Administrator Joshua Bolten, sent
    a letter to the Speaker of the House, agreeing to a ``clean fix'' of
    the appropriations trigger problem. The Administration's proposal would
    forgive the fiscal year 2003 and 2004 appropriations shortfalls,
    thereby ensuring that MDUFMA would not sunset at the end of fiscal year
    2005, and pledging Administration support for full appropriations
    funding in the remaining years of MDUFMA. At that time, industry
    supported a clean trigger fix, and the Administration did request and
    Congress appropriated full funding for the program for fiscal year
    2005. FDA continues to work with stakeholders to ensure the success of
    MDUFMA.
        If Congress does not enact corrective legislation, FDA will lose
    its authority to collect medical device user fees beginning October 1,
    2005 and the performance goals negotiated for the medical device
    program will end. FDA would have to reduce staffing levels, abandon
    critical infrastructure modernization, reduce interaction with
    applicants, abandon planned guidance development, terminate the Medical
    Device Fellowship Program and largely eliminate our use of contract
    expertise in academia and the private sector, and take a variety of
    other steps to limit expenditures to the amounts made available in our
    fiscal year 2006 and fiscal year 2007 appropriations. FDA would expect
    review times to deteriorate, resulting in significant delays in the
    introduction of new medical devices.
        Question. What effect, if any, would a continuing resolution have
    on MDUFMA?
        Answer. FDA's most critical need for this program is for Congress
    to enact corrective legislation before the end of the fiscal year to
    modify the ``appropriations trigger'' requirement to forgive the
    shortfall in appropriations for fiscal year 2003 and 2004. If Congress
    does not enact corrective legislation, FDA will lose its authority to
    collect medical device user fees beginning October 1, 2005 and the
    performance goals negotiated for the medical device program will end.
    The problems associated with a continuing resolution are small compared
    with the prospect of an early, abrupt end to the MDUDMA user fee
    program.
        If the MDUFMA fee program dies, FDA would have to reduce staffing
    levels, abandon critical infrastructure modernization, reduce
    interaction with applicants, abandon planned guidance development,
    terminate the Medical Device Fellowship Program and largely eliminate
    our use of contract expertise in academia and the private sector, and
    take a variety of other steps to limit expenditures to the amounts made
    available in our fiscal year 2006 and fiscal year 2007 appropriations.
    FDA would expect review times to deteriorate, resulting in significant
    delays in the introduction of new medical devices.
        Any continuing resolution would create its own challenges. Assuming
    the MDUFMA appropriations trigger issue is resolved, FDA's primary
    concern is the length of any continuing resolution. A year-long CR that
    is at levels below the MDUFMA-specified appropriation would cause the
    program to terminate. FDA will be unable to collect fees during a
    continuing resolution. This is not a small problem, it is an effect of
    the continuing resolution.
        The Agency appears to be making progress on meeting the MDUFMA
    performance goals. However, I have heard from some device company
    constituents that they are concerned about the increases in the
    application fees they are paying. For example, application fees for
    breakthrough products (Premarket Applications) have grown by over 50
    percent in the first 3 years. Unless such increases are limited in the
    remaining 2 years, PMA fees will grow from the MDUFMA-envisioned
    $250,000 in the final year of the program to over $350,000. Some have
    suggested limiting fee increases in the last 2 years of MDUFMA to the
    rate of inflation--similar to the rate of growth for appropriations
    expected for the next 2 years.
        Question. Would you support limiting fee increases in the remaining
    2 years of the program to preserve the larger goals of MDUFMA? If not,
    can you tell the committee why the agency could not accept such a
    limitation and what impact such a proposal would have specifically in
    terms of FDA's ability to meet performance goals, recruit and retain
    staff necessary to meet the performance goals and fulfill non-goal
    related activities?
        Answer. FDA is committed to working with our stakeholders and
    Congress to save the MDUFMA user fee program and its performance goals.
    FDA staff are now working with Congressional staff and stakeholders to
    save the MDUFMA user fee program and the many benefits it offers. FDA
    sincerely hopes this process will lead to quick action on a solution
    that is acceptable to FDA and the Administration, our stakeholders, and
    Congress.
        It is my understanding that part of the growing frustration on the
    part of the medical technology companies with regard to MDUFMA is the
    feeling that the Center for Devices and Radiological Health still does
    not have baseline information on what it costs to review each type of
    application, and has dedicated more user fee revenue to reserve funds
    than hiring actual reviewers.
        Question. Can you tell the committee what it costs to review the
    different application types? If not, will this information be available
    in time for reauthorization? How many new FTE reviewers has CDRH hired
    with this massive infusion of appropriations and fees?
        Answer. FDA has contracted for a study to develop information on
    the standard costs of various types of medical device applications, but
    the contractor has not yet provided his report of findings to FDA. The
    study results, showing costs per completed application in fiscal year
    2003 and fiscal year 2004, will be available in time for
    reauthorization.
        [This information follows:]

                                      ADDITIONAL STAFF-YEARS ADDED TO DEVICE REVIEW
                                            [Compared with fiscal year 2002]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Fiscal year
                              FDA Component                             Fiscal year     Fiscal year    2005 (Current
                                                                           2003            2004          Estimate)
    ----------------------------------------------------------------------------------------------------------------
    CDRH............................................................              12              63             152
    CBER............................................................              14              25              36
    ORA.............................................................               5               6              10
                                                                     -----------------------------------------------
          Total.....................................................              31              91             198
    ----------------------------------------------------------------------------------------------------------------

                                  FOOD SAFETY

        Question. According to statements made by former HHS Secretary
    Thompson, the food supply is extremely vulnerable to attack. However, I
    note in the budget request that FDA plans to do fewer food import
    physical exams in fiscal year 2005 and fiscal year 2006 than it did in
    fiscal year 2004. This is particularly troubling because the Committee
    provided an increase of $35.5 million for food safety activities in
    fiscal year 2005 and FDA has requested an increase of slightly more
    than $30 million in fiscal year 2006.
        Has FDA changed its food safety strategy so that import physical
    exams are no longer a priority? If so, what other activities are you
    undertaking to protect the food supply?
        Answer. Food import physical exams have always been just one part
    of FDA's import strategy. A field examination is a visual and physical
    examination of a product to determine whether it complies with FDA
    requirements for admissibility. During food import physical exams, FDA
    personnel check attributes such as damage during storage or transit,
    inadequate refrigeration, rodent or insect activity, presence of lead
    in dinnerware, appearance of decomposition, and compliance with
    labeling requirements. However, a food import physical exam cannot be
    used to test for microbiological or chemical contamination and must be
    supplemented with other activities.
        FDA cannot rely solely on the physical examination of a product
    through a food import physical exam to reduce the potential risks posed
    by imported foods. Currently, a significant effort is underway to
    broaden and develop appropriate knowledge based risks. ORA continues to
    think that the best approach to improving the safety and security of
    food import lines is to devote resources to expanding and refining
    targeting and by following through on potentially high risk import
    entries rather than by simply increasing the percentage of food import
    lines that receive a physical field exam.
        To manage the ever-increasing volume of imported food shipments,
    FDA is using risk management criteria to achieve the greatest food
    protection possible. While we cannot physically inspect every shipment,
    it is important to note that every shipment containing FDA-regulated
    products entered through the Bureau of Customs and Border Protection's
    (CBP) automated system is electronically reviewed by FDA's system.
    FDA's Operational and Administrative System for Import Support (OASIS)
    determines if the shipment meets identified criteria for physical
    examination or sampling and analysis or warrants other review by FDA
    personnel. This electronic screening allows FDA to concentrate its
    enforcement resources on high-risk shipments while allowing low-risk
    shipments to proceed into commerce.
        The Public Health Security and Bioterrorism Preparedness and
    Response Act of 2002 provided a significant new tool that enhances
    FDA's ability to electronically review all FDA-regulated imported food
    shipments. That law requires that FDA receive prior notice submissions
    before food is imported or offered for import into the United States.
    Advance notice of imported food shipments, called ``Prior Notice,''
    provides FDA with detailed information regarding the product, shipment
    and supply chain before imported food arrives in the United States.
    This not only allows the electronic system to review and screen the
    shipments for potential serious threats to health, intentional, alleged
    or otherwise, before the food enters the United States but also allows
    FDA staff to review prior notice submissions for those products flagged
    by the systems as presenting the most significant risk. Screening and
    review of the augmented data allows FDA, with the support of the
    Customs and Border Protection also known as the CBP, to target import
    inspections more effectively and help protect the Nation's food supply
    against terrorist acts and other public health emergencies. FDA worked
    very closely with CBP to develop the screening system. FDA receives
    approximately 27,000 prior notice submissions about incoming food
    shipments every day. FDA believes this new system, which complements
    food import physical exams, provides for risk based targeting and
    follow through on potentially high-risk import entries.
        Question. What is FDA doing with the funding provided in fiscal
    year 2005 and what does the Agency plan to do with the fiscal year 2006
    request amount?
        Answer. We appreciate the committee's support for the
    Administration's food defense initiative. The fiscal year 2006 budget
    continues to fund the programs initiated with fiscal year 2005
    appropriations. Below is a short summary of what the agency is doing
    with the $35.2 million provided by the congress last year, and what we
    plan to do with the $30 million increase requested for fiscal year
    2006.
        [The information follows:]

        FDA FOOD DEFENSE INCREASES FISCAL YEAR 2005 AND FISCAL YEAR 2006

    Fiscal year 2005 Appropriations: + $35,216,000 and + 99 FTE
                Food Emergency Response Network (FERN) + $14,880,000
        FDA, along with USDA's FSIS, is building a national laboratory
    network that will enable us to test thousands of food samples within a
    matter of days in the event of a food terrorism crisis or other
    emergency event. The fiscal year 2005 appropriations increase will add
    6 FDA-funded State laboratories to the 10 FDA Federal laboratories
    already a member of FERN. It will also continue efforts to expand the
    electronic Laboratory Exchange Network (eLEXNET). The Request for
    Applications (RFA) for cooperative agreements to fund 6 State
    laboratories was published in the Federal Register in May 2005.

                Research + $9,920,000
        The enacted increase will help ensure that we have the capability
    to anticipate, prevent, detect, inactivate and recover from a broad
    range of agents that could pose serious threats to the food supply. The
    increase will also enable us to understand the behavior of threat
    agents in foods and the lethal/toxic dose needed to cause illness or
    death. FDA's intramural and extramural food defense research projects
    focus, in particular, on developing and validating field-deployable
    methods, as mandated by section 302 of the Public Health Response and
    Bioterrorism Preparedness Act of 2002.

                Inspections + $6,944,000
        The enacted increase helps ensure that domestic and imported foods
    are safe for consumption. FDA is planning to conduct 60,000 import
    field exams and 38,000 Prior-Notice Security Reviews using targeted
    information gleaned from prior-notice submissions and intelligence made
    available to the Prior-Notice Center.

                Bio-Surveillance + $1,984,000
        FDA will contribute to the Administration's Bio-Surveillance
    Initiative by developing nationally recognized standards for data
    messaging and communication in the health area and by researching the
    appropriate connectivity method with the National Biosurveillance
    Integration System at the Department of Homeland Security.

                Crisis/Incident Management + $1,488,000
        The enacted increase will support the Emergency Operations Network
    Incident Management System Project. This project will provide a
    comprehensive system for managing emergencies and related incidents
    handled throughout the FDA, including its centers and field offices.
    The development of such a system is in accordance with Homeland
    Security Presidential Directive (HSPD-5), ``Management of Domestic
    Incidents'', and the establishment of a National Incident Management
    System.

    Requested Fiscal Year 2006 Budget Authority Increase + $30,074,000 and
            + 17 FTE
                Food Emergency Response Network + $20,000,000
        The requested increase will add 19 FDA-funded State laboratories to
    the 6 funded in fiscal year 2005 and to the 10 FDA Federal laboratories
    already members of FERN.

                Research + $5,574,000
        The requested increase will continue to ensure that we have the
    capability or ``science tools'' to anticipate, prevent, detect,
    characterize, confirm, inactivate, and recover from a broad range of
    agents that could pose serious threats to the food supply in accordance
    with section 302 of the Bioterrorism Act.

                Bio-Surveillance + $3,000,000
        FDA will continue to contribute to the Administration's Bio-
    Surveillance Initiative by integrating existing surveillance systems
    with the Department of Homeland Security.

                Crisis/Incident Management + $1,500,000
        The enacted increase will continue to support the Emergency
    Operations Network Incident Management System Project.

                Import Examinations and Inspections
        (No increase is requested, but FDA will focus base resources on
    more effective Prior-Notice Security Reviews)
        The enacted increase helps ensure that domestic and imported foods
    are safe for consumption. Funds allow for 60,000 import field exams and
    38,000 Prior-Notice Security Reviews (new Goal) using intelligence made
    available to the Prior-Notice Center.
        In the Food and Drug Administration's fiscal year 2006 request, the
    agency has requested an increase of $20 million for the Food Emergency
    Response Network. When FERN is completed, this collaborative effort
    with USDA, will include a mix of chemical, radiological, and
    microbiological labs that total 100 across the United States. The
    Committee has already provided significant funding increases for FERN
    and completing this project promises to be a sizable investment that is
    not currently known by the Committee.
        Question. What does this investment buy and what is the anticipated
    outcome of increasing lab capacity through FERN? Also, please provide,
    for the record, a table that displays the complete investment for the
    FERN project to date and in future fiscal years. In addition, include
    the number of labs that have been and will be added in each year.
        Answer. We would be happy to provide this information on the FERN
    project.
        [The information follows:]
        The first two tables below describe our planned expenditures for
    the total food defense increases in fiscal year 2005 and fiscal year
    2006. The third table displays FERN lab output data from fiscal year
    2005 to the outyears. The number of USDA and FDA funded FERN
    laboratories needed to respond to a terrorist event involving food was
    based on discussions with the White House Interagency Food Working
    Group. These discussions included the development of a plausible
    scenario in which 100,000 units of a specific food was contaminated
    with a threat agent. Based on this scenario, we estimated that 100
    laboratories would be required to provide the needed surge capacity to
    respond to the attack Please note that FDA will fund 50 chemical/
    radiological labs and FSIS plans to fund 50 microbiological
    laboratories, for a total of 100 FERN laboratories. For specific
    funding information for FSIS, please see the USDA/FSIS Budget
    Submission transmitted to this Subcommittee.

                                           FERN PERFORMANCE--FISCAL YEAR 2006
    ----------------------------------------------------------------------------------------------------------------
                    Request                         What the funds provide               Related program goals
    ----------------------------------------------------------------------------------------------------------------
    $35,216,000 Budget Authority...........  6 new State Labs added to Food       Increase national laboratory
                                              Emergency Response Network (FERN).   capacity to test food samples in
                                              Laboratory equipment, supplies,      the event of a terrorist attack.
                                              training and security to enhance    Expand Federal/State/local
                                              State capability to assist in        involvement in FDA's eLEXNET
                                              FDA's Food Defense activities.       system by having 95 laboratories
                                             A secure food laboratory IT network   participate in the system by the
                                              (eLEXNET) for the real time          end of fiscal year 2005.
                                              sharing of information on a         Provide more targeted, risk-based
                                              national basis.                      inspectional coverage of imported
                                             60,000 import field exams, 38,000     foods to reduce the risk of
                                              Prior-Notice Security Reviews.       contaminated products entering
                                             Increased research on prevention      domestic commerce.
                                              technologies, agent                 Develop effective protection
                                              characteristics, new methods, and    strategies to ``shield'' the food
                                              dose response relationships.         supply from terrorist threats.
                                             Improved coordination and            Improve early attack warning and
                                              integration of existing food         bio-surveillance capabilities at
                                              surveillance capabilities with the   the national level to prepare
                                              Department of Homeland Security's    against a potential terrorist
                                              integration and analysis function,   attack.
                                              as part of the government-wide Bio-
                                              Surveillance Initiative.
                                             Improved Crisis Management
                                              capabilities.
    ----------------------------------------------------------------------------------------------------------------

                                           FERN PERFORMANCE--FISCAL YEAR 2006
    ----------------------------------------------------------------------------------------------------------------
                    Request                         What the increase buys               Related program goals
    ----------------------------------------------------------------------------------------------------------------
    Increase $30,074,000 Budget Authority..  19 new State Labs added to Food      Increase national laboratory
                                              Emergency Response Network (FERN).   capacity to test food samples in
                                              Laboratory equipment, supplies,      the event of a terrorist attack.
                                              training and security to enhance    Develop effective protection
                                              State capability to assist in        strategies to ``shield'' the food
                                              FDA's Food Defense activities.       supply from terrorist threats.
                                             Increased research on prevention     Improve early attack warning and
                                              technologies, agent                  bio-surveillance capabilities at
                                              characteristics, new methods, and    the national level to prepare
                                              dose response relationships.         against a potential terrorist
                                             Improved coordination and             attack.
                                              integration of existing food
                                              surveillance capabilities with the
                                              Department of Homeland Security's
                                              integration and analysis function,
                                              as part of the government-wide Bio-
                                              Surveillance Initiative.
                                             Improved Crisis Management
                                              capabilities.
    Base Resources.........................  60,000 import field exams and        Provide more effective, risk-based
                                              38,000 Prior-Notice Security         inspectional coverage of imported
                                              Reviews.                             foods to reduce the risk of
                                                                                   contaminated products entering
                                                                                   domestic commerce.
    ----------------------------------------------------------------------------------------------------------------

                                                          FDA TOTAL LABORATORY CAPABILITY DISTRIBUTION
                                                                      [Dollars in millions]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Fiscal year                       Project
                                                Fiscal year     Fiscal year        2006         Fiscal year       outyear        Two Year      Total  State
                                                2005 output    2005 enacted     cumulative     2006 request     cumulative        outyear          labs
                                                                    \1\           output                          output       estimate \2\
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Microbiological Screening & Confirmatory  ..............  ..............  ..............  ..............  ..............  ..............  ..............
     \3\....................................
    Chemical................................               6            $9.9              20           $22.4              36           $46.6              36
    Radiological............................               5             5.9              14            16.3              14
    Food Lab Response and Methods Validation/ ..............             5.0  ..............             6.6  ..............            13.9  ..............
     Proficiency Testing/Training...........
                                             ---------------------------------------------------------------------------------------------------------------
          TOTAL.............................               6            14.9              25            34.9              50            76.8              50
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Fiscal year 2005 Request includes enacted rescissions.
    \2\ Outyear estimates reflect projected costs to complete FDA's 50 FERN labs, based on a 2 year estimate. Amounts requested in future budgets are
      contingent upon availability of funds. Once the 50 FERN labs are complete, FDA estimates that the FERN cost will be limited to annual recurring needs.

    \3\ USDA funded.

        Question. How did you determine that 100 would be the appropriate
    number of FERN labs?
        Answer. The Administration based the number of USDA and FDA funded
    FERN Laboratories needed to respond to a terrorist event involving food
    on discussions with the Interagency Food Working Group or the IFWG.
    These discussions included the development of a plausible scenario in
    which 100,000 units of a specific food was contaminated with a threat
    agent. Based on this scenario, we estimated that 100 laboratories would
    be required to provide the needed surge capacity to respond to the
    attack.
        However, it should be noted that this number of 100 reflects
    laboratory capabilities for chemical, microbiological and radiological
    analyses rather than actual laboratory locations, because some State
    laboratories will have the capability to analyze samples for multiple
    agents at one location. Although the FERN strives to include
    laboratories with the ability to analyze foods for several types of
    agents, it is also realized that some laboratory locations may only
    have capabilities for one type of threat agent, but not the others.
    Hence, that is why the number of physical locations included within the
    FERN network could range from 50 with 50 laboratory locations
    performing multiple analyses to 100 laboratory locations performing one
    type of analysis each. Laboratories will need to be capable of being
    operational around the clock, 7 days a week, have trained personnel,
    use validated methods, and have satisfactorily completed proficiency
    test samples.
        Question. Once labs are added to the network, I assume maintenance
    of equipment and lab supplies in the facilities will begin. What is the
    annual cost of maintaining FERN labs? Will the cost be born by the FDA
    or State partners?
        Answer. Once FDA establishes a FERN lab, we also fund the
    maintenance costs, which we estimate at $350,000 per year for each
    laboratory. FDA continues to provide support to the States for the
    Annual Surveillance Sampling Program and to maintain capability for
    threat agents.

                                  DRUG SAFETY

         Question. In recent months, FDA has received a significant amount
    of news coverage related to the withdrawal of some widely prescribed
    pain relievers over safety concerns. I note that the FDA has included
    an increase of $5.0 million for drug safety in the fiscal year 2006
    budget. What does FDA plan to do to reduce the likelihood that events
    like this will happen in the future?
        Answer. On November 5, 2004, Acting FDA Commissioner Lester
    Crawford announced a 5-step plan for enhancing our efforts in drug
    safety and on February 15, 2005, HHS Secretary Mike Leavitt and Acting
    FDA Commissioner Lester Crawford unveiled a new vision for FDA that
    will promote a culture of openness and enhanced oversight within the
    Agency. We would be happy to provide references to these documents and
    an outline of the information they contain.
        [The information follows:]
        FDA Acts to Strengthen the Safety Program for Marketed Drugs (11/
    05/2004) http://www.fda.gov/bbs/topics/news/2004/NEW01131.html).
        The elements of this plan are:
      --Sponsor an Institute of Medicine (IOM) Study of the Drug Safety
            System: An IOM committee, under an FDA contract, will study the
            effectiveness of the United States drug safety system with
            emphasis on the post-market phase, and assess what additional
            steps could be taken to learn more about the side effects of
            drugs as they are actually used. The committee will examine
            FDA's role within the health care delivery system and recommend
            measures to enhance the confidence of Americans in the safety
            and effectiveness of their drugs.
      --Implement a Program for Adjudicating Differences of Professional
            Opinion: CDER will formalize a program to provide an improved
            process to ensure that the opinions of scientific reviewers are
            incorporated into its decision-making process. In most cases,
            free and open discussion of scientific issues among review
            teams, and with supervisors, managers and external advisors,
            leads to an agreed course of action. Sometimes, however, a
            consensus decision cannot be reached, and an employee may feel
            that his or her opinion was not adequately considered. Such
            disagreements can have a potentially significant public health
            impact, so CDER's program provides for a review of the involved
            differing professional opinions by FDA and outside experts. An
            ad hoc panel, whose members were not directly involved in
            disputed decisions, will have 30 days to review all relevant
            materials and recommend to the Center Director an appropriate
            course of action.
      --Appoint Director, Office of Drug Safety: CDER will conduct a
            national search to fill the currently vacant position of
            Director of the Office of Drug Safety, which is responsible for
            overseeing the post-marketing safety program for all drugs. The
            Center is seeking a candidate who is a nationally recognized
            drug safety expert with knowledge of the basic science of drug
            development and surveillance, and has a strong commitment to
            the protection of public health.
      --Conduct Drug Safety/Risk Management Consultations: In the coming
            year, CDER will conduct workshops and Advisory Committee
            meetings to discuss complex drug safety and risk management
            issues. These may include emerging concerns for products that
            are investigational or already marketed. Examples of input that
            might be sought include whether a particular safety concern
            alters the risk to benefit balance of a drug; whether FDA
            should request a sponsor to conduct a particular type of study
            to further address an issue; what types of studies would best
            answer the question; whether a finding is unique to one product
            or seems to be a drug class effect; whether a labeling change
            is warranted and, if so, what type, and how to otherwise
            facilitate careful and informed use of a drug. These
            consultations will include experts from FDA, other Federal
            agencies, academia, the pharmaceutical industry and the
            healthcare community.
        Publish Risk Management Guidance: By the end of this year, FDA
    intends to publish final versions of three guidances that have been
    developed by our agency to help pharmaceutical firms manage risks
    involving drugs and biological products. These documents are
    ``Premarketing Guidance,'' covering risk assessment of pharmaceuticals
    prior to their marketing; ``RiskMAP Guidance,'' which deals with the
    development and use of risk-minimization action plans; and
    ``Pharmacovigilance Guidance,'' which discusses post-marketing risk
    assessment, good pharmacovigilance practices and pharmacoepidemiologic
    assessment.
        (Note: these were published on 3/24/05 and can be found at the
    following websites:
        Premarketing Risk Assessment: http://www.fda.gov/cder/guidance/
    6357fnl.htm
        Development and Use of Risk Minimization Action Plans: http://
    www.fda.gov/cder/guidance/6358fnl.htm
        Good Pharmacovigilance Practices and Pharmacoepidemiologic
    Assessment: http://www.fda.gov/cder/guidance/6359OCC.htm
        On February 15, 2005, HHS Secretary Mike Leavitt and Acting FDA
    Commissioner Lester Crawford unveiled a new vision for FDA that will
    promote a culture of openness and enhanced oversight within the Agency.
        Reforms Will Improve Oversight and Openness at FDA 02/15/2005:
    http://www.hhs.gov/news/press/2005pres/20050215.html
        In keeping with this vision, the FDA will create a new independent
    Drug Safety Oversight Board to oversee the management of drug safety
    issues. In addition, the FDA is proposing a Drug Watch web page through
    which the Drug Safety Oversight Board would share drug safety
    information sooner and more broadly, including information on potential
    safety problems even before the Agency has reached conclusions that
    would prompt a regulatory action. The new communications include:
      --The Proposed Drug Watch Page.--At the direction of the new Drug
            Safety Oversight Board, this page would include emerging
            information about possible serious side effects or other safety
            risks.
      --Healthcare Professional Information Sheets.--We have increased out
            efforts to develop and make these sheets available to better
            communicate emerging risk information to the medical community.
            We will continue to develop these information sheets, or will
            update existing ones, as we become aware of possible serious
            new side effects for a drug. The sheets will contain FDA Alert
            describing emerging information.
      --Patient Information Sheets.--We have also increased our efforts to
            develop and make available on CDER's Website user friendly
            information for patients and consumers on drugs about which we
            have identified emerging issues. We will continue to develop
            these sheets, or update existing ones, as we become aware of
            possible serious new side effects for a drug. The sheets will
            contain FDA Alert describing emerging information.

                               COUNTERFEIT DRUGS

        Question. In last year's hearing record, FDA inserted its report on
    counterfeit drugs. In this report FDA identifies eight critical
    elements that need to be addressed in order to safeguard the drug
    supply. Please update the Committee on the progress you have made on
    these items.
        Answer. FDA has been actively working with stakeholders such as
    manufacturers, wholesalers, retailers, health professionals, State and
    Federal regulatory agencies, technology experts, and standard-setting
    bodies to put into place the measures outlined in the FDA Counterfeit
    Drug Task Force Report. We have made considerable progress in some
    areas, while in other areas there is still work to be done. FDA
    currently is finishing drafting a report that provides an update on the
    progress on the recommended measures. We expect that this update will
    provide you with the type of comprehensive update that you ask in your
    question.
        [The information follows:]

          COMBATING COUNTERFEIT DRUGS: A REPORT OF THE FOOD AND DRUG
                   ADMINISTRATION ANNUAL UPDATE--MAY 18, 2005

        On February 18, 2004, FDA issued a Report entitled ``Combating
    Counterfeit Drugs: A Report of the Food and Drug Administration.'' The
    comprehensive Report highlights several measures that can be taken to
    better protect Americans from counterfeit drugs. These measures address
    six critical areas:
      --Securing the actual drug product and its packaging
      --Securing the movement of the product as it travels through the U.S.
            drug distribution chain
      --Enhancing regulatory oversight and enforcement
      --Increasing penalties for counterfeiters
      --Heightening vigilance and awareness of counterfeit drugs
      --Increasing international collaboration
        Over the past year, we have worked with manufacturers, wholesalers,
    pharmacies, consumer groups, technology specialists, standard-setting
    bodies, State and Federal agencies, international governmental
    entities, and others to advance the measures outlined in the Report.
    Significant progress is being made in many of these areas. Although we
    continue to believe that the U.S. drug supply is among the safest in
    the world, more work needs to be done to further implement these
    measures and further secure our Nation's drug supply.
        In 2004, FDA's Office of Criminal Investigations (OCI) initiated 58
    counterfeit drug cases, a significant increase from the 30 cases
    initiated in 2003. We believe that this is in part due to an increased
    awareness and vigilance at all levels of the drug distribution chain as
    a result of the Combating Counterfeit Drugs Report released last year.
    In addition, this increase in investigations is due to increased
    referrals from and coordination with other State and Federal law-
    enforcement agencies and communication with drug manufacturers.
        Fortunately, most of the counterfeit drugs at issue did not reach
    consumers because we focused our limited resources and developed
    proactive investigations that enabled us to identify components of
    counterfeit products and interdict finished counterfeit drug products
    before they entered domestic distribution.
        Although the number of counterfeit drug cases has increased and the
    threat to the public health is real, most of the suspect counterfeits
    that we discovered in 2004 were found in smaller quantities, compared
    to those found in 2003. Most of these drugs were destined for the black
    market or internet distribution, rather than for widespread
    distribution in the Nation's drug supply chain.

     TECHNOLOGY: SECURING THE PRODUCT, PACKAGING, AND MOVEMENT THROUGH THE
                                  SUPPLY CHAIN

        In the Report, we stated that it is critical to implement new
    technologies to better protect our drug supply. We concluded that a
    combination of rapidly improving track and trace technologies and
    product authentication technologies could be used to provide a greater
    level of security for drug products. These technologies are intended to
    secure the product, packaging, and movement of the product as it
    travels through the drug supply chain.

    Track and Trace Technology
        In the Report, we stated that adoption and wide-spread use of
    reliable track and trace technology is feasible by 2007. This would
    help secure the integrity of the supply chain by providing an accurate
    drug ``pedigree,'' a record documenting that the drug was manufactured
    and distributed under secure conditions. We particularly advocated for
    the implementation of electronic track and trace mechanisms and noted
    that radio-frequency identification (RFID) is the most promising
    technology to meet this need. RFID technology uses a tiny radio
    frequency chip containing essential data in the form of an electronic
    product code (EPC). Implementation of RFID will allow supply chain
    stakeholders to track the chain of custody (or pedigree) of every
    package of medication. By tying each discrete product unit to a unique
    electronic serial number, a product can be tracked electronically
    through every step of the supply chain.
        Over the last year stakeholders have made tremendous progress in
    the development and implementation of EPC/RFID. This is a huge endeavor
    that requires close collaboration among all constituents of the
    pharmaceutical distribution system. We have observed and supported this
    collaboration, and we continue to support it today.
        A critical piece of this undertaking is the development of
    standards for the type of technology to be used and the systems for
    storing and sharing pedigree information. This activity will ensure
    that the electronic track and trace technologies adopted are
    comprehensible and data communication systems are interoperable. We
    have been present at and actively participated in many industry,
    standard-setting, and government meetings and workshops where
    implementation issues have been discussed. We appreciate the
    opportunities we have been given to participate in the discussions and
    provide input when needed.
        We received a number of questions over the past year regarding RFID
    and regulatory issues from members of the supply chain. In response to
    these common questions, on November 15, 2004, we issued a Compliance
    Policy Guide (CPG) for implementing RFID feasibility studies and pilot
    programs as an important and essential step in moving this technology
    forward. The CPG presents FDA's current thinking regarding several
    labeling, current Good Manufacturing Practices (GMP), and other
    regulatory issues that may arise by affixing an RFID tag to a drug
    product for a feasibility study or pilot program. Several members of
    the supply chain simultaneously announced their intention to move
    forward with pilot programs (joint programs across the supply chain or
    within an individual company) that will involve the tagging of products
    susceptible to counterfeiting. In fact, three major pharmaceutical
    companies said that they will incorporate an RFID tag into at least one
    of their products by the end of 2005. We have been in close
    communication with participants in these and other pilot studies and
    provided input when appropriate.
        Also in November, we announced the creation of an internal, cross-
    agency ``RFID Workgroup.'' This group is charged to monitor adoption of
    RFID in the pharmaceutical supply chain, pro-actively identify
    regulatory issues raised by the use of this new technology, and develop
    straightforward processes for handling those issues. We believe that
    the workgroup will improve communication with members of the supply
    chain on RFID related issues and will facilitate both the performance
    of pilot studies and the collection of data needed to formulate policy.
        It is important to gain a better understanding of the effects of
    RFID on drug products, particularly biological products because they
    may be more susceptible to change in their environment. In the past
    year, we developed a protocol for the Product Quality Research
    Institute (PQRI) (a collaboration of FDA, academia, and industry) to
    evaluate the effects of radio-frequency on specific biological protein-
    based products. This study is in its very early stages. Also, a
    laboratory within FDA's Center for Devices and Radiological Health is
    conducting analyses of the heating and the radio-frequency field
    strengths induced in certain liquid pharmaceuticals by some RFID
    systems. We are encouraged by the response of individual companies
    informing us that they are conducting studies. In addition, the Health
    Research Initiative of the Auto-ID Laboratories is conducting
    additional studies on the effects of radio-frequency on various drug
    products and storage conditions. We look forward to the results of such
    studies.
        Next Steps.--FDA will continue to play an active role in public and
    private sector efforts toward developing an ``electronic safety net''
    for our drug supply, including the adoption and widespread use of
    reliable track and trace technology by 2007. We will continue to
    facilitate and monitor standard-setting activities, including efforts
    by epcGlobal (an entity that has taken a lead role in developing
    standards) to establish standards for numbering systems, chip
    frequency, electronic pedigree, and data-sharing and security. In
    addition, we will continue to encourage and foster research on the use
    and potential impact of RFID on drug and biological products. Finally,
    we will regularly review the extent and pace at which RFID is being
    adopted.

    Authentication Technology
        In the Report, we noted that authentication technologies for
    pharmaceuticals (such as color-shifting inks, holograms, taggants, or
    chemical markers imbedded in a drug or its label) have been
    sufficiently perfected that they can now serve as a critical component
    of a layered approach to control counterfeit drugs. FDA's Report
    acknowledged the importance of using one or more authentication
    technologies for drug products, in particular those most likely to be
    counterfeited. Over the past year, we have worked with individual drug
    manufacturers who sought to incorporate such technologies into their
    product, labeling, or packaging. When asked, we have provided advice
    and suggestions regarding application and use of authentication
    technologies and worked with sponsors on the regulatory issues
    associated with making changes to approved product labeling.
        In the Report, we said that in order to facilitate the use of
    authentication technologies on or in approved products, we would
    consider publishing a draft guidance on notification procedures for
    making changes to products, their packaging, or their labeling. We
    decided not to issue guidance in the past year because we would like to
    gain additional experience working with companies in their application
    and use of authentication technologies so the guidance can have
    appropriate general applicability.
        Next Steps.--We will continue to work with companies and
    organizations to facilitate use of authentication technologies in
    products, labeling, and packaging.

                      REGULATORY OVERSIGHT AND ENFORCEMENT

    Electronic Pedigree
        In the Report, we said that adoption of electronic track and trace
    technology would help stakeholders meet and surpass the goals of the
    Prescription Drug Marketing Act (PDMA). We said that we intend to focus
    our efforts on facilitating industry adoption of this technology. To
    allow stakeholders to move toward an electronic pedigree we said that
    we would further delay the effective date for certain provisions in a
    final rule that FDA promulgated in December 1999 to implement the
    Prescription Drug Marketing Act of 1987 (PDMA), as modified by the
    Prescription Drug Amendments of 1992 (PDA). On February 23, 2004, we
    published a notice in the Federal Register delaying the effective date
    until December 2006.
        As stated above, we are pleased with the progress stakeholders,
    standard-setting bodies, and software and hardware companies have made
    thus far toward implementing an electronic pedigree for drug products.
    We recognize that there have been, and continue to be, challenges along
    the way. However, we are optimistic that this progress will continue in
    an expeditious manner toward meeting our 2007 goal. If it appears that
    this goal will not be met, we plan to consider the options regarding
    implementation of the PDMA provisions that are the subject of the stay.
        Next Steps.--We are closely monitoring the progress of widespread
    use of electronic pedigrees as we assess whether to lift, maintain, or
    pursue other options regarding the stay of implementation of the
    provisions in the PDMA final rule. We will continue to work with
    stakeholders to facilitate implementation.

    State Efforts
        In the Report, we recognized the important role that the States
    have in regulating the drug supply chain, and we stated that adoption
    and enforcement of strong, proven anti-counterfeiting laws and
    regulations by the States would help in our collective effort to detect
    and deter counterfeit drugs. FDA strongly supported the efforts taken
    by the National Association of Boards of Pharmacy (NABP) in revising
    the Model Rules for Licensure of Wholesale Distributors for States to
    adopt. These Model Rules make it difficult for illegitimate wholesalers
    to become licensed and then to transact business. Four States have laws
    in place that are similar to the Model Rules (Florida, Nevada,
    California, and Indiana), and other States are considering adoption
    (e.g., New Jersey, Iowa). FDA has provided advice and input on a few
    State legislative proposals and we recommend that more States move in
    this direction in the coming year.
        NABP last year also announced the creation the Verified-Accredited
    Wholesale Distributors (VAWD) program as a complement to the Model
    Rules. Applicants for VAWD accreditation undergo a criteria compliance
    review, licensure verification, an inspection, background checks, and
    screening through NABP's clearinghouse. It is intended to provide
    assurance that the wholesale distribution facility operates
    legitimately, is validly licensed in good standing, and is employing
    security and best practices for safely distributing prescription drugs
    from manufacturers to pharmacies and other institutions. Recently,
    Indiana was the first State to pass a law that requires VAWD
    accreditation for all drug wholesale distributors who do business in
    Indiana.
        In the Report, we said that there would be great value in the
    creation of a national list of drugs most likely to be counterfeited
    based on factors that are likely to contribute to counterfeiting risk.
    The Model Rules called for such a national list as a starting point for
    application of pedigree requirements in the short term so that there
    would not be 50 different State lists. In December 2004, NABP convened
    a National Drug Advisory Coalition, which included industry and State
    and national government representation. FDA has served in an ex-officio
    role on this Coalition. The Coalition developed criteria for inclusion
    or removal from such a list and created a national list that includes
    31 drugs. FDA applauds NABP on this accomplishment.
        We recognize that States have implemented and are considering
    provisions requiring a pedigree (in some cases electronic) for drug
    products. We are pleased that these efforts complement Federal
    requirements and believe that rapid and uniform implementation of a
    pedigree that starts at the point of manufacture and accompanies the
    drug product until it is dispensed would be beneficial. As stated in
    the Report, adoption and enforcement of the Model Rules by all States
    would have the greatest impact on protecting the Nation's drug supply.
        In the Report, we also said that increased penalties would help
    deter counterfeiting and more adequately punish those convicted. As we
    continue the efforts on the Federal level, it is equally important that
    States adopt stronger penalties (like those outlined in the Model
    Rules) so the penalties associated with counterfeiting drugs are
    commensurate to the significant threat they pose to the public health.
        Next steps.--FDA will continue to support efforts by the States to
    adopt and enforce stricter laws and to pursue increased Federal
    penalties for drug counterfeiting.

    Secure Business Practices
        In the Report, we described the important role that all
    participants in the drug supply chain have in adopting secure business
    practices. Around the time the Report was issued several trade
    associations for wholesale distributors issued guidelines for their
    members regarding best practices for drug distribution system
    integrity. In fact, in the past year, the Healthcare Distribution
    Management Association (HDMA) released new membership rules that
    require active members to adopt best practices that include extensive
    regulatory, financial, security, and due diligence processes and
    procedures.
        It is also important to note that many of the secure business
    practices outlined in these trade associations' best practices
    guidelines are included in the Model Rules for Licensure of Wholesale
    Distributors for adoption by the States.
        Next Steps.--We will continue to work with stakeholders who would
    like to develop secure business practices.

    Heightened Vigilance and Awareness
                Health Professional Reporting Via MedWatch
        In the Report, we indicated that we would encourage and educate
    health professionals to use the MedWatch form as a mechanism to report
    suspect counterfeit drugs to FDA. To make the reporting of suspect
    counterfeits easier, we changed the instructions for the MedWatch
    reporting form, both paper and electronic versions, so reporters will
    know how and when to report suspect counterfeits. We have also amended
    the MedWatch website description of product problems and added
    ``suspect counterfeit'' to the list of product problems to report to
    FDA using the MedWatch form. FDA staff has promoted the use of MedWatch
    for reporting suspect counterfeits in numerous speeches to health
    professional organizations over the past year. A small number of such
    reports are starting to come in using the MedWatch form.
        Next steps.--FDA will continue to educate health professionals to
    use the MedWatch form to report suspect counterfeit drugs.

    Counterfeit Alert Network
        In the Report, we stated we would create a Counterfeit Alert
    Network (CAN) and partner with health professional and consumer groups
    to provide timely and effective notification to their members or
    constituents of a verified counterfeit event. By signing the CAN co-
    sponsorship agreement, organizations become CAN partners and agree to
    deliver time-sensitive messages and information on specific counterfeit
    incidents and educational messages about counterfeits in general, as
    well as information about how and when to report suspect counterfeit
    drug products. In the past year, we have formed the CAN and currently
    13 organizations have signed the CAN co-sponsorship agreement.
        Also, in the Report, we stated we would develop internal guidelines
    for the informational contents of outgoing FDA messages that would be
    useful to communicate a counterfeiting incident to CAN partners. In the
    past year, we have developed these guidelines, in the form of a
    template, in collaboration with CAN partners. This template will allow
    for the efficient preparation and delivery of uniform counterfeit alert
    messages for partners to further disseminate.
        Next Steps.--FDA will encourage stakeholders to become members of
    the CAN and continue to work with CAN partners to be ready to
    disseminate effective and appropriate counterfeit alerts when needed.
    Streamline FDA's Internal Rapid Response to Reports
        In the Report, we said that we would streamline our internal
    processes to respond quickly to reports of suspect counterfeits by
    improving coordination and communication among all initial responders
    in the agency. In the past year we amended our internal standard
    operating procedures and developed a protocol for more efficient
    internal communication and coordination when a suspect counterfeit drug
    is reported to the agency, regardless of where the report is received
    (e.g., MedWatch, an FDA field office, call to the FDA hotline).
        Next Steps.--No additional action is required.

    Educating Consumers and Health Professionals
        In the Report, we noted that educating consumers about the risks of
    counterfeits is a critical piece of the effort to stop counterfeits
    from entering the stream of commerce. In the past year we have taken
    many steps towards educating consumers. First, we developed two public
    service announcements (PSAs) geared to consumers. These PSAs ran in 4.5
    million magazines. In addition, 4.6 million medication leaflets
    distributed by retail pharmacies with patient's prescriptions also
    carried these PSAs along with additional consumer information about
    counterfeit drugs. Also, FDA drafted an article about counterfeit drugs
    that was printed in several local papers nationwide, with an estimated
    readership of about 9.5 million consumers.
        We also set up a webpage on the FDA website for consumers to obtain
    information about counterfeit drugs, FDA initiatives, and educational
    information. This website can be found at www.fda.gov/counterfeit. In
    addition, the National Consumers League (NCL) developed a highly
    informative website containing useful consumer information about
    counterfeit drugs.
        In the past year, FDA partnered with the National Health Council
    (NHC) to jointly create and disseminate educational messages on
    counterfeit drugs. NHC is a private, non-profit organization of over
    100 national health-related organizations. Under this partnership,
    messages to raise awareness of the dangers of counterfeit drugs and how
    to avoid them will be developed and tested to measure their
    effectiveness. In addition, products will be created to deliver these
    messages to the target audience.
        In addition, FDA is developing educational messages to inform
    pharmacists about how to recognize counterfeits, counsel patients on
    how to minimize the risk of exposure to counterfeits, and on how to
    notify FDA if a counterfeit drug is suspected. These efforts are in the
    early stages.
        In the Report, we said that we would re-launch our safe online
    buying practice campaign. In March 2005, we launched a new campaign
    with tips for consumers on how to buy drugs safely on the Internet and
    minimize their risks of getting a counterfeit or otherwise substandard
    drug.
        Next steps.--We will increase dissemination of the PSAs and
    counterfeit drug messages. We will continue to update and post relevant
    information on the counterfeit drug webpage. We will also continue to
    work with the NHC to finalize educational messages and develop a
    dissemination strategy for those messages. In the coming months, we
    will also work with pharmacy organizations to finalize educational
    messages for pharmacists and develop a strategy to disseminate these
    messages.

    International Collaboration
        In the Report, we recognized that counterfeit drugs are a worldwide
    concern, and we stated that we would collaborate with foreign
    stakeholders to develop strategies to deter and detect counterfeits
    globally. In February 2004, the World Health Organization (WHO) hosted
    a meeting to discuss an approach for developing global strategies for
    combating counterfeit drugs. FDA participated in this meeting and
    supports WHO's efforts in this area. It was decided at the WHO meeting
    that a concept paper would be drafted with a proposed strategy to
    address this problem. In March 2005, we attended the 4 th Pan American
    Conference on Drug Regulatory Harmonization held by the Pan-American
    Health Organization (PAHO) where a report was presented and
    recommendations were discussed regarding combating counterfeit drugs in
    the Americas. FDA's counterfeit drug initiative is consistent with the
    recommendations of the PAHO report.
        FDA's Office of Criminal Investigations (OCI) continues to work
    with foreign law-enforcement agencies directly and through Interpol on
    individual international counterfeit cases.
        OCI also has provided training on counterfeit drugs to foreign law-
    enforcement, customs and judicial officers from various parts of the
    world through the U.S. Patent and Trademark Office (PTO) Intellectual
    Property Enforcement Academy. In addition, in the past year, several
    individual countries have sought FDA's insights, advice, and/or
    training on combating counterfeit drugs. Although the approaches that
    we outlined in the Report were specific to the U.S. drug distribution
    system, many of the principles outlined in the Report are applicable
    generally.
        Next Steps.--To the extent that resources permit, FDA will continue
    to work with international organizations, foreign law enforcement
    agencies, and individual governments to provide training and advice
    concerning drug counterfeiting and to collaborate on coordinated
    strategies to combat the problem of counterfeit drugs globally.

    Conclusion
        Significant progress has been made towards implementing the
    measures outlined in FDA's Combating Counterfeit Drugs Report issued in
    February 2004. Although the use of electronic track and trace
    technology is still in the implementation stage, adoption and
    widespread use is closer to becoming a reality as stakeholders work
    diligently to find solutions to the challenges faced along the way. The
    use of authentication technologies is gaining acceptance as
    manufacturers realize that steps should be taken to protect their
    products from sophisticated counterfeiters. States are starting to
    adopt stricter laws and harsher penalties to ensure that only
    legitimate wholesalers do business in their State and they are taking
    measures to do their part in protecting supply chain integrity. Trading
    partners in the drug supply chain are also taking steps to ensure
    secure business practices are adopted and utilized as drug products are
    bought and sold. Educational efforts have been undertaken to help
    health professionals and consumers develop a greater awareness and
    knowledge about counterfeit drugs and how to minimize the risks of
    exposure. In addition, efforts are underway to tackle counterfeit drugs
    on a global level.
        Despite the progress made, there remains a viable and concrete
    threat of counterfeit drugs entering the U.S. drug distribution system.
    We must all continue to work together to expeditiously pursue the
    measures outlined in the Report to further protect the safety and
    security of the U.S. drug supply.

        appendix: significant counterfeit cases closed in the past year
        Below are a number of significant counterfeit drug cases that were
    closed in the past year:

    Counterfeit Lipitor
        During the first quarter of 2005, three men pled guilty to Federal
    criminal charges in a multi-million dollar Lipitor smuggling and
    counterfeiting conspiracy. The pleas are a result of an ongoing OCI
    investigation involving the manufacturing, smuggling, and interstate
    distribution of counterfeit pharmaceuticals that was initiated by OCI
    in April 2003. To date, eight people have been indicted; four have
    pleaded guilty, and another was convicted by a trial jury.
        In another counterfeit Lipitor case, an OCI undercover operation
    resulted in the arrest and conviction of a Belize citizen for violating
    Title 21, U.S.C.  331 (a)--Introduction into Interstate Commerce of a
    Misbranded Drug. In September 2004 the defendant was sentenced to 10
    months incarceration and 1 year probation.

    Genapharm.com (Counterfeit Human Growth Hormone)
        On March 9, 2004, an Austin, Texas man pled guilty to four counts
    of conspiracy to introduce misbranded and unapproved new drugs into
    interstate commerce, counterfeiting human growth hormone, and
    possessing controlled drugs with intent to distribute. Two other
    persons involved in these offenses were previously convicted and
    sentenced.

    Counterfeit Viagra
        On June 23, 2004, an individual pled guilty to charges of
    conspiracy, trafficking in counterfeit goods, and a felony violation of
    the Federal Food, Drug and Cosmetic Act. In pleading guilty, the
    defendant admitted that he conspired with a manufacturer in Beijing to
    import thousands of counterfeit Viagra tablets into the United States,
    which he would then resell. The defendant was sentenced on March 25,
    2005 to 18 months in prison, followed by 3 years probation and was
    fined $6,000.

    Counterfeit Serostim
        On June 16, 2004, an indictment was unsealed in San Diego that
    charged an individual with conspiring to unlawfully distribute human
    growth hormone and trafficking in counterfeit goods. According to the
    indictment, this individual obtained counterfeit Serostim and sold it
    to bodybuilders who did not possess lawful prescriptions for the drug.
    Another individual involved in this investigation pled guilty to
    similar charges on February 19, 2003. Serostim is a prescription drug
    containing the active ingredient ``somatropin,'' a form of human growth
    hormone. Serostim is approved by the FDA for use in the United States
    to treat AIDS wasting disease.

    Counterfeit Labeled Pharmaceuticals
        An Alabama drug wholesaler was convicted for violating Title 21,
    U.S.C.  331 (i) (3)--Selling and Holding for Sale a Counterfeit Drug.
    In October 2004 the company was sentenced to 5 years probation and
    fined $24,000.

    Counterfeit Viagra
        In January 2005, a Southern California man pled guilty to importing
    counterfeit Viagra from China and manufacturing 700,000 counterfeit
    Viagra tablets at a lab in the United States. An accomplice was
    convicted of similar charges in September 2004. The total value of the
    counterfeit Viagra in this case is more than $5.65 million.

    World Express Rx
        In January 2005, a San Diego man was sentenced to serve a 51-month
    prison term and forfeit substantial cash proceeds for his role in
    operating a large Internet pharmacy scheme. The drugs distributed
    included a variety of products counterfeited in Mexico, smuggled into
    the United States and sent throughout the country. Some of the
    ingredients for the drugs were shipped from India and China. In other
    instances, unapproved and counterfeit drugs made in India and Pakistan
    entered the United States via the Bahamas. At least 14 other
    individuals are also being prosecuted in California or Florida as part
    of this international conspiracy.

              NATIONAL ANTIMICROBIAL RESISTANCE MONITORING SYSTEM

        Question. Can we get a current accounting of funds available to FDA
    to fund the NARMS program and the distribution of these funds to the
    various agencies?
        Answer. At this time, FDA has not determined the exact amount of
    NARMS funding for CDC and USDA for fiscal year 2006 but plans to make
    decisions in the Fall of 2005. In fiscal year 2005, the NARMS program
    took a reduction due to competing Agency priorities, however, FDA
    funded USDA and CDC at the same level they were funded in fiscal year
    2004 with FDA absorbing any reduction in program funding. FDA believes
    that all three arms are integral to the success of the NARMS program
    and to achieve the benefits envisioned at its inception and agreed upon
    by all three agencies. We would be happy to provide a chart showing the
    allocation of NARMS funding in fiscal year 2004 and fiscal year 2005.
        [The information follows:]

                       NARMS FUNDING FISCAL YEAR 2004-2005
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                Fiscal year     Fiscal year
                                                   2004            2005
    ------------------------------------------------------------------------
    USDA....................................           1.606           1.606
    CDC.....................................           2.037           2.037
    FDA \1\.................................           3.991           3.686
                                             -------------------------------
          Total.............................           7.634           7.329
    ------------------------------------------------------------------------
    \1\ Included in this figure are laboratory supplies FDA purchases for
      USDA, CDC and FDA.

        Question. Permanent funding needs to be established to allow ARS to
    hire permanent staff positions. Also, current funding is inadequate to
    allow for the collection of samples in a scientifically-based,
    randomized and statistically-sound manner. Can funding be line-itemed
    to insure on-going designated funding stream?
        Answer. All three components of NARMS are critical to monitor the
    development of bacterial resistance from the use of antibiotics in
    animals and subsequent public health impacts. NARMS is foremost a
    public health surveillance system. Emergence of bacterial antibiotic
    resistance among livestock is certainly critical to establish links
    between use in food producing animals and public health consequences.
    However, it is of equal importance to the other arms and should not be
    singled out as the most responsive measure of the NARMS program.
        FDA is planning an independent external review of all three
    components of the NARMS program, the human, retail meat, and slaughter
    components and is holding a public meeting, June 23-24, 2005, to
    address sampling issues and how the NARMS funds have been spent , as
    well as other issues.
        Question. Can an independent panel be formed to direct the
    activities and funding for the NARMS program?
        Answer. FDA is planning an independent external review of all three
    components of the NARMS program, the human, retail meat, and slaughter
    components and is holding a public meeting, June 23-24, 2005, to
    address sampling issues and how the NARMS funds have been spent , as
    well as other issues.
        Question. There was report language in last year's appropriations
    bill requiring adequate funding for the 3 arms of NARMS. Are the three
    portions of the NARMS program adequately funded as directed in this
    report language?
        Answer. FDA strongly supports NARMS and all its components, and
    believes that it is important to maintain NARMS funding, to the extent
    possible, even when there are competing public health priorities. FDA
    has funded NARMS since NARMS was conceived in 1996 and is committed to
    the continued funding of this program as much as possible without
    compromising our other core programs.
         In fiscal year 2005, the NARMS program took a reduction, however,
    FDA funded USDA and CDC at the same level they were funded in fiscal
    year 2004 with FDA absorbing any reduction in program funding. FDA
    believes that all three arms are integral to the success of the NARMS
    program and to achieve the benefits envisioned at its inception and
    agreed upon by all three agencies.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                                 FDA PAY COSTS

        Question. In fiscal year 2005, the FDA's top priority was to
    provide funding to cover necessary increased salaries and expenses for
    their staff. The FDA's budget, in fact, is 60 percent salaries and
    expenses. In the fiscal year 2006 budget request, however, no funding
    is requested at all to cover the required pay increases, effectively
    resulting in a $36 million shortfall.
        Why isn't funding requested for increased salaries and expenses in
    the fiscal year 2006 budget, since it was the top priority for the
    previous fiscal year?
        Answer. In fiscal year 2006 FDA needs approximately $36 million to
    cover the cost of a pay increase. The agency will cover the costs of
    the pay raise within the total request.
        Question. How does FDA propose to absorb the funding for employee
    pay increases, approximately $36 million? What specific programs, and
    in what amounts, will that funding come from?
        Answer. This will be accomplished in fiscal year 2006 through
    instituting hiring freezes and attrition of over 250 FTE. In select
    areas where we are still hiring, we will carefully targeting the areas
    for backfills, such as import field exams. FDA will use risk-based
    management principles throughout the program areas to ensure we are
    properly targeting programs to protect public safety.

                               CITIZEN PETITIONS

        Question. It has been brought to my attention that FDA recognizes
    the need to expedite the decision making process for citizen petitions
    and that the current system may be contributing to agency delay in
    approval of abbreviated new drug applications (ANDAs). Further, I
    understand that FDA is currently exploring reforms to this process as a
    way to accelerate consumer access to more affordable medicines.
        Please provide a chart listing the citizen petitions filed with FDA
    in fiscal year 2003 and fiscal year 2004 that target ANDAs, including
    the name of filer, date the petition was filed and completion date for
    each petition.
        Answer. There were 42 citizen petitions filed with FDA in fiscal
    year 2003 and fiscal year 2004 that relate specifically to ANDAs. We
    would be happy to provide this information. The petitions are in
    alphabetical order by the topic of the petition so that related
    petitions are grouped together and where no completed date is provided,
    the petition is still pending with the Agency. The information
    describes only petitions that relate to ANDAs specifically and does not
    include certain types of petitions that are necessary to approving some
    ANDAs, but do not on their face relate to ANDAs, for example, relisting
    petitions. When a drug is no longer being marketed, an ANDA applicant
    seeking to reference that drug product must file a relisting petition
    requesting that the FDA determine that the drug product was not
    withdrawn for reasons of safety or effectiveness. Also, in some
    instances there were additional citizen petitions relating to a
    particular drug product that may have been filed outside of the
    requested timeframe. For example, only one petition relating to
    fentanyl transdermal products is shown, but a total of four petitions
    were filed, some in fiscal year 2005.
        [The information follows:]

     BLOCKING PETITIONS--SUBMITTED IN FISCAL YEAR 2003 AND FISCAL YEAR 2004

    180-day; gabapentin, can exclusivity be waived?

        PETITIONER: Pfizer.
        DOCKET #: 04P-0227.
        SUBMITTED: 5/11/2004.
        COMPLETED: 7/2/2004.
        That FDA acknowledge that 180-day exclusivity is not a right or
    asset subject to transfer or waiver in favor of one or more specified
    subsequent ANDA applicants; specifically that FDA not approve Teva
    during the running of Purepac's exclusivity.

    180-day; para IV recertification for CMC changes
        PETITIONER: Biovail.
        DOCKET #: 03P-0121.
        SUBMITTED: 3/26/2003.
        That FDA require paragraph IV re-certification in the case of ANDAs
    when there is an amendment to the CMC portion of the ANDA.

    30-month; DuoNeb (Ipatropium/Albuterol)
        PETITIONER: Dey, L.P.
        DOCKET #: 04P-0324.
        SUBMITTED 7/16/2004.
        That FDA determine that Ivax' ANDA 76-724 is subject to 30-month
    stay of approval. Related to Docket No. 04P-0520.

    Agrylin (anagrelide HCl)--CP
        PETITIONER: Shire.
        DOCKET #: 04P-0365/CP1.
        SUBMITTED: 8/16/2004.
        COMPLETED: 4/18/2005.
        That FDA refrain from approving ANDAs that reference Agrylin.

    Agrylin (anagrelide HCl)--PSA
        PETITIONER: Shire.
        DOCKET #: 04P-0365/PSA1.
        SUBMITTED: 9/3/2004.
        COMPLETED: 4/18/2005.
        Petition for Stay of Action (PSA) to CP1.

    Alphagan; refuse ANDAs for 0.2 percent
        PETITIONER: Allergan.
        DOCKET #: 02P-0469.
        SUBMITTED: 10/28/2002.
        COMPLETED: 5/21/2003.
        That FDA refuse to approve ANDA's for brimonidine tartrate 0.2
    percent. A newer (and allegedly safer) 0.15 percent product has
    recently been approved. See relisting CPs, Docket Nos. 02P-0391and 02P-
    0404.

    Amino acid solutions
        PETITIONER: Braun Medical.
        DOCKET #: 02P-0450.
        SUBMITTED: 10/16/2002.
        COMPLETED: 6/19/2003.
        Withhold approval of any ANDA for amino acid drug products packaged
    in DEHP-plasticized PVC and intended for use in infant populations.

    Amlodipine/Benazepril
        PETITIONER: Frommer Lawrence.
        DOCKET #: 04P-0339.
        SUBMITTED: 7/29/2004.
        That FDA refuse to accept for filing ANDAs for this combination
    drug that do not include fed and fasted BE studies.

    Desmopressin BE
        PETITIONER: Ferring Pharm Inc.
        DOCKET #: 04P-0068.
        SUBMITTED: 2/13/2004.
        That FDA establish specific BE requirements for oral products
    containg desmopressin (DDAVP).

    Doryx and Suitability Petition
        PETITIONER: Warner Chilcott.
        DOCKET #: 04P-0417.
        SUBMITTED: 9/13/2004.
        That FDA require ANDAs for Doxycycline Hyclate Capsule products
    containing powder or similar fill and using Doryx as the RLD first
    obtain FDA's acceptance of a suitability petition for a change in
    dosage form.

    Fentanyl--Palo Alto
        PETITIONER; Palo Alto Health.
        DOCKET #: 04P-0340.
        UBMITTED: 7/29/2004.
        COMPLETED: 1/28/2005.
        That FDA require ANDA applicants for transdermal fentanyl
    (Duragesic) to perform BA/BE studies on both intact and stripped skin.

    Ferrlecit (CP1)
        PETITIONER: Watson Pharma/CRG.
        DOCKET #: 04P-0070/CP1.
        SUBMITTED: 2/13/2004.
        That FDA not approve any ANDA for Ferrlecit (sodium ferric
    gluconate complex in Sucrose) until all conditions in the petition are
    met.

    Ferrlecit (CP2)
        PETITIONER: Watson Pharma.
        DOCKET #: 04P-0070/CP2.
        SUBMITTED: 8/18/2004
        That FDA refuse to receive an ANDA for Ferrlecit until FDA
    establishes guidelines to deternine sameness of a generic sodium ferric
    gluconate complex product.

    Flonase (Fluticasone Nasal Suspensions)
        PETITIONER: GSK.
        DOCKET #: 04P-0239.
        SUBMITTED: 5/19/2004.
        That FDA refrain from approving ANDAs for nasal suspension
    formulations and issue a BE guidance.

    Flonase (Fluticasone Propionate Nasal Spray)
        PETITIONER: Bell Boyd & Lloyd.
        DOCKET #: 04P-0206.
        SUBMITTED: 5/3/2004.
        That FDA make a determination that no ANDA seeking FDA premarket
    approval of a generic formulation of Fluticasone Propionate Nasal
    Spray, 50 mcg, shall be received for substantive review, or granted
    final approval, unless such an ANDA contains successful results of BA
    and BE studies conducted under the methodologies set forth in FDA's.

    Levothyroxine--allow Unithroid only as RLD
        PETITIONER: Jones Pharma.
        DOCKET #: 03P-0097.
        SUBMITTED: 3/13/2003.
        COMPLETED: 10/1/2003.

    Levothyroxine--ANDA guidance
        PETITIONER: Jerome Stevens.
        DOCKET #: 04P-0061.
        SUBMITTED: 2/10/2004.
        COMPLETED: 6/23/2004.
        That FDA establish guidance and clarify requirements for levo
    ANDAs.

    Levothyroxine--BE methodology
        PETITIONER: Abbott.
        DOCKET #: 03P-0387/CP1.
        SUBMITTED: 8/25/2003.
        COMPLETED: 6/23/2004.
        That FDA make certain requirements for BE studies of levothyroxine.

    Levothyroxine--BE methodology (PRC)
        PETITIONER: Abbott.
        DOCKET #: 03P-0387/PRC1.
        SUBMITTED: 7/23/2004.
        That FDA reconsider its denial of earlier petition requesting that
    FDA require certain BE studies of levothyroxine.

    Levothyroxine--CP and PSA re BE standards
        PETITIONER: Jones Pharma.
        DOCKET #: 03P-0126/CP1.
        SUBMITTED: 3/28/2003.
        COMPLETED: 6/23/2004.
        That FDA refrain from approving or accepting for filing any levo
    ANDA that shows BE via 2001 Guidance or as announced at Mar 12-13 2003
    meeting of Pharm Sci AC; that FDA convene a joint mtg of Pharm Sci AC
    and E&M Drugs AC to establish BE standards.

    Levothyroxine--name Levoxyl as 3RLD--PSA
        PETITIONER: Abbott:
        DOCKET #: 03P-0113/PSA.
        SUBMITTED: 5/13/2003.
        COMPLETED: 11/7/2003.
        That FDA stay the effective date of the decision to grant Mylan's
    request that Levoxyl be named a RLD.

    Levothyroxine--name Synthroid as 2RLD--PSA
        PETITIONER: Abbott.
        DOCKET #: 03P-0107/PSA.
        SUBMITTED: 5/13/2003.
        COMPLETED: 11/7/2003.
        That FDA stay the effective date of the decision to grant Mylan's
    request that Synthroid be named a RLD.

    Levothyroxine--PRC on CP/PSA re BE standards
        PETITIONER: Abbott.
        DOCKET #: 03P-0126/PRC1.
        SUBMITTED: 7/23/2004.

    Levothyroxine--w/d Synthroid & Levoxyl as RLDs
        PETITIONER: Abbott.
        DOCKET #: 03P-0210.
        SUBMITTED: 5/13/2003.
        COMPLETED: 11/7/2003.
        That FDA withdraw the decision in Docket Nos. 03P-0107 and 03P-0113
    to name Synthroid and Levoxyl as RLDs.

    Loratadine and b2
        PETITIONER: GenPharm.
        DOCKET #: 03P-0160.
        SUBMITTED: 4/16/2003.
        COMPLETED: 6/24/2004.
        That FDA require 505(j) applications for generic OTC loratadine
    (Claritin), and not permit b2 applications.

    Lovenox--not approve ANDAs
        PETITIONER: Aventis.
        DOCKET #: 03P-0064.
        SUBMITTED: 2/19/2003.
        That FDA not approve any ANDA using Lovenox (enoxaparin sodium
    injection, a low molecular weight heparin) as the RLD unless (a) the
    manufacturing process is determined to be equivalent, or equivalent s&e
    is supported by clinical trials, and (b) the generic product contains a
    1,6 anhydro ring structure at the reducing ends of between 15 percent
    and 25 percent.

    Metaxalone
        PETITIONER: King.
        DOCKET #: 04P-0140/CP1.
        SUBMITTED: 3/19/2004.
        That FDA (a) rescind the 3/1/2004 ``Dear Applicant'' letter, (b)
    require ANDA applicants using SKELAXIN as the RLD to certify re the 128
    patent, and (c) prohibit a carve out of PK information.

    Metaxalone--PSA1
        PETITIONER: King.
        DOCKET #: 04P-0140/PSA1.
        SUBMITTED: 3/19/2004.
        PSA to CP1.

    Metaxalone--PSA2
        PETITIONER: Mutual.
        DOCKET #: 04P-0140/PSA2.
        SUBMITTED: 4/5/2004.
        That FDA stay approval of any sNDA for Skelaxin, specifically s-046
    regarding dosing with food.

    Methylphenidate--Concerta
        PETITIONER: McNeil.
        DOCKET #: 04P-0139.
        SUBMITTED: 3/19/2004.
        That FDA apply additional BE metrics other than the average BE
    parameters to ensure that the approval of generic versions of Concerta
    (methylphenidate HCl) extended-release tablets are both bioequivalent
    and clinically equivalent to Concerta.

    Methylphenidate--Metadate CD--BE
        PETITIONER: Celltech.
        DOCKET #: 04P-0225.
        SUBMITTED: 5/7/2004.
        That FDA require an additional BE test for generic versions of
    Celltech's Metadate CD (ER methylphenidate).

    Mupiricin Calcium (topical)
        PETITIONER: Glaxo.
        DOCKET #: 04P-0290.
        SUBMITTED: 7/8/2004.
        That FDA refrain from approving any ANDAs for topical mupirocin
    calcium products containing the amorphous form of the active
    ingredient.

    Mupirocin ointment; BE requirement for
        PETITIONER:--GlaxoSmithKline.
        DOCKET #: 03P-0140.
        SUBMITTED: 4/8/2003.
        COMPLETED: 11/7/2003.
        That FDA not approve ANDAs for topical mupirocin ointment products
    absent additional data to support the full labeling of the RLD
    (Bactroban).

    Oxandrolone BE
        PETITIONER: Savient Pharm Inc.
        DOCKET #: 04P-0074.
        SUBMITTED: 2/18/2004.
        That FDA establish specific BE requirements for oral products
    containg oxandrolone.

    Oxycontin, ANDAs and RMPs
        PETITIONER: Purdue Pharma.
        DOCKET #: 04P-0006/PSA.
        SUBMITTED: 1/7/2004.
        COMPLETED: 3/23/2004.
        That FDA stay approval of modified-release ANDAs that reference
    Oxycontin until FDA has evaluated supplements from Purdue that
    incorporate an RMP into labeling.

    Periostat--2003 CP
        PETITIONER: CollaGenex.
        DOCKET #: 03P-0315/CP1.
        SUBMITTED: 7/14/2003.
        That FDA refuse to approve any ANDA for Periostat.

    Periostat--2003 CP re West-ward
        PETITIONER: CollaGenex.
        DOCKET #: 03P-0372.
        SUBMITTED: 8/15/2003.
        That FDA refuse to approve West-ward's ANDA for Periostat.

    Periostat--2003 PSA
        PETITIONER: CollaGenex.
        DOCKET #: 03P-0315/PSA1.
        SUBMITTED: 7/18/2003.
        PSA to CP1. That FDA refuse to approve any ANDA for Periostat.

    Restasis
        PETITIONER: Allergan.
        DOCKET #: 03P-0275/PSA.
        SUBMITTED: 8/6/2003.
        COMPLETED: 12/18/2003.
        Stay approval of all Section 505(j) ANDAs and Section 505(b)(2)
    NDAs for generic versions of Restasis because it is not an antibiotic
    and therefore is entitled to 3-year exclusivity.

    Ribavirin
        PETITIONER: ICN Pharm.
        DOCKET #: 03P-0321.
        SUBMITTED: 7/16/2003.
        COMPLETED: 4/6/2004.
        That FDA not approve generic Rebetol under 505(j) with labeling
    that omits information on the use of ribavirin with PEG-Intron because
    such a product would be misbranded; any guidance with respect to
    labeling and cross-labeling of generic ribavirin products must be done
    according to GGP regs and therefore requests that FDA defer action on.
    . .

    Sirolimus with Rapamune
        PETITIONER: Wyeth.
        DOCKET #: 03P-518.
        SUBMITTED: 11/5/2003.
        COMPLETED: 9/20/2004.
        Refrain from approving any ANDA for Sirolimus with Rapamune as the
    RLD before the expiration of the statutory exclusivity that applies to
    Rapamune.

    Therapeutic proteins and b2
        PETITIONER: BIO.
        DOCKET #: 03P-0176.
        SUBMITTED: 4/24/2003.
        That FDA not approve anything less than a full NDA for a
    therapeutic protein product regulated under the FDCA. This petition
    generally relates to the can-there-be-generic-biologics question.

        Question. Which offices at FDA are involved in reviewing citizen
    petitions that target ANDAs? What role, if any, does the HHS Office of
    General Counsel play?
        Answer. A number of offices within the Center for Drug Evaluation
    and Research are involved in reviewing citizen petitions that relate to
    ANDAs. The Office of Regulatory Policy or ORP is responsible for
    drafting responses to these types of citizen petitions. ORP consults
    the Office of Generic Drugs on all of these petitions and consults with
    the appropriate medical review division within Office of New Drugs
    regarding issues relating to the approval of the innovator product that
    is the basis for the ANDA. If a citizen petition raises safety issues,
    the Office of Drug Safety is also involved in reviewing the petition.
    In addition, other offices may be consulted, as needed, for example the
    Office of Compliance, Controlled Substances Staff. ORP consults with
    the Office of Chief Counsel FDA, the Food and Drug division of the HHS
    Office of General Counsel, regarding petitions that raise legal issues,
    and the Office of Chief Counsel reviews all citizen petition responses
    for litigation risk and legal sufficiency. The Office of Commissioner,
    Office of Policy, may be consulted and the Associate Commissioner of
    Policy and Planning has signed some of the citizen petition responses
    in the past.
        FDA's Office of Chief Counsel, which is the Food and Drug Division
    of HHS OGC, assists in resolving legal issues raised in incoming
    citizen petitions, assists in drafting citizen petition responses, and
    reviews citizen petition responses and administrative records
    supporting those responses for legal sufficiency. The Food and Drug
    Division of HHS OGC consults the Immediate Office at HHS OGC when a
    citizen petition raises issues that are particularly sensitive, novel,
    or complex.
        Question. Currently, how many citizen petitions targeting ANDAs
    have been under review by the FDA Office of General Counsel for more
    than 180 days? How many FTEs are dedicated to reviewing citizen
    petitions in the FDA Office of General Counsel?
        Answer. Currently there is one citizen petition that raises ANDA-
    related issues that has been under review by the Food and Drug Division
    of HHS OGC for more than 180 days. The Food and Drug Division of HHS
    OGC devotes approximately .7 FTE per year to responding to ANDA-related
    citizen petitions.
        Question. What specifically is FDA doing to reform the FDA citizen
    petition review process, and what potential solutions are under
    consideration?
        Answer. We are examining our citizen petition process very
    thoroughly. During the past 8 months, the Office of Regulatory Policy,
    or ORP, has undertaken an extensive review of how we handle citizen
    petitions assigned to CDER. The purpose of this review is to identify
    areas where we can work more efficiently and effectively, despite the
    significant increase in the number of citizen petitions received. For
    example, CDER has seen approximately a 50 percent increase in the
    number of citizen petitions received in CY04 over CY03, and we
    anticipate an additional increase in the number of citizen petitions
    submitted in CY05, based on the current rate of receipt for CY05. As
    part of this review process, ORP worked with the Office of Generic
    Drugs or OGD, the Office of New Drugs, and the Office of Chief Counsel
    to determine causes of delay. We have already begun implementing
    changes to our internal processes and will track whether these changes
    improve the overall response time for citizen petitions. As part of
    this process, ORP will increase its interactions with other offices
    early in the process to provide better direction on what information is
    needed for a citizen petition response. We believe that increased
    communication will help to avoid misunderstandings, wasted efforts, or
    unnecessary delays. ORP and OGD are also increasing communications
    relating to priorities and anticipated timetables, so that we can
    coordinate citizen petition responses with upcoming ANDA approvals. In
    addition, we have added recommended goal dates for each stage of the
    citizen petition review process.
        We also note that outside of ORP's process improvement efforts, OGD
    has made organizational changes designed to improve the citizen
    petition review process. OGD has established a specific group of
    scientists who will be responsible for addressing citizen petition
    review issues. This organizational change will increase the
    consistency, quality, and speed of OGD input on citizen petition
    responses.
        Question. Do you believe FDA needs additional FTEs and/or funding
    to make the citizen petition review process more efficient? If so,
    please provide an estimate of the increased funding amount needed in
    fiscal year 2006.
        Answer. During the past 8 months, the Office of Regulatory Policy,
    or ORP, has undertaken an extensive review of how we handle citizen
    petitions assigned to CDER. The purpose of this review is to identify
    areas where we can work more efficiently and effectively, despite the
    significant increase in the number of citizen petitions received.
        We have already begun implementing changes to our internal
    processes and will track whether these changes improve the overall
    response time for citizen petitions. As part of this process, ORP will
    increase its interactions with other offices early in the process to
    provide better direction on what information is needed for a citizen
    petition response. We believe that increased communication will help to
    avoid misunderstandings, wasted efforts, or unnecessary delays. ORP and
    OGD are also increasing communications relating to priorities and
    anticipated timetables, so that we can coordinate citizen petition
    responses with upcoming ANDA approvals. In addition, we have added
    recommended goal dates for each stage of the citizen petition review
    process.
        We also note that outside of ORP's process improvement efforts, OGD
    has made organizational changes designed to improve the citizen
    petition review process. OGD has established a specific group of
    scientists who will be responsible for addressing citizen petition
    review issues. This organizational change will increase the
    consistency, quality, and speed of OGD input on citizen petition
    responses.

                                MDUFMA SHORTFALL

        Question. As you know, the MDUFMA user fee program is set to expire
    this year, unless additional authorizing language is passed by the
    Congress. We have provided significant increases for CDER since this
    program was initiated, and further increases are requested this year.
        Has authorizing language been submitted by the FDA to forgive
    previous MDUFMA funding shortfalls, enabling the MDUFMA program to
    continue past the current fiscal year?
        Answer. The Administration informally transmitted its legislative
    proposal to alter the appropriations triggers for fiscal year 2003 and
    2004 to Congress in May 2004. FDA staff are now working with
    Congressional staff and stakeholders to save the MDUFMA user fee
    program and the many benefits its offers to industry, FDA, the health
    care community, and patients. FDA sincerely hopes this process will
    lead to a proposal that is acceptable to FDA and the Administration,
    our stakeholders, and Congress.
        Question. If not, what is the status of that language, and
    specifically when do you expect it to be sent to Congress?
        Answer. The Administration informally transmitted its legislative
    proposal to alter the appropriations triggers for fiscal year 2003 and
    2004 to Congress in May 2004. Since that time, some of the stakeholders
    have asked for further changes in the MDUFMA law. FDA staff are now
    working with Congressional staff and stakeholders to develop the
    legislative language required to save the MDUFMA user fee program and
    the many benefits it offers to industry, FDA, the health care
    community, and patients. FDA sincerely hopes this process will lead to
    a proposal that is acceptable to FDA and the Administration, our
    stakeholders, and Congress.
        Question. What will happen if the language is not submitted or
    passed by the Congress before October 1, 2005? Does FDA have a plan to
    make up for the potentially lost user fee income?
        Answer. If Congress does not enact corrective legislation, FDA will
    lose its authority to collect medical device user fees beginning
    October 1, 2005 and the performance goals negotiated for the medical
    device program will end.
        FDA would have to reduce staffing levels, abandon critical
    infrastructure modernization, reduce interaction with applicants,
    abandon planned guidance development, terminate the Medical Device
    Fellowship Program and largely eliminate our use of contract expertise
    in academia and the private sector, and take a variety of other steps
    to limit expenditures to the amounts made available in our fiscal year
    2006 and fiscal year 2007 appropriations. FDA would expect review times
    to deteriorate, resulting in significant delays in the introduction of
    new medical devices.

                                 TISSUE SAFETY

        Question. What is the status of the FDA rule that was proposed in
    1997 that would provide guidelines for current good manufacturing
    practices for establishments that produce human cells, tissues, and
    related products?
        Answer. In 2004, FDA published the last two of three final rules to
    implement a new risk-based approach for the regulation of human cells,
    tissues, and cellular and tissue-based products, HCT/Ps. Together,
    these three rules are expected to prevent the spread of communicable
    diseases, assure that safety and effectiveness are demonstrated for
    cellular and tissue-based products that are also drugs, biological
    products, or devices, and enhance public confidence in these products
    so that they can fulfill their potential for saving and improving
    lives.
        FDA published the third and last final rule on November 24, 2004.
    The Good Tissue Practice Rule requires manufacturers to recover,
    process, store, label, package, and distribute human cells, tissues,
    and cellular and tissue-based products in a way that prevents the
    introduction, transmission, or spread of communicable disease. Good
    tissue practice includes the methods, facilities and controls used to
    manufacture HCT/Ps. The rule also contains provisions for FDA
    inspection of establishments and enforcement of the regulations.
        FDA published the second of the three final rules on May 25, 2004.
    The Donor Eligibility rule requires donor screening and testing to
    prevent the unwitting use of contaminated tissues with the potential to
    transmit infectious disease. The new rule extends the protections
    provided by FDA's previously issued tissue rules by requiring testing
    and/or screening for additional communicable diseases that can be
    transmitted through transplanted tissues and cells. The new regulation
    adds requirements to screen for human transmissible spongiform
    encephalopathies, including Creutzfeldt-Jakob disease, and to screen
    and test for syphilis. Screening and testing for still other relevant
    communicable disease agents, such as human T-lymphotropic virus, will
    be required for viable cells and tissue rich in leukocytes such as
    semen and hematopoietic stem cells. For reproductive tissues, the
    regulation also addresses potential risks associated with Chlamydia
    trachomatis and Neisseria gonorrhoeae.
        The Donor Eligibility rule also provides a framework for
    identifying and addressing new or emerging diseases that may pose risks
    to recipients of transplanted HCT/Ps and for which appropriate
    screening measures or testing are available. Thus, this regulation
    gives FDA the flexibility to rapidly address new disease threats as
    they appear, providing substantial additional protections for patients
    receiving tissue transplants. The Donor Eligibility final rule and the
    Good Tissue Practice final rule will become effective on May 25, 2005.
        FDA previously published the Establishment Registration and Listing
    final rule requiring human cell, tissue, and cellular and tissue-based
    product establishments to register and list their products with the
    Agency. On January 21, 2004, this rule became effective for certain
    establishments, for example, reproductive tissue and cord blood
    establishments, which had previously been exempt from its provisions.
    The rule is now fully effective. This complete database of HCT/P
    establishments and their products will provide important information to
    FDA, and will assist the agency to improve communications with industry
    and the public.
             nutritional products, labeling and dietary supplements
        Question. This month, FDA published two Advance Notices of Proposed
    Rulemaking regarding the appearance and usefulness of food labels.
    Specifically, these ANPRMs discussed how calories and serving sizes are
    shown on food labels.
        How much funding is included in the fiscal year 2006 budget request
    for the Office of Nutritional Products, Labeling and Dietary
    Supplements?
        Answer. The estimated fiscal year 2006 budget for the Office of
    Nutritional Products, Labeling and Dietary Supplements is $10 million.
        Question. Would these proposed rules come under the FDA Office of
    Nutrition Products, Labeling and Dietary Supplements?
        Answer. Yes, the two Advance Notices of Proposed Rulemaking
    regarding the appearance and usefulness of food labels will come under
    the FDA Office of Nutrition Products, Labeling and Dietary Supplements.
        Question. Please provide a summary of the activities under the
    jurisdiction of this office, including funding allocated for each
    activity, for the past 5 years.
        Answer. We would be happy to provide the budget and FTE for the
    Office of Nutritional Products, Labeling and Dietary Supplements also
    known as ONPLDS for fiscal year 2001-2006, and an estimate breakdown of
    budgetary resources and FTE among major activity areas appears below.
    Compliance, international activities, outreach and education, and
    research activities are included within the major activity areas listed
    below.
        [The information follows:]

                                 DRUG LABELING

        Question. As you know, once FDA approves a drug, they are no longer
    able to direct the drug manufacturer to ensure that labels on the
    approved drug appear a certain way. Vioxx, the drug recently pulled
    from the market because of serious safety questions, negotiated with
    the FDA for 14 months before finally changing their drug label to
    reflect an increased risk of heart attacks, and FDA couldn't force them
    to change the label earlier. There are serious concerns about the
    potential number of people who died as a result of taking this drug
    during this time of negotiation. An FDA official has recently said that
    FDA needs additional authority to be able to force drug manufacturers
    to present labels in a specific way, without negotiation.
        Dr. Crawford, do you believe FDA needs additional authority to
    force manufacturers to present drug labels in a manner deemed
    appropriate by the FDA, without negotiation with the drug companies?
        Answer. I do not believe additional authority is needed. FDA has
    significant authority to determine that a drug is misbranded if its
    labeling is false or misleading. We can seek judicial relief to mandate
    changes to the label or take action to remove the product from the
    market. However, both of these actions take time. The process would
    normally begin with a warning letter to the company expressing FDA's
    position, and the company would have a chance to respond. If the
    company does not make the changes voluntarily, FDA would then have to
    pursue judicial relief, which is a time-consuming process.
        When FDA considers removing a product from the market over a
    sponsor's objections, FDA would first evaluate whether the risks of
    marketing the product with false or misleading labeling outweighed the
    benefits to the population of patients that rely on the product. In
    many cases, the risks may not outweigh the benefits. And again, if the
    sponsor does not agree to stop marketing, the procedures for removing a
    drug from the market are very time consuming. They require publication
    of a notice and opportunity for hearing in the Federal Register, and a
    possible administrative hearing if the sponsor demonstrates that there
    is a genuine issue of material fact to be decided in a hearing.
        Question. If you don't believe additional authority is needed, what
    steps can FDA take to make sure that situations and questions such as
    those surrounding Vioxx and the need for stronger labels on certain
    drugs don't present themselves again? Essentially, how do you keep this
    from happening time and again?
        Answer. FDA is taking a number of steps to help ensure that
    patients and health care professionals have access to current
    information about drug safety. As we explained in our response to a
    previous question, we are proposing a Drug Watch Web Page to respond to
    the needs of patients and health care providers. This web page will
    contain emerging information for both previously and newly approved
    drugs about possible serious side effects or other safety risks. This
    information may alter the benefit/risk analysis of a drug for some
    patients, and affect patient selection or monitoring decisions. FDA is
    also improving communication through more widespread development of
    Healthcare Professional and Patient Information Sheets.
        Healthcare Professional Information Sheets are one-page information
    sheets for healthcare professionals for all new molecular entities as
    well as some other drugs (e.g., drugs on FDA's Drug Watch and all drugs
    with Medication Guides (FDA-approved patient labeling). The information
    sheets will contain the most important new information for safe and
    effective product use, such as known and potential safety issues based
    on reports of adverse events, new information that may affect
    prescribing of the drug, and the approved indications and benefits of
    the drug. Patient Information Sheets are one-page information sheets
    for patients containing new safety information as well as basic
    information about how to use the drug in a consumer friendly format.
        Finally, it is important to recognize that, as Dr. Janet Woodcock
    emphasized before the Senate Health, Education, Labor and Pensions
    Committee last March, another significant issue is that once a label
    change is made, old labels in paper form are still in distribution and
    it takes time to get newer labels in circulation. Dr. Woodcock
    testified that the new strategy of posting drug safety information
    sooner using the Drug Watch mechanism will help alleviate this concern
    because it will enable the FDA to get information directly to the
    people who need it in a more timely manner. We are confident that the
    new drug safety actions we are implementing will help ensure that
    consumers and healthcare practitioners have access to the most recent
    safety information about drug products.
        Question. How do you respond to the findings of this study?
        Answer. There is a common misconception that FDA issued new
    regulations in 1997. In fact, that is not the case. As a result of the
    changing social, health, and marketing environments, FDA issued
    guidance clarifying existing regulations governing how sponsors could
    comply with the requirements for presenting risk information.
        Existing regulations require that drug advertisements not be false
    or misleading. FDA closely monitor all prescription drug promotion
    including direct-to-consumer (DTC) promotion. For most drugs, there is
    no requirement that manufacturers submit promotional pieces to FDA for
    review prior to use. As a result, FDA often reviews promotional pieces
    at the same time as they are used in the public domain to promote the
    drug. When FDA finds that promotion is misleading, FDA works to ensure
    that the promotion ceases, typically by issuing enforcement letters,
    known as untitled letters and Warning Letters.
        Overall, the results of the study that you cite corroborate one of
    the primary findings of FDA's research on DTC promotion--that DTC
    advertising has positive and negative outcomes. Specifically, higher
    prescribing rates were seen among those patients who showed symptoms of
    the relatively more ambiguous adjustment disorder and requested
    prescription medication than those who did not. However, when patients
    presented with the symptoms of major depression, their requests
    resulted in more of the acceptable steps in the care for major
    depression, the clearer of the two disorders to diagnose.
        FDA's own work has examined this issue in research on the impact of
    DTC advertising on the doctor-patient relationship. In our study
    sample, FDA research showed that 32 percent of patients asked about a
    prescription drug. Of this proportion of responses, 49 percent reported
    that they received the drug they had asked about (51 percent did not
    get the drug they asked for). Forty-one percent said they received
    advice to change diet or behavior, and 34 percent said they received a
    prescription for another drug. FDA's final report of its three surveys
    entitled Patient and Physician Attitudes and Behaviors Associated with
    DTC Promotion of Prescription Drugs can be found online at http://
    www.fda.gov/cder/ddmac/researchka.htm.
        FDA's physician data showed that when patients asked for a specific
    brand, 64 percent of primary care physicians and 46 percent of
    specialists prescribed the requested drug (i.e., 36 percent and 54
    percent did not provide requested drug). The most common reasons
    reported for not prescribing a requested drug were that a different
    drug was more appropriate or the drug was not right for the patient. Of
    those physicians who recalled a patient asking about a prescription
    drug, 88 percent reported the patient had the condition the drug
    treats.
        Question. Do you believe that doctors are commonly prescribing
    medication that may not be necessary due to increased public requests?
    Do you believe this is a public health issue?
        Answer. The issue of inappropriate prescribing predates Direct to
    Consumer or DTC, TV advertising. Of note, it is arguably most
    problematic for antibiotics, a class of drugs that is very rarely
    advertised DTC.
        Patients do ask about prescription medications, but DTC advertising
    is not the primary driver of those requests. FDA survey research shows
    that among patients who had been to their doctor in the last 3 months,
    approximately 4 percent reported that they made an appointment because
    they wanted a prescription for a product they had seen advertised.
        Physicians use their clinical judgment when deciding to prescribe
    or not prescribe. The simple act of a patient requesting treatment
    should not automatically trigger the presumption that the request is
    inappropriate. The question is when we should give deference to
    clinical expertise and let science be the final arbiter of
    ``appropriateness.''
        Question. How much money is allocated in the FDA budget to be spent
    on monitoring of drug advertisements?
        Answer. An estimated $1,948,000 is planned in the FDA 2005 budget
    and an estimated $2,140,000 is planned in the FDA 2006 budget for
    monitoring of drug advertisements.
        Question. What role is FDA playing in trying to ensure that drug
    advertisements include appropriate information regarding potential
    benefits, warnings and side effects?
        Answer. The Division of Drug Marketing, Advertising, and
    Communications, or DDMAC is responsible for regulating prescription
    drug promotion. DDMAC's mission is to protect the public health by
    insuring that prescription drug information is truthful, balanced, and
    accurately communicated. DDMAC accomplishes its mission through a
    comprehensive surveillance, enforcement, and education program, and by
    fostering optimal communication of labeling and promotional information
    to both health care professionals and consumers.
        Based in part on discussion at FDA's September 22-23, 2003 public
    meeting, FDA developed guidance to encourage advertising that provides
    understandable risk and benefit information appropriate to support
    conversations between consumers and their health care providers. On
    February 4, 2004, the agency issued three draft guidance documents,
    addressing: Options for presenting risk information in consumer-
    directed print advertisements for prescription drugs, to encourage use
    of consumer-friendly language and formats; criteria FDA uses to
    distinguish between disease awareness communications and promotional
    materials, in an effort to encourage manufacturers to disseminate
    disease educational messages to the public; and, a manner in which
    restricted device firms can comply with the rules for disclosure of
    risk information in consumer-directed broadcast advertising for their
    products, to help encourage compliance in this emerging area of medical
    product promotion.
        Question. Do you believe the FDA needs to play a greater role in
    drug advertisement monitoring? Is more money required for these
    activities?
        Answer. The pharmaceutical industry spends more than $20 billion a
    year on promoting prescription drugs to healthcare professionals and
    consumers. Expenditures on DTC promotion has increased from $791
    million in 1996 to over $4 billion in 2004.
        FDA's monitoring program includes reviewing promotional pieces that
    are submitted at the time of initial use and monitoring companies'
    websites, TV and print DTC advertisements, medical journal
    advertisements, and promotion in the exhibit halls at medical
    conferences. Any violations noted in promotion are prioritized using a
    risk-based approach so that the most serious violations are addressed
    first. FDA issues untitled and warning letters to address violations.
    These letters almost always result in the cessation of the misleading
    promotion. In the case of more serious violations that are addressed
    with Warning Letters, the company agrees to disseminate remedial
    information to correct the misleading messages presented in the
    violative promotion. In addition, FDA uses its resources to encourage
    voluntary compliance by companies to the regulations. These efforts
    include providing advisory comments to companies when requested, and
    for accelerated approval drugs, issuing guidance and conducting
    outreach programs.
        Question. What percentage of drug advertisements are seen and
    approved, even unofficially, by FDA before they are put on television?
    Do you believe this percentage should be higher? How often does FDA
    send out warning letters regarding drug advertisements, and how
    effective is this method of monitoring?
        Answer. There were 143 proposed Direct to Consumer, or DTC
    broadcast ads submitted to the Division of Drug Marketing, Advertising
    and Communication for comment and 485 DTC broadcast ads disseminated in
    2004. However these numbers cannot be simply used to calculate a
    percentage of ads that are seen before they are disseminated because of
    the following factors. Companies sometimes choose not to proceed with
    specific ads after they receive comments from FDA. In addition, some of
    the disseminated ads are different versions of the proposed ads. It is
    not unusual for a company to generate several ads during the same
    promotional campaign.
        FDA issued 2 Warning Letters and 8 untitled letters in 2004 for DTC
    promotion. These letters are effective in stopping the misleading
    promotion. In addition, the Warning Letters resulted in the company
    disseminating remedial ads to correct the misleading promotional
    messages contained in the cited ads.

            COUNTERTERRORISM/FOOD AND AGRICULTURE DEFENSE INITIATIVE

        Question. Since fiscal year 2002, funding for FDA's
    counterterrorism activities, including regular increases and emergency
    supplemental funding, has increased from approximately $7 million to
    $244 million, an increase of $237 million in less than 4 years,
    including a requested increase of more than $30 million in fiscal year
    2006. While I don't doubt the necessity of increased funding and
    activities related to counterterrorism, I do believe that it is
    imperative that we maintain tight control and knowledge over how these
    funds are being spent, and specifically how they are benefiting and
    keeping the public safe.
        Is all of the $244 million funding requested for counterterrorism
    this year part of the President's Food and Agriculture Defense
    Initiative? If not, how much is considered a part of this initiative?
        Answer. The fiscal year 2006 counterterrorism (CT) request includes
    $65 million for continued implementation of Homeland Security
    Presidential Directive 9, also known as HSPD-9, relating to ``Defense
    of United States Agriculture and Food.'' This includes a $30 million
    increase above the initial fiscal year 2005 HSPD-9 implementation of
    $35 million. The balance of the $244 million was provided to FDA prior
    to the issuance of HSPD-9 in February 2004 and funds a number of
    initiatives and efforts supported by Congress. These includes FTE hired
    for field operations under the fiscal year 2002 Supplemental;
    counterterrorism research, including the food defense research mandated
    by section 302 of the Bioterrorism Act; vulnerability assessments to
    identify high priority products and likely threat agents;
    countermeasures to protect the public from harm caused by a terrorism;
    and physical security for FDA facilities, including Agency
    laboratories.
        Question. How is FDA working with other agencies on FADI? What is
    the FDA's proportion of the funding? Is it your belief that other
    agencies are paying a proportionate share of their cost for FADI, and
    how is that determined? Who makes that determination?
        Answer. FDA is working with the USDA/FSIS, Department of Homeland
    Security,
        White House Homeland Security Council, and the intelligence
    community to implement the initiative. We believe the fiscal year 2006
    President's budget appropriately reflects funding levels government-
    wide to implement the initiative. Section 26 of HSPD-9 appears below
    and describes the budget process for implementing the initiative.
        Budget
        (26) For all future budgets, the Secretaries of Agriculture, Health
    and Human Services, and Homeland Security shall submit to the Director
    of the Office of Management and Budget, concurrent with their budget
    submissions, an integrated budget plan for defense of the United States
    food system.
        Question. Please provide the total amount of funding transferred to
    other agencies, and specifically how this funding will be used.
        Answer. The agency anticipates that a portion of the $3 million
    requested in fiscal year 2006 for food defense may be made available to
    Department of Homeland Security as part of the biosurveillance
    initiative. The funds will be used to integrate FDA's food defense
    biosurveillance systems with the Department of Homeland Security. Funds
    also will be used to support staff sent to the National biosurveillance
    analysis center to provide technical expertise to DHS led information
    integration and analysis efforts.
        Question. When will FADI and the other FDA counterterrorism
    initiatives be fully implemented? Should the Committee expect continued
    requests for increases in the years to come?
        Answer. The U.S. Government's counterterrorism initiatives,
    including FDA's efforts, are anticipated to continue in the near term
    and will be re-evaluated, as appropriate, based on future intelligence
    and threat assessments conducted by the intelligence and homeland
    security officials in collaboration with FDA and other Federal
    agencies. Therefore, it would be difficult to predict a meaningful
    timetable for full implementation of counterterrorism initiatives by
    FDA or any other agency. If the $30 million request for food defense is
    fully funded, we anticipate that most out-year requirements can be
    funded with recurring base funds. Below is specific information on our
    request for enabling the agency to protect the food supply.
        [The information follows:]

                            COUNTERTERRORISM FUNDING

    FERN--$20.0 million
        FERN, which is managed by FDA's Office of Regulatory Affairs, or
    ORA, is a multiyear effort to establish a comprehensive network of
    Federal and State laboratories across the United States that will
    enable FDA to test thousands of food samples within a matter of days in
    the event of an act of terrorism or other emergency.
        The requested increase, in conjunction with base funding, will
    provide an additional 19 FDA-funded State laboratories, adding to the
    six that were funded in 2005 and to the 10 FDA laboratories that are
    already up and running. Currently, 99 labs in 44 States and Puerto Rico
    have satisfactorily completed the FERN Laboratory Qualification
    Checklist, which provides vital information to determine if a lab meets
    the criteria for participation in FERN and is eligible for Federal
    funding.
        These funds will also permit FERN's National Program Office to
    manage the laboratory response in the event of a food related emergency
    and coordinate the FERN support programs which provide validated food
    testing methods, proficiency testing for laboratories, electronic
    communications, and training programs for laboratory personnel.
        FERN, developed in accordance with HSPD-9, integrates the Nation's
    laboratory infrastructure to detect and identify biological, chemical
    or radiological threat agents in food at the local, State, and Federal
    levels. Its primary objectives include prevention (Federal and State
    surveillance sampling programs); preparedness (strengthen laboratory
    capacity and capabilities); response (surge capacity to handle
    terrorist attacks or a national emergency involving the food supply);
    and, recovery (support recalls, seizures, and disposal of contaminated
    food to restore confidence in the food supply). FERN resources are
    leveraged by collaborating and coordinating with other lab networks
    including the Laboratory Response Network (LRN) and the National Animal
    Health Laboratory Network.
        Below is FDA's plan to fully implement FERN. For specific funding
    information for FSIS, please see the USDA/FSIS Budget Submission
    transmitted to this Subcommittee.

                                                          FDA TOTAL LABORATORY CAPABILITY DISTRIBUTION
                                                                [Dollars in millions of dollars]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Fiscal year                      Projected
                                                Fiscal year     Fiscal year        2006         Fiscal year       outyear        Two year       Total State
                                                2005 output    2005 enacted     cumulative     2006 request     cumulative        outyear          labs
                                                                    \1\           output                          output       estimate \2\
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Microbiological Screening & Confirmatory  ..............  ..............  ..............  ..............  ..............  ..............  ..............
     \3\....................................
    Chemical................................               6            $9.9              20           $22.4              36           $46.6              36
    Radiological............................  ..............  ..............               5             5.9              14            16.3              14
    Food Lab Response and Methods Validation/ ..............             5.0  ..............             6.6  ..............            13.9  ..............
     Proficiency Testing/Training...........
                                             ---------------------------------------------------------------------------------------------------------------
          TOTAL.............................               6            14.9              25            34.9              50            76.8              50
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Fiscal year 2005 Request includes enacted rescissions.
    \2\ Outyear estimates reflect projected costs to complete FDA's 50 FERN labs, based on a 2 year estimate. Amounts requested in future budgets are
      contingent upon availability of funds. Once the 50 FERN labs are complete, FDA estimates that the FERN cost will be limited to annual recurring needs.

    \3\USDA funded.

    Food Defense Research--$5.574 million
        This applied and targeted research initiative addresses the
    significant need for research funding to ensure our ability to detect
    or inactivate a broad range of agents that could pose serious threats
    to the food supply. These funds will:
      --Expand and accelerate the food defense research plan by identifying
            additional agent/commodity combinations which will effect the
            relevant food defense research thrusts of methods development,
            agent characteristics, prevention technologies, and dose-
            response relationships;
      --Provide the required base support from FDA for the microbial
            forensics program that the Interagency Agreement with the DHS/
            National Biodefense Analysis and Countermeasures Center
            specifies; and,
      --Help to maintain the foods defense research enterprise
            infrastructure (equipment maintenance and repair, BSL-3 labs,
            select agent inspections, animal care inspections, and LRN/FERN
            methods validation labs).
        In the food defense area, mission-critical knowledge gaps are
    addressed through an integrated portfolio of intramural, extramural,
    and consortia-based programs, which address the need to anticipate,
    prevent, detect, respond, and recover from a terrorist attack on the
    food supply. This requires research activities in:
      --Knowledge of the behavior and susceptibility of the population to
            microbiological, chemical, radiological, and biologically-
            derived toxic agents in priority vulnerable foods during the
            stages of production, distribution, marketing, and preparation;
      --Identification and/or development of new techniques for
            ``shielding'' priority vulnerable foods through the development
            of new prevention and/or security technologies;
      --Development of enhanced sampling and detection methods for priority
            agents in vulnerable foods including field deployable and in-
            line sensor-based screening, analytical, and investigational
            (forensic) technologies;
      --Development of effective methods for ensuring that critical food
            production and manufacturing infrastructure can be rapidly and
            effectively decontaminated if a terrorism event were to occur;
      --Assessments of vulnerabilities of foods and identifying areas where
            enhancements in preventive measures could increase the security
            of the food supply, and,
      --Knowledge of consumer behaviors and the critical role consumers
            play in preventing illness associated with an attack on the
            food supply, to ensure timely and relevant information about
            threats and/or an attack is understood by consumers.

    Crisis Management: Emergency Operations Network Project and Incident
            Management System--$1.5 million
        The request also supports the Emergency Operations Network/Incident
    Management System Project to provide a comprehensive system for
    managing emergencies and related incidents in FDA's centers and field
    offices. The development of this system conforms to HSPD-5,
    ``Management of Domestic Incidents'', and the establishment of a
    National Incident Management System. The Emergency Operations Network
    Incident Management System (EON IMS), managed by the FDA Office of
    Crisis Management, is the central hub for exchanging and relaying all
    emergency-related information into, within, and outside of FDA. One of
    its overarching objectives is to integrate multiple data streams from
    other electronic systems--such as the FERN, eLEXNET, Epidemic
    Information Exchange, and from FDA laboratories/investigators and
    external agencies--into a coherent fashion during critical decision
    points. This improved information management will create a safety net
    that significantly reduces the probability that terrorists will achieve
    their aims and minimize the impact of these threats if they occur. The
    EON IMS is important in all emergencies and exercises requiring
    efficient receipt and dissemination of large volumes of information to
    our stakeholders, including the public and other Federal and State
    agencies. This system will provide a web-based connection for all FDA
    offices and our partners, through which accurate real-time information
    about various incidents can be shared and discussed.
        The EON IMS, which is critical for the agency to manage, plan for,
    and respond to emergency situations, has three components: incident
    tracking and contact management, a collaboration and knowledge
    management tool for meetings and document management, and a Geographic
    Information System for mapping and impact assessment.
        By developing and incorporating agency-wide guidance in the EON
    IMS, FDA will ensure that its emergency response is uniform,
    consistent, and coordinated. Participants coordinating an emergency
    will be able to provide input and access real-time data regarding a
    specific emergency, Agency operating plans and procedures, contact
    databases, and analysis tools which will enhance the agency's
    capability of responding in the most efficient way possible.

    Biosurveillance/NBIS--$3.0 million
        The Department of Homeland Security is leading the development of
    the National Biosurveillance Integration System (NBIS), which is
    intended to integrate systems that monitor health, environment, and
    intelligence information in order to provide early detection of
    threats, guided responses to events, and information sharing among
    agencies. eLEXNET and FERN data capture system, have been identified as
    a food sector data system that would address an unmet need in the DHS-
    led information integration effort that is a candidate system to
    participate in NBIS. FDA's ORA will contribute to the Administration's
    Bio-Surveillance Initiative by developing nationally recognized
    standards for data messaging and communication in the health area and
    by establishing the appropriate connectivity with the NBIS. FDA also
    will provide its technical expertise by providing staff to the national
    biosurveillance analysis center at DHS.
        Question. Can you tell us what FDA has achieved and what work
    remains to be done? How does FDA measure success in achieving these
    goals?
        Answer. As stated in the previous answer to a question, full
    implementation of the Administration's counterterrorism initiatives,
    including FDA's efforts, is an on-going activity that depends on
    current as well as future intelligence and threat assessments.
    Therefore it we cannot accurately predict a timetable for full
    implementation. In the area of food defense, however, the Presidents
    budget places high priority on fully developing the Food Emergency
    Response Network so that there is adequate lab testing surge capacity
    in the event of a terrorist attack on the food supply, food defense
    research so that we have the ability to identify threats and the
    science tools to address them, crisis management, and biosurveillance.
    The goal of FERN is to establish 100 State laboratories, 50 of which
    are chemical and radiological laboratories funded by FDA and the
    remaining 50 are microbiological laboratories funded by USDA/FSIS. The
    fiscal year 2006 budget fully funds 25 of the planned 50 FDA FERN State
    labs. We would be happy to provide specific examples of FDA's on-going
    CT activities and accomplishments.
        [The information follows:]

                    FDA'S CT ACTIVITIES AND ACCOMPLISHMENTS

    Foods
        Working with industry to reduce threats and contain outbreaks of
    foodborne illness.--FDA has issued new industry guidance on security
    measures, and has encouraged specific additional industry security
    measures in response to the increased threat level. The guidance will
    help food producers, warehouses, importers, stores, restaurants, and
    other food establishments minimize the risk that their food will be
    subject to terrorism.
        Increasing risk-based surveillance of domestic and imported food.--
    FDA has increased risk-based inspections of domestic food facilities
    and sampling and lab analysis of foods produced here and abroad.
        Expanding the Food Emergency Response Network.--With the U.S.
    Department of Agriculture, FDA is designing a network of labs that will
    help prevent and respond to chemical, biological or radiation
    contamination of our Nation's food supply.
        Implementing the 2002 Bioterrorism Act.--Under the Public Health
    Security and Bioterrorism Preparedness and Response Act of 2002, FDA
    has developed and published regulations requiring the estimated over
    400,000 domestic and foreign food facilities to register with FDA. This
    will allow FDA to contact food facilities in the case of a bioterrorism
    or food-borne illness incident. Also, the new regulations require
    importers to tell FDA in advance about food shipments, improve FDA's
    ability to detain food, and require food companies to keep records that
    will help FDA address a bioterrorism or food-borne illness incident. To
    implement the prior notice regulation and screen intelligence data on
    food imports, the agency also established the Prior Notice Center,
    which is co-located with the Customs and Border Protection's National
    Targeting Center.
        Increasing ability to quickly identify outbreaks of foodborne
    illness.--FDA is working with the U.S. Centers for Disease Control and
    Prevention to ensure that outbreaks or unusual patterns of illness are
    investigated quickly.
        Increasing participation in the first Internet-based food safety
    system.--FDA's goal is to have 105 laboratories in fiscal year 2006.
    Currently there are 95 laboratories around the country participating in
    eLEXNET (Electronic Laboratory Exchange Network). This shared
    electronic data system consolidates and shares microbial food
    contamination findings among Federal, State and local laboratories.
        Medical Products
        Helping to speed development of new emergency treatments and
    diagnostic tests.--FDA is adapting its review processes and working
    vigilantly to speed the development of products to diagnose, treat or
    prevent outbreaks from exposure to anthrax, smallpox, plague, and other
    biological, chemical and radiological agents that could be used by
    terrorists. FDA is even assuming many of the responsibilities normally
    carried out by drug sponsors. Specific efforts to date have focused on:
      --Products to reduce the effects of radioactive elements;
      --New antitoxins to prevent or treat botulism and anthrax;
      --Novel vaccines to prevent smallpox;
      --Antimicrobials to treat pneumonic plague;
      --Approval of Levaquin (levofloxacin) for inhalational anthrax post-
            exposure prophylaxis in adults;
      --Approval of new labeling for Cipro (ciprofloxacin), based on the
            information obtained from the CDC's program evaluation
            conducted after the anthrax events of October 2001;
      --A number of generic ciprofloxacin drug products have been approved,
            which will ensure an adequate supply of product should a
            biologic event occur.

    Speeding Availability of Critical Medical Products
        FDA has made it possible for critically important treatments and
    diagnostic tests to be made rapidly available for use during
    emergencies. Flexible, creative ways are being found to share
    information about these new products (for example, videos for patients
    who might receive smallpox vaccine).

    Providing Researchers With Early Guidance and Assistance
        FDA is providing guidance early on to researchers so that
    discoveries made in the laboratory can be more quickly turned into
    counterterrorism products available to first responders, health
    professionals and the military. FDA published the Draft Guidance for
    Industry: Vaccinia Virus-Developing Drugs to Mitigate Complications
    from Smallpox Vaccination.

    Relying on Animal Efficacy Studies
        Under a new regulation, FDA can now approve medical treatments
    against chemical, biological, radiological, or nuclear agents based on
    evidence of effectiveness from animal studies when human studies are
    not ethical or feasible. Human data supporting the safety of such
    products is still required.

    Ensuring an Adequate Stockpile of Emergency Medical Pproducts
        FDA is working with the CDC's Strategic National Stockpile, as well
    as with industry, the National Institutes of Health, the Defense
    Department, and foreign governments to ensure the safety and
    effectiveness of stockpiled vaccines and other medical products so that
    the products are available for use during terrorist attacks. FDA and
    CDC formed a Post-event Surveillance Working Group and developed a plan
    for the collection of post-event safety and outcome information on
    medical countermeasures deployed from the SNS and distributed due to a
    mass casualty situation caused by a terrorist event.

    Offering Research Grants and Other Funding
        FDA continues to facilitate the ongoing human trials in plague in
    Africa and monkey studies in pneumonic plague, funded in previous years
    through interagency agreements with the CDC and NIAID, respectively.
    Concomitantly with the human plague studies, an investigational rapid
    plague diagnostic test kit is being evaluated. Previously funded trials
    are ongoing to study the impact of long-term use of antibiotics that
    could be used for post-exposure prevention in healthy adults and in
    special populations (such as pregnant women).

    Working With the Military
        FDA has worked with the Joint Chiefs of Staff to help obtain
    critical medical products for combat readiness. It has helped U.S.
    Special Forces obtain medical countermeasures for airborne hospitals
    used in evacuating battlefield casualties. It has provided intensive
    consultation and review to help make available needed investigational
    and licensed medical products such as antisera and vaccines. FDA
    approved pyridostigmine bromide for combat use by U.S. military
    personnel to protect them from the lethal effects of the nerve gas
    Soman. The agency also cleared a high-tech battlefield wound dressing
    that can stop massive bleeding within minutes and a decontamination
    lotion for use by the military to remove or neutralize chemical warfare
    agents and other toxins from the skin, preventing serious burns and
    death.

    Protecting Children
        FDA has been providing guidance to parents and health professionals
    when they use antibiotics and other drugs to treat children and
    pregnant and nursing women stricken by bioterrorist attacks. The advice
    covers such areas as:
      --Proper dosage,
      --Adverse effects, and
      --How to pulverize the tablets and mix them with foods or drinks to
            give to children in an emergency.
        FDA has now approved pediatric dosage forms of the AstroPen
    atropine autoinjector to treat children, from infants to adolescents,
    exposed to certain nerve agents or organophosphate insecticides.
        Two forms of potassium iodide, appropriate for pediatric use, have
    been approved as a thyroid blocking agent for use in radiation
    emergencies. ThyroShield is an oral solution, and ThyroSafe Tablets are
    half the strength of previously approved tablets. ThyroSafe is also
    scored in quarters for dosing very young children.

    Detecting Bioterrorism Agents
        FDA is helping develop methods to detect biological agents that
    terrorists might use in an attack.

    Blood Donations
        Keeping the blood supply safe.--FDA has provided guidance to blood
    donation centers and healthcare facilities on prudent measures to
    reduce any possible risk of transmitting anthrax through blood donated
    by people who may be infected with the disease.
        Radiation Protection
        Helping companies develop drugs to prevent and treat radiation
    exposure.--Radiogardase (insoluble Prussian blue) capsules were
    approved to treat people internally contaminated with radioactive
    Cesium-137 or Thallium. Pentetate calcium trisodium injection (Calcium
    DTPA) and pentetate zinc trisodium injection (Zinc DTPA) were approved
    for the treatment of internal contamination with plutonium, americium,
    or curium. FDA also posted a draft guidance on ``Internal Radioactive
    Contamination--Development of Decorporation Agents.'' This guidance to
    industry is to encourage the development of drugs that help eliminate
    radioactive materials from the body.
        Reviewing radiation devices used against terrorism.--FDA is
    monitoring the safety and effectiveness of radiation-emitting devices
    used to detect potential security threats in airports and other
    locations, devices used to destroy biological agents released in a
    terrorist attack, and used to treat victims of radiation exposure.

    Veterinary Products
        Increasing security measures for animal feed.--FDA is working with
    other government agencies, the animal feed industry and other producer
    groups to minimize the risk of terrorist attacks on feed for animals
    that are raised for human food.
        Facilitating the supply of critical animal drugs.--FDA is ensuring
    the availability of veterinary drug products to meet emergency needs.

    Cosmetics
        Working with the cosmetic industry to reduce threats.--In November
    2003, FDA issued final guidance to industry on security steps they can
    take to help ensure that their products are secure against terrorism.
        Field Operations
        Improving inspections.--Thanks to increased bioterrorism funding
    from Congress, FDA has hired over 650 new inspectors and other field
    personnel to keep watch on imports and other avenues our enemies might
    try to use to contaminate our food or tamper with other FDA-regulated
    products. FDA has also increased inspections of facilities that
    manufacture medical products that could be used in response to a
    terrorism threat.
        Upgrading laboratories.--FDA has upgraded its laboratories to
    handle the increased number of sample analyses. Lab scientists are
    developing rapid methods for detecting bacterial and viral food
    contaminants.
        Scrutinizing imports.--FDA has expanded its coverage to an
    additional 45 ports of entry where there are significant shipments of
    FDA-regulated products. The agency is also strengthening its import
    information systems to improve targeting of suspect products. The links
    between import and domestic information are being tightened so imported
    products can be better traced in this country.
        Toxicological Research
        Enhancing research facilities and technologies.--FDA is developing
    a Level 3 lab at its National Center for Toxicological Research to
    safely allow analysis and research on select agents. The lab will be
    used to test food samples that may be contaminated by biological,
    chemical or radiological means. The center is continuing research to
    identify and characterize biological warfare agents using technologies
    involving DNA and proteins.
        Developing methods to detect explosives.The center is developing
    sensor technologies to detect nitrogen-based explosives in airline
    cargo by refining its patented methodology currently used to detect and
    identify deteriorating food.

                                     NARMS

        Question. How much money is in the FDA fiscal year 2006 budget
    request for NARMS? How much of that money will be transferred to CDC,
    to USDA, and how much will be used to collect and test retail meat
    samples?
        Answer. At this time, FDA has not determined the exact amount of
    NARMS funding for CDC and USDA for fiscal year 2006 but plans to make
    decisions in the Fall of 2005. FDA believes that all three arms are
    integral to the success of the NARMS program and to achieve the
    benefits envisioned at its inception and agreed upon by all three
    agencies.
        Question. What is the status of the report requested in the fiscal
    year 2005 Senate Report regarding the distribution of NARMS funding
    between USDA, FDA and CDC? By what date can we expect to receive this
    report, which is currently overdue?
        Answer. The requested NARMS report is currently in the clearance
    process.

                           FDA OFFICE OF DRUG SAFETY

        Question. As you are aware, the FDA Office of Drug Safety has been
    under significantly increased scrutiny in recent months due to the
    removal of several drugs such as Vioxx and Bextra from the market and
    high levels of media coverage. Part of FDA's response to this has been
    to conduct a 3 day panel on Cox-2 Inhibitors, the creation of a new
    Drug Safety Oversight Board, and increased efforts to ensure that
    adverse events are properly monitored and the public is aware of risks
    associated with different drugs, such as the creation of a new Drug
    Watch web page. The fiscal year 2006 budget request includes an
    increase of $5 million for the Office of Drug Safety, bringing total
    funding to $22.9 million. Although this is nearly a 25 percent increase
    in funding, in a budget that totals nearly $1.5 billion, $22.9 million
    seems like a small amount for a subject under such scrutiny and facing
    so many difficulties. Further, many of the new efforts recently
    announced by the FDA appear as though they will be under the
    jurisdiction of the Office of Drug Safety.
        Please provide a chart showing specifically how much all of the new
    activities announced on February 15 regarding drug safety will cost,
    and from where that funding will come.
        Answer. We believe that additional funding beyond what is in our
    fiscal year 2006 budget request would significantly improve our
    oversight of drug safety. Additional funding would enable the Agency to
    increase its access to large population-based databases and to develop
    software tools to manage and analyze the data. The following
    information provides background on the current postmarketing
    surveillance system and explains why we believe that system should be
    expanded.
         On February 15, 2005, HHS Secretary Leavitt and Acting FDA
    Commissioner Crawford unveiled a new, emboldened vision for FDA that
    will promote a culture of transparency, openness, and enhanced
    oversight within the Agency. As part of this vision, FDA plans to
    create a new Drug Safety Oversight Board or DSB to provide independent
    oversight and advice on the management of important drug safety issues
    and to manage the dissemination of certain safety information through
    FDA's web site to health care professionals and patients.
        Under this proposal, FDA plans to enhance the independence of
    internal deliberations and decisions regarding risk/benefit analyses
    and consumer safety. The DSB will oversee the management of important
    drug safety issues within CDER. The DSB will include individuals from
    FDA, as well as medical experts from other HHS agencies and government
    departments, such as the National Institutes of Health and Department
    of Veterans Affairs. Individuals on the Board who have conducted the
    primary review of data or served as deciding officials for any
    regulatory action under consideration will be recused from voting on
    issues concerning those particular drugs. CDER's Deputy Director will
    serve as the Chair of the DSB. The DSB also may consult with other
    medical experts and representatives of patient and consumer groups.
    CDER is updating its Manual of Policies and Procedures or MAPP, to
    reflect the organizational structure, roles, and responsibilities of
    the DSB in CDER. Among other responsibilities described in the MAPP,
    the DSB and its staff will; Identify, track, and oversee the management
    of important drug safety issues; Adjudicate organizational disputes
    concerning the management of drug safety issues; Establish policies
    regarding management of drug safety issues in CDER; Select drugs to be
    placed on Drug Watch (described below) and update their status
    (including deciding to remove drugs from Drug Watch) as appropriate;
    Oversee the development of patient and professional information sheets
    in CDER; Track important emerging safety issues and ensure that they
    are resolved in a timely manner; and Ensure that CDER decisions about a
    drug's safety benefit from the input and perspective of experts within
    and outside FDA who have not conducted the primary review or served as
    a deciding official in the ongoing pre-market evaluation or post-market
    surveillance activities with respect to that drug.
        FDA also plans to increase the transparency of the Agency's
    decision-making process by establishing new and expanding existing
    communication channels to provide drug safety information to the
    public. These communications will help ensure that established and
    emerging drug safety data are quickly available in an easily accessible
    form. The increased openness will enable patients and their health care
    professionals to make better-informed decisions about individual
    treatment options.
        One communication mechanism the Agency is proposing is a new Drug
    Watch webpage that would include emerging information about possible
    serious side effects or other safety risks for previously and newly
    approved drugs. Per our proposal, this resource would contain important
    information that might affect patient selection or monitoring
    decisions. The web resource might also contain information about
    measures that patients and practitioners could take to prevent or
    mitigate harm. Once implemented, this information resource will
    significantly enhance public knowledge and understanding of safety
    issues by discussing emerging or potential safety problems, sometimes
    even before FDA has reached a conclusion that would prompt a regulatory
    action.
        We are also intensifying our current efforts to provide the public
    with the most important information for the safe and effective use of
    drugs in patient-friendly language. We are doing this through two
    tools: Patient Information Sheets and Healthcare Professional
    Information Sheets.
        Patient Information Sheets.--Are intended to convey critical facets
    of a product's approved labeling in lay terms. These sheets will also
    include a section for ``emerging safety information'' in those
    instances when we determine that there is information on the Drug Watch
    that a patient should consider. This ``emerging safety information''
    will match the information on the Drug Watch. Information from the Drug
    Watch that is not in the final labeling of the product will be clearly
    identifiable and accompanied by a disclaimer, such as: ``This
    information reflects FDA's preliminary analysis of data concerning this
    drug. FDA is considering, but has not reached a final conclusion about,
    this information. FDA intends to update this sheet when additional
    information or analyses become available.'' Our ultimate objective is
    to develop Patient Information Sheets for all approved drugs, most of
    which will not have an emerging safety section.
        Healthcare Professional Information Sheets.--Are intended to
    highlight the most up-to-date information practitioners may want to
    consider in prescribing drugs for their patients. We ultimately intend
    to develop these sheets for all new molecular entities as well as some
    other drugs. This is not a new approach. When available, the highlights
    section of a product's approved labeling will be used to develop the
    Healthcare Professional Information sheets.
        We would be happy to provide a chart that provides estimates for
    costs associated with the activities announced by Secretary Leavitt in
    February.
        The activities described below were announced in February 2005 and
    we have an estimate of the total FTE resources that we plan to use to
    conduct these additional drug safety activities in fiscal year 2005 and
    fiscal year 2006. However, because we have just launched these new
    activities--the Drug Safety Oversight Board, the Drug Watch Web Page,
    and Patient and health care professional information sheets--we do not
    have an historical basis to definitively estimate the share of
    resources that each of these activities will command from the total
    resources allocated to perform the activities announced in February,
    2005. For example, we cannot reliably predict whether the work
    associated with the Drug Watch Web Page will be more or less demanding
    compared to the work to support the Drug Safety Oversight Board or to
    prepare the information sheets. However, we have committed a total of 8
    FTEs in fiscal year 2005 and 4 additional FTEs in fiscal year 2006 (for
    a cumulative commitment of 12 FTEs) to these three areas.
        [The information follows:]

                                                 DRUG SAFETY ACTIVITIES
    ----------------------------------------------------------------------------------------------------------------
                                                       Budgeted from current fiscal    Projected additional funding
                                                         year 2005 base resources     with fiscal year 2006 increase
               New Drug Safety Activities            ---------------------------------------------------------------
                                                        Dollars in                      Dollars in
                                                         millions       Amount FTE       millions       Amount FTE
    ----------------------------------------------------------------------------------------------------------------
    Drug Safety Oversight Board (DSB)...............  ..............  ..............  ..............  ..............
    Drug Watch Web page.............................  ..............  ..............  ..............  ..............
    Patient and Healthcare Professional Information   ..............  ..............  ..............  ..............
     Sheets and related drug safety communications
     efforts........................................
                                                     ---------------------------------------------------------------
          TOTAL.....................................           $1.08               8          $0.552               4
    ----------------------------------------------------------------------------------------------------------------

        Question. Do you believe additional funding beyond what is in the
    budget request will be necessary to significantly improve FDA's
    oversight of drug safety?
        Answer. We believe that the funding requested in the fiscal year
    2006 Budget for drug safety oversight, combined with other FDA
    initiatives, will significantly improve our oversight of drug safety.
    Today, FDA's post-marketing risk monitoring and assessment rely
    primarily on two methods of adverse event reporting to the Agency
    through direct, voluntary reporting by health professionals and
    consumers and required reporting by pharmaceutical manufacturers.
    Required reporting by manufacturers is based primarily on reports they
    receive voluntarily from user facilities, healthcare professionals, and
    consumers. In 2003, FDA received more than 370,000 such reports. The
    Agency's medical, statistical, and epidemiological experts use these
    reports to continually evaluate a product's safety profile. Our post-
    marketing monitoring programs focus primarily on identifying events
    that were not observed or recognized before approval and identifying
    adverse events that might be happening because a product is not being
    used as anticipated.
        The system has inherent limitations--mainly that it relies on
    healthcare providers being able to recognize and then voluntarily
    report an adverse event. We usually do not know if we are missing
    important problems or whether underreporting is obscuring a problem.
    During the past 7 years, we have made vast improvements in the way we
    manage and analyze this large amount of data. We now use a variety of
    electronic and statistical tools that have increased our ability to get
    information to our safety evaluators in a timely way, but these
    improvements do not address the inherent limitations in the system.
        The United States lacks a systematic approach to monitoring and
    assessing the safety of medicines that are in general use. This fact is
    particularly concerning for newly marketed products. In the case of a
    new drug, the only safety data we have comes from the product's use in
    clinical trials, where small numbers of carefully screened and closely
    monitored patients use a drug for a relatively short time period. The
    clinical trial world is very different from the real world where a drug
    is suddenly available to millions of people who may have multiple
    conditions, may be taking multiple drugs, and may be working with
    multiple healthcare providers. If the United States had a systematic
    approach to monitoring and assessing drug safety, it would contain
    systems to help identify and quantify risks, programs to investigate
    and analyze the risks, and methods to intervene and inform as needed to
    prevent further harm.
        To ensure that the FDA is fulfilling its responsibility to monitor
    the safety of drugs, we can no longer rely on information gleaned
    solely from voluntary reporting. Instead, the FDA needs a drug safety
    system dedicated to the timely collection, triage and analysis of post-
    marketing data. Such a Drug Safety Net would have four major
    components. The first component is access to large clinical and drug
    use data sets to help detect adverse events and medication errors and
    to conduct population-based safety studies. In fiscal year 2006, using
    the increased resources requested in the President's budget for drug
    safety activities, we estimate that we will allocate $2.24 million in
    budget authority and $0.4 million in user fees to this first activity.
    The second component is a network of partnerships to increase the power
    to detect problems. In fiscal year 2006, we estimate that we will
    allocate $0.8 million in budget authority and $0.2 million in user fees
    to this second component. The third component is strong analytic tools
    to rapidly identify drug safety signals. In fiscal year 2006, we
    estimate that we will allocate $1.4 million in budget authority and 0.5
    million in user fees for this third component. The fourth component is
    communicating timely and practical information to help healthcare
    providers and consumers make good choices regarding medicines. In
    fiscal year 2006, the estimated allocation for this fourth component is
    $0.5 million in budget authority and $0.2 million in user fees.
        To appropriately assess post-marketing safety of drugs, FDA needs
    access to a wide range of clinical, pharmacy, and administrative
    databases. Given the highly fragmented healthcare system in the United
    States, there is no single healthcare database that the Agency can rely
    on to monitor drug adverse events. It is essential that the FDA have
    access to a wide range of databases to adequately assess drug safety.
    Such databases include: Existing Federal databases, such as those
    maintained by the Center for Medicare and Medicaid Services (CMS), the
    Department of Veterans Affairs (VA), the Department of Defense (DOD),
    the Indian Health Service (IHS); clinical and hospital networks, and
    insurers, for example, health maintenance organizations, preferred
    provider organizations, Blue Cross/Blue Shield; and pharmacy benefit
    management organizations such as Advance PCS, Premier.
        In addition, access to a greater variety and breadth of data will
    give the FDA the opportunity to perform broad epidemiologic studies
    that can examine the risks of adverse events and the risk factors
    associated with these events for individual medicines or drug classes.
        Tools to manage and analyze the large databases described above are
    essential if the value of the information contained therein is to be
    realized. The FDA is currently pilot testing tools such as desktop data
    mining techniques. A much greater effort is needed on the part of the
    FDA, in consultation with experts in government, academia, the private
    sector, and the pharmaceutical industry, to help us realize the
    potential of these data mining and analysis tools.

                                    MERCURY

        Question. The fiscal year 2005 Senate Report included language
    encouraging FDA to ``implement an outreach and education effort with
    physicians and other appropriate outlets in order to increase awareness
    among potentially affected consumers, and to measure the effectiveness
    of the efforts on target group behavior and impact on their overall
    consumption of seafood.'' The EPA is currently working to determine and
    outline what safe levels of mercury are.
        What has FDA done in response to the Senate report language? How is
    FDA working with EPA on the mercury issue?
        Answer. FDA and EPA are jointly sponsoring a public education
    campaign to reach women who may become pregnant, pregnant women,
    nursing mothers, and parents of young children about the methylmercury
    advisory. An extensive outreach effort to over 9,000 print and
    electronic media outlets, including outlets that specialize in reaching
    women, has been conducted.
        Information about the advisory has been sent to over 50
    organizations of health care providers to women and children, such as
    the American Academy of Pediatrics, the American Academy of Family
    Physicians, the American College of Obstetricians and Gynecologists,
    and the American College of Nurse Midwives; directors of the Women,
    Infant, and Children, or WIC, program; and all local health
    departments. The advisory has also been distributed through exhibits at
    medical professional association meetings that took place in 2004 and
    will be distributed at similar meetings scheduled during 2005.
        Brochures about the methylmercury advisory have been sent to
    practicing pediatricians, obstetricians and gynecologists, nurse
    midwives, and nurse practitioners and physician assistants specializing
    in pediatrics or obstetrics throughout the country for distribution
    through their offices. These health professionals can order additional
    copies of the brochure, as needed, from FDA and EPA for their patients.
    In November and December of 2004, EPA and FDA were filling additional
    requests for these brochures at a rate of approximately 35,000
    brochures per week.
        An educational program for pregnant women on food safety for use by
    health educators will be launched in spring 2005 that will highlight
    information from the methylmercury advisory. This program will include
    an educational video and a curriculum and will be sent to 35,000 health
    educators working with pregnant women. A special web page for pregnant
    women will be part of the program.
        Special funding has been set aside for community outreach efforts
    in several different geographic locations to insure that the message
    reaches women in special populations at greater potential exposure.
    Examples include Native Americans and certain Hispanic and Asian groups
    who have high fish consumption practices. Some of these projects are
    already underway; others will begin later this year.
        A Federal-State Working Group on the Coordination of Methylmercury
    advisories has been established to examine ways to join the Federal
    advisory with the State advisories as much as possible.
        This outreach campaign will be evaluated through the FDA-USDA
    consumer survey on food safety knowledge, attitudes, and behaviors that
    will be completed in 2005.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                                IMPORTED GELATIN

        Question. Imports into the United States of gelatin and gelatin
    products, such as unfilled capsules, have increased significantly since
    2000. U.S. producers of gelatin products have raised serious questions
    about the safety of the raw materials and manufacturing practices used
    in facilities producing gelatin for shipment to the United States. It
    is my understanding that Food and Drug Administration inspectors have
    not to date inspected any gelatin-producing facilities in developing
    countries.
        In particular, imports of these products from India have increased
    nearly 1300 percent over the period since 2000. In fact, many countries
    bar beef exports from India because of widespread cattle and livestock
    diseases, such as rinderpest and foot and mouth disease. Those diseases
    should not be a problem if the gelatin is produced with modern
    manufacturing practices, but without FDA inspection it could not be
    known what practices and facilities are used in gelatin production in
    India. Further, although the Indian cattle population is deemed to be
    BSE-free by the OIE, that alone would not assure the wholesomeness and
    safety of cattle products and byproducts from India--including gelatin
    produced from cattle bones.
         What criteria does FDA use to determine which overseas food
    processing facilities it should inspect as a condition of shipping to
    the United States and which it should allow to ship products to the
    United States without any inspection?
        Answer. In general, FDA focuses foreign inspections on the same
    high-risk food products highlighted for domestic coverage, and FDA does
    not inspect overseas food processing facilities as a condition of
    shipping products to the United States. The number of foreign
    inspections conducted each year for CFSAN regulated products is
    minuscule compared to the number of firms exporting to the United
    States. For these reasons, it is very important that FDA carefully
    select the foreign firms it inspects. The results of triaging the
    Center's ``databases'' of inspectional information are used to better
    identify the risks associated with particular imported products and
    allow the Center to prioritize and efficiently use resources to inspect
    at the port of entry or for onsite inspections in the identified
    foreign countries. The Center must assure the broadest use of the
    information obtained by carefully selecting the products, firms and
    countries to be as representative as possible.
        Countries are selected if they are significant sources of product
    for U.S. markets or if FDA identifies or suspects there is a food
    safety or security concern that must be further evaluated. Product
    selections focus on products produced commercially and shipped in large
    quantities into the United States or shipped in smaller quantities but
    intended for consumption by vulnerable populations. These inspections
    are considered ``mission critical.''
        Question. By what date can this Committee be assured that FDA will
    have inspected the plants in India from which gelatin shipments to the
    United States are made?
        Answer. FDA does not have the authority to require inspection of
    foreign facilities and the agency must be invited by the country of
    interest to inspect facilities in that country. This process can become
    quite protracted, and requires coordination with the authorities of the
    exporting country. The first step in scheduling inspections of foreign
    food manufacturers is to contact the regulatory agency in India that
    has authority over the firms to be inspected.
        CFSAN has tentatively identified 12 gelatin manufacturing
    facilities in India that it would like to inspect. FDA also hopes to
    inspect some of the bone suppliers to these gelatin manufacturing
    facilities as they are identified. The Indian agency with regulatory
    authority over gelatin manufacturers usually provides a representative
    to accompany the FDA investigator during the inspections.
        FDA has initiated contact with the regulatory agency in India and
    expects to conduct inspections during this fiscal year.

              NATIONAL ANTIMICROBIAL RESISTANCE MONITORING SERVICE

        Question. The National Antimicrobial Resistance Monitoring Service
    (NARMS) is a tool used by three Federal agencies--the Food and Drug
    Administration (FDA), the Department of Agriculture (USDA), and the
    Centers for Disease Control and Prevention (CDC)--to monitor changes in
    antimicrobial resistance in bacterial pathogens.
        In December of 2004, I submitted a request to you for more
    information about the operation of NARMS and the distribution of NARMS
    funds, but I have not received any new information about this important
    program.
        Answer. On March 7th, 2005, FDA sent a response to you addressing
    your request for information about the operation of NARMS and the
    distribution of NARMS funds. We would be happy to provide a copy of
    this letter, for your convenience.
        Question. Have FDA, USDA and CDC planned a meeting to discuss the
    distribution of NARMS fiscal year 2005 funds?
        Answer. Quarterly meetings on NARMS are conducted and the budget is
    one of the items discussed. In addition, FDA is planning an independent
    external review of all three components of the NARMS program including
    human, retail meat, and slaughter, in conjunction with a public
    meeting, June 23-24, 2005, to address sampling issues and how the NARMS
    funds have been spent as well as other issues. If there are any
    particular Senate staff members whom you would like us to invite to
    this meeting, please let us know.
        Question. When will the annual report on NARMS activities for 2002
    and 2003 be prepared and released to the public?
        Answer. FDA published the first annual NARMS retail meat report on
    September 30, 2004. This can be found on line at the NARMS website. See
    http://www.fda.gov/cvm/narms_pg.html. This report provides data on the
    prevalence of antimicrobial resistant foodborne pathogens and commensal
    bacteria among retail meat and poultry samples. The 2003 retail meat
    report is currently in preparation. CDC is responsible for the annual
    report on the human arm of NARMS and USDA for the animal arm of NARMS.
    CDC and USDA annual reports can also be viewed from the NARMS website.
        Question. What was the level of funding for NARMS in fiscal year
    2004, and what are the current expenditures (fiscal 2005) for this
    program?
        Answer. FDA's total funding of NARMS in fiscal year 2004 was $7.6
    millions and $7.3 million in fiscal year 2005. This level reflects both
    the fiscal year 2005 across the board rescission and FDA efforts,
    announced in the fiscal year 2005 Congressional Justification, to find
    efficiencies across FDA programs.
        Question. How are NARMS funds being distributed among FDA, USDA and
    CDC, and what specific activities are being conducted through this
    program?
        Answer: At this time, FDA has not determined the exact amount of
    the National Antimicrobial Resistance Monitoring System, or NARMS,
    funding for FDA, CDC and USDA for fiscal year 2006 but plans to make
    decisions in the Fall of 2005. FDA believes that all three arms are
    integral to the success of the NARMS program and to achieve the
    benefits envisioned at its inception and agreed upon by all three
    agencies. The Agency has continued the retail meat arm of NARMS at FDA.
    Ten participating FoodNet sites collect samples from local grocery
    stores and submit the isolates to the FDA laboratory for antimicrobial
    susceptibility testing. This allows FDA to have a more representative
    picture of the contribution of the food supply to antimicrobial
    resistance and helps sponsor with their antimicrobial drug submissions
    to FDA under GFI#152. In addition, FDA has improved NARMS methods
    including the development of a standardized Campylobacter broth
    microdilution method approved by the National Committee for Clinical
    Laboratory Standards, and completed the first annual NARMS retail meat
    report on September 30, 2004 which can be found on line at http://
    www.fda.gov/cvm/narms_pg.html. This report provides data on the
    prevalence of antimicrobial resistant foodborne pathogens and commensal
    bacteria among retail meat and poultry samples. Also, FDA has enhanced
    the robustness of the NARMS retail meat arm by training personnel in
    participating State public health labs in isolation and testing
    methodologies as well as instituted randomized sampling strategies;
    screened animal feeds and animal feed components for the presences of
    resistant pathogens including Salmonella, E. coli and Enterococcus;
    presented numerous abstracts, posters, and scientific talks on NARMS at
    national and international scientific meetings. CDC and USDA also have
    accomplished numerous activities under NARMS. Please contact CDC and
    USDA directly for information on their specific activities under NARMS.
                                     ______

                 Questions Submitted by Senator Byron L. Dorgan

                  MANUFACTURING SUPPLEMENTS AND ANNUAL REPORTS

        Question. How many applications did the FDA receive and review from
    drug manufacturers under section 506A of the Federal Food, Drug, and
    Cosmetic Act in fiscal year 2004? How many of those applications were
    approved?
        Answer. I would be happy to provide that for the record.
        [The information follows:]

        Question. How many drug manufacturing facilities has the FDA
    inspected overseas from fiscal year 2000 through fiscal year 2004? In
    how many countries are those facilities located? Please provide a list
    of those countries.
        Answer. For fiscal year 2000-fiscal year 2004 FDA conducted 1,159
    inspections at 858 facilities located in 41 foreign countries. These
    inspections took place in: Italy, Germany, United Kingdom, Canada,
    India, France, Japan, China, Switzerland, Ireland, Spain, Sweden,
    Netherlands, Denmark, Belgium, Mexico, Australia, Israel, Austria,
    Czech Republic, Hungary, Taiwan, Singapore, Slovenia, Finland, South
    Africa, South Korea, Portugal, Norway, Turkey, Croatia, Argentina,
    Romania, Jordan, Poland, Slovakia, Russia, Thailand, Macau, Latvia, and
    Malta.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                           SINGLE FOOD SAFETY AGENCY

        Question. Currently, Federal oversight for food safety is
    fragmented with at least 12 different Federal agencies and 35 different
    laws governing food safety. There are also dozens of House and Senate
    subcommittees with food safety oversight. With overlapping
    jurisdictions and scattered responsibilities, Federal agencies often
    lack accountability on food safety-related issues and resources are not
    properly allocated to ensure the public health is protected. The recent
    rise of concerns about antibiotic resistance transferred from food
    animals to humans and mad cow disease underscore the need for change.
    Our Federal food safety statutes need to be modernized to more
    effectively ensure that food safety hazards are minimized and research
    and education programs are bolstered. I introduced a bill last week--S.
    729--that would do just that.
        President Bush and former Homeland Security Secretary Ridge have
    both publicly discussed the concept of combining Federal food safety
    responsibilities into a single agency, and outgoing HHS Secretary Tommy
    Thompson noted in December that he had trouble sleeping at night,
    worrying about attacks on our food supply.
        Just last Thursday, the trade press reported that Gerald Masoudi,
    FDA's chief counsel, said the lack of coordination among the agencies
    with responsibility for beef safety as one of the greatest challenges
    to protecting the public against mad cow disease. Masoudi said: ``The
    responsibility of contaminated food products is spread out among three
    Federal agencies that do not regulate the problem in a consistent
    manner.''
         With all these high-ranking officials raising concerns about the
    safety of the food supply, has FDA decided to embrace the concept of a
    single food safety agency? What do you see as the disadvantages of
    combining the Federal food safety agencies into a single agency? Are
    there any advantages?
        Answer. Over the years, there has been much discussion about
    consolidating all food safety, inspection, and labeling functions into
    one agency with the intention of increasing the effectiveness of the
    food safety system. In 2002, the White House examined into food safety
    issues, including the single food agency issue, and concluded that the
    goals of the Administration are better advanced through enhanced
    interagency coordination rather than through the development of
    legislation to create a single food agency.
        From FDA's viewpoint, the important question is whether the various
    Federal agencies with food safety authorities are working together
    effectively. The answer to that question is yes. The existing system is
    working. The American food supply continues to be among the safest in
    the world. Food safety agencies are working more closely together than
    ever before.
        With regard to the Federal Government's efforts to protect the
    public from mad cow disease, or Bovine Spongiform Encephalopathy known
    as BSE, the Federal agencies with responsibility for food and animal
    feed have a harmonized national food safety policy for BSE. For
    example, the Interim Final Rule published by FDA that bans the use of
    specified risk materials and other prohibited cattle materials in all
    FDA-regulated foods and cosmetics parallels USDA's Interim Final Rule
    for meat and meat products. Both FDA and USDA closely coordinated the
    Federal Government's actions in response to the finding of a BSE-
    positive cow in the State of Washington in December 2003. This
    coordinated response was successful in quickly containing adulterated
    food and feed products and in limiting food safety concerns in the
    general public.
        FDA appreciates your continued leadership in food safety issues.
    Ensuring the safety of the food supply is a top priority for FDA and
    for the Administration. A great deal has been done in the past few
    years to improve food safety and security. FDA has worked with food
    safety agencies at the Federal, State and local levels to significantly
    strengthen the Nation's food safety system across the entire
    distribution chain, from farm to table, to better protect our food
    supply against deliberate and accidental threats. This cooperation has
    resulted in greater awareness of such vulnerabilities, the creation of
    more effective prevention programs, new surveillance systems, and
    faster foodborne illness outbreak response capabilities. An effective
    food defense system is built on a strong food safety system.
        The fiscal year 2006 budget requests an increase of $30 million for
    food defense activities. Of this amount, $20 million will support a
    national laboratory network known as the Food Emergency Response
    Network, or FERN. FDA and USDA have worked in close collaboration to
    establish this network. A critical component of controlling threats
    from deliberate food-borne contamination is the ability to rapidly test
    large numbers of samples of potentially contaminated foods for a broad
    array of biological, chemical, and radiological agents. FERN will
    increase the Nation's laboratory surge capacity through a nationwide
    network of Federal and State laboratories capable of testing the safety
    of thousands of food samples, thereby enhancing the Nation's ability to
    swiftly respond to a terrorist attack. The additional $10 million will
    be used for targeted food defense research, for continued coordination
    and sharing of data with the Department of Homeland Security as part of
    the government-wide Bio-Surveillance Initiative, and for upgrades in
    FDA's crisis management capabilities.
        Significant new tools to enhance the safety of the food supply were
    provided by the Public Health Security and Bioterrorism Preparedness
    and Response Act also know as the Bioterrorism Act, which the President
    signed in 2002. This landmark legislation represents the most
    fundamental enhancement to FDA's food safety authorities in many years,
    and FDA has been working hard to implement it. In response to the
    provisions included in the Bioterrorism Act, FDA has: Published a final
    rule to implement recordkeeping requirement on 12/9/2004; Published a
    final rule to implement the administrative detention provision on 6/4/
    2004; Signed a Memorandum of Understanding with Customs and Border
    Protection or CBP, on 12/3/2003 to allow FDA to commission CBP officers
    in ports and other locations to conduct investigations and examinations
    of imported foods; and Published Interim Final Rules to implement the
    requirement for domestic and foreign facilities to register with FDA
    and the requirement for prior notice of imported food on 10/10/2003.
        In addition to implementing the Bioterrorism Act, FDA has many
    other ongoing counterterrorism activities. For example, since September
    11, 2001, FDA has increased its emergency response capability by
    realigning resources to counterterrorism and by reassessing and
    strengthening its emergency response plans. FDA has also conducted
    numerous emergency response and preparedness exercises to further
    strengthen our response to a terrorist event involving our Nation's
    food supply. These exercises have included Federal, State, and industry
    partners.
        FDA has completed vulnerability assessments focused on specific
    foods, suspect agents, and processing steps where an agent could be
    intentionally introduced. These vulnerability assessments have assisted
    the agency in focusing on those commodities considered to be most at
    risk for intentional contamination. Government and industry have worked
    together on specific and targeted mitigation steps to address the
    vulnerabilities identified in our assessments. These assessments have
    also assisted the agency in focusing intramural and extramural research
    on four major areas: new methods for detection of agents, prevention
    technologies, agent characteristics, and dose response.
        FDA has also issued food security guidance documents to different
    segments of the food industry on the preventive measures they can take
    to minimize the risk that food or cosmetics under their control will be
    subject to tampering or other malicious, criminal, or terrorist
    actions.
        Other Counterterrorism Activities over past 3 years include:
    Increasing laboratory surge capacity by expanding participation in the
    Food Emergency Response Network, constructing BSL-3 laboratories in the
    Field and supporting the construction and deployment of two mobile
    laboratories; Enhancing an early-warning system to identify hazardous
    foods by expanding the number of Federal, State, and local laboratories
    providing data through our Electronic Laboratory Exchange Network;
    Conducting numerous research projects to improve our ability to detect
    contamination, focusing on rapid test methods for use in the Field;
    Carrying out food defense activities under Homeland Security
    Presidential Directives; the Interagency Security Plan; the Secretary's
    Bioterrorism Strategic Plan; and FDA's Strategic Action Plan; Enhancing
    FDA's ability to plan, manage, and respond to food emergencies through
    the Emergency Operations Network or EON, an electronic incident
    management system; and Enhancing law enforcement and intelligence
    gathering/analysis by, for example, participating in select Joint
    Terrorism Task Forces and establishing a dedicated Counterterrorism
    Section in FDA's Office of Criminal Investigations.
        Question. Do you believe the creation of the Department of Homeland
    Security could serve as a model for the creation of a single food
    safety agency?
        Answer. As we explained in our response to the previous question,
    the Administration has looked at the issue of consolidation and has
    determined that the goals of the Administration are better advanced
    through enhanced interagency coordination rather than through
    consolidation.
        Question. Can you explain the rationale for cutting back the
    inspections budget for all FDA products at a time when we are facing
    greater risks to the food supply?
        Answer. FDA's Field Program budget has increased every year since
    fiscal year 2002. However, as Agency resources for particular programs
    and activities fluctuate due to funding changes, budget priority
    changes or demands of higher priority work, we have responded by
    working to ensure that we use available resources strategically.
        To manage the ever-increasing volume of imported food shipments, we
    are using risk management strategies to achieve the greatest food
    protection with our available resources. While we cannot physically
    inspect every shipment, it is important to note that every shipment
    containing FDA-regulated products entered through the Bureau of Customs
    and Border Protection's (CBP) automated system is electronically
    reviewed by FDA's system. FDA's system, OASIS, determines if the
    shipment meets identified criteria for physical examination or sampling
    and analysis or warrants other review by FDA personnel. This electronic
    screening allows FDA to concentrate its inspection resources on high-
    risk shipments while allowing low-risk shipments to proceed into
    commerce.
        The Prior Notice provision of the Public Health Security and
    Bioterrorism Preparedness and Response Act of 2002 provided a
    significant new tool to the agency. It requires that FDA receive prior
    notice before food is imported or offered for import into the United
    States. Advance notice of imported food shipments, called ``Prior
    Notice,'' allows FDA, with the support of the CBP, to target import
    inspections more effectively and help protect the Nation's food supply
    against terrorist acts and other public health emergencies. With the
    new prior notice requirement, specific information mandated by the
    Bioterrorism Act must be submitted to FDA before the imported food
    arrives in the United States. This not only allows the electronic
    system to review and screen the shipments for potential serious threats
    to health (intentional or otherwise) before food arrives in the United
    States, but it also allows for FDA staff review of prior notices for
    those products flagged by the system as presenting the most significant
    risk. FDA worked very closely with CBP in developing this screening
    system. FDA receives approximately 27,000 prior notice submissions
    about incoming food shipments every day. The Prior Notice electronic
    system uses intelligence data, known risk factors, and information
    about the shipper and consignee to identify prior notice submissions
    that warrant additional scrutiny for security purposes.

                                 SEAFOOD SAFETY

        Question. The New York Times reported on Sunday, April 10, that six
    out of eight major stores selling salmon as wild were in fact selling
    farm-raised salmon labeled as wild salmon. As you know, in the last 2
    years, scientific bodies have warned that farm-raised salmon contains
    higher levels of polychlorinated biphenyls, or PCBs, then wild salmon.
    The EPA says PCBs can cause cancer and other effects on the immune
    system, the reproductive system and the endocrine system. So consumers
    are paying premium prices for what they may consider ``safer'' salmon,
    and they are not getting what they pay for.
        What is FDA doing to investigate this potential case of misbranding
    that may affect the public health? Does the agency have plans to
    implement a more rigorous sampling system to ensure that consumers are
    in fact buying what is on the label?
        Answer. Reported polychlorinated biphenyls or PCBs residue levels
    found in farmed salmon are far below the FDA's tolerance level of 2
    parts per million for total PCBs in fish tissue and do not justify any
    restrictions in fish consumption. FDA advises that consumers should not
    alter their consumption of salmon. This fish is an excellent source of
    protein and omega 3-fatty acids. From a public health perspective,
    there is no need to make a distinction between farmed vs. wild salmon.
    Both are low in chemical contamination and should be consumed as a part
    of healthy, nutritional diet.
        FDA has limited ability to increase enforcement action of labeling
    violations. In the broader interest of the consumer, food safety issues
    continue to take precedence. Moreover, most of the alleged misbranding
    occurred in retail establishments. In these cases, FDA usually defers
    to the States in matters related to retail food safety. The
    Agricultural Marketing Service, or AMS, recently announced mandatory
    labeling of fish and shellfish in retail food stores to indicate
    country of origin and method of production (i.e., wild-caught or farm-
    raised). AMS is responsible for implementing this country of origin
    labeling program, which went into effect on April 4, 2005.
        Question. With most food plants going un-inspected for 5 years or
    more at a time, what resources do you need to assure the food industry
    that the cop is on the beat?
        Answer. Inspection frequencies vary depending on the products
    produced and the nature of the establishment, although our statistics
    indicate that it is not true that most food plants go un-inspected for
    5 years or more. Inspection priorities may be based on a firm's
    compliance history or coverage of new firms that have not been
    previously inspected. Food firms producing high-risk products are
    inspected annually with provisions that allow for less frequent
    inspections of high-risk firms that have a good inspection history.
    After accounting for resources needed to cover their high-risk
    responsibility, FDA districts apply their remaining resources,
    including available State contract inspections, to non-high risk food
    firms in their jurisdictions. On average, non-high risk establishments
    are inspected once every 3.7 years. These include FDA, State contract,
    and State partnership inspections. In fiscal year 2006, the requested
    funds will provide for a total of 21,325 domestic inspections. Of
    these, FDA investigators will perform 10,025 inspections and States
    will perform 11,300 inspections. These 11,300 State inspections include
    an estimated 2,000 State partnership inspections which are voluntarily
    provided. In addition, FDA follows up on consumer and trade complaints,
    voluntary recalls conducted by the industry.

                               DIETARY SUPPLEMENT

        Question. The agency has promised to finalize the regulations for
    the last several years and both consumer groups and the dietary
    supplement industry agree that these requirements would go a long way
    toward implementing the Dietary Supplement Health and Education Act of
    1994.
        What is the status of the final rule on dietary supplement good
    manufacturing practices?
        Answer. The proposed rule was published on March 13, 2003, and
    included responses to numerous comments received after publication of
    the ANPRM in 1997. The comment period for the proposed rule was
    extended until August 2003. We held public stakeholder meetings on
    April 29, 2003 in College Park, MD, and on May 6, 2003 in Oakland, CA.
    We also held a public meeting, via satellite downlink, on May 9, 2003,
    with viewing sites at our district and regional offices throughout the
    country. After the comment period closed, we began the process of
    analyzing the comments submitted to the proposed rule. The issues
    raised by the comments are complex, and in some cases, novel. We have
    expended significant internal resources on reviewing and preparing
    responses to the comments received.
        The publication of a final rule on the current good manufacturing
    practice requirements for dietary supplements is a very high priority
    at FDA's Center for Food Safety and Applied Nutrition. I can assure you
    that this final rule is one of FDA's highest priorities and will be
    published as soon as possible.
        I have been working with Senator Hatch to develop a requirement
    that dietary supplement companies report serious injuries, known as
    adverse events, to FDA. FDA's support would GREATLY speed our progress.
        Question. Would you support our efforts to require mandatory
    adverse event reporting?
        Answer. At this time, the Administration has not established a
    position on legislative proposals requiring manufacturers of dietary
    supplements to report serious adverse events related to use of their
    products to the FDA.
        Following the removal of ephedra from the market in 2003, FDA said
    it would conduct a full safety review of the twelve dangerous
    supplements identified by Consumer Reports by October 2004. This has
    not happened, to my knowledge, even though four of these supplements
    that are known to be carcinogenic or to cause liver failure--
    aristolochic acid, androstenedione, chaparral, and kava--appeared with
    warnings on FDA's website.
        Question. What is the status of FDA's review of the dozen dietary
    supplements that have been identified as dangerous by Consumer Reports?
        Answer. Under section 402(f)(1)(A) of the Federal Food, Drug, and
    Cosmetic Act (21 U.S.C. 342(f)(1)(A)), a food is considered adulterated
    if, among other things, it is a dietary supplement or contains a
    dietary ingredient that presents a significant or unreasonable risk of
    illness or injury under the conditions of use recommended or suggested
    in labeling, or if no conditions of use are suggested or recommended in
    the labeling, under ordinary conditions of use. FDA bears the burden of
    establishing that the product presents a significant or unreasonable
    risk. We continually monitor the marketplace and the scientific
    literature to identify dietary supplements and dietary ingredients that
    may present safety concerns. Regulatory actions are based upon the
    totality of the scientific evidence available, including the
    pharmacology of the substance, scientific literature, adverse event
    reports, and evidence-based reviews.
        We continue to consider emerging information on the safety of all
    dietary supplements, including those listed in the Consumer Reports
    Magazine article, as it becomes available. Based on information
    available to FDA at this time, we have no basis to conclude that any of
    the dietary supplements containing the substances identified in the
    Consumer Reports Magazine article violate the act.

                                    MAD COW

        Question. I requested, with Senators Harkin, Cochran and Chambliss,
    a GAO report which found that FDA's oversight of the feed ban contains
    ``program weaknesses that continue to undermine the Nation's firewalls
    against BSE.'' While FDA has banned the use in cattle feed of certain
    cattle parts suspected to cause BSE transmission, there are loopholes
    in the ban and loopholes in its enforcement. The report suggested that
    FDA more frequently inspect animal feed facilities, sample cattle feed
    for the presence of banned materials, and work more closely with USDA.
    You introduced legislation last year, S. 2007, that we are in the
    process of revising to concur with these recommendations.
        How will FDA address the recommendations in the new GAO report
    highlighting weaknesses in FDA's enforcement of the feed ban, such as
    implementing more frequent inspections and testing for banned
    materials?
        Answer. As noted in the FDA response to the GAO report, while a few
    areas to further strengthen the feed ban program were identified, for
    which FDA has or will implement the recommendations suggested, FDA does
    not believe that material weaknesses were identified.
         It is important to understand that FDA's risk-based approach to
    implementation of the ruminant feed ban regulation. This regulation
    potentially impacts a wide variety of firms involved in the animal feed
    industry. For example, every firm that manufactures, transports,
    distributes or sells animal feed or feed ingredients for any animal
    species is subject to inspection under the FDA ruminant feed ban
    compliance program, regardless of whether prohibited material is
    utilized. Even swine and poultry farms that mix their own feed and
    grocery stores that sell pet food are potentially subject to inspection
    under this rule. All operations that involve feeding ruminants, such as
    dairy and beef cattle are also subject to the rule. In consideration of
    the limited resources for inspecting this large population of firms,
    FDA is obligated to set priorities for inspecting a meaningful
    subpopulation of these regulated firms.
        FDA informs FDA and State investigators of its inspection
    priorities via its publication of the BSE/Ruminant Feed Inspection
    Compliance Program guidance document. FDA's highest inspection priority
    is firms that manufacture or process animal feeds or feed ingredients
    that contain prohibited material. It is most important that these
    products are not used for ruminant feed so this industry segment, which
    includes renderers, protein blenders, and feed mills, is inspected on
    an annual basis.
        Firms outside of this segment generally, have a lower inspection
    priority since they pose a lower risk of producing contaminated feed.
    Other segments, such as cattle feeders, are of interest to the FDA, but
    according to estimates, there are over one million ruminant feeders in
    the United States. The agency continues to develop and utilize
    educational tools to complement inspections and to promote voluntary
    compliance in these large industry segments. FDA will additionally
    implement inspectional initiatives to increase its presence in some of
    these less inspected segments, such as transporters and animal feed
    salvagers, based upon our assessment of compliance and risk in these
    industry sectors.
        FDA has been collecting and testing animal feed samples since
    August 18, 2003, when FDA issued a sampling assignment to the FDA field
    staff for the collection of 600 domestic samples. In fiscal year 2005,
    we will collect 900 samples for testing. The characteristics of the
    ruminant feed ban sampling assignment are unique and more complex when
    compared to other FDA sampling programs. Other programs are more simply
    based on a methodology that can definitively detect the presence of the
    objectionable contaminant or pathogen. Further, the nature of the
    contaminants in some of the other programs allows for the establishment
    of tolerance levels. The mere detection of a pathogen or some of these
    other contaminants, in excess of an established tolerance, is
    sufficient to consider the sample violative in these other programs. In
    contrast to these other programs, analytical findings alone under the
    ruminant feed ban program do not establish that the sample violates the
    ruminant feed ban rule. As the ruminant feed ban sampling assignment
    notes, positive analytical findings necessitate follow-up evaluations
    to determine whether the findings were indeed the result of a violation
    of the ruminant feed ban regulation.
         Since no test currently exists for the detection of the infectious
    prion agent that causes BSE in feed, analysis of feed is not, by
    itself, a means of verifying the safety of cattle feed. Additionally,
    feed microscopy and/or PCR analytical results alone are not adequate to
    make compliance decisions about whether or not the presence of
    materials does or does not comply with the provisions established in
    the ruminant feed ban rule. The feed microscopy method has limitations
    and the rule has exemptions. Feed microscopy generally can only detect
    the presence of mammalian tissue, through the identification of either
    bone or hair. In certain other situations, feed microscopy can only
    detect the presence of animal tissue when blood is detected. The
    present ruminant feed ban allows for certain exemptions regarding the
    application of the mammalian protein prohibition. Exempted materials
    include pure porcine meat and bone meal, blood from any animal species,
    including ruminants; gelatin, and milk protein. Further, there is no
    prohibition on the use of non-mammalian proteins such as poultry meal.
    The detection of certain non-specific materials, such as bone or
    muscle, may be the result of exempt ingredients, such as ruminant blood
    meal, pure porcine meat and bone meal, or poultry meal. PCR has similar
    limitations since the test cannot differentiate between prohibited
    material ingredients and certain ruminant-containing exempt
    ingredients, such as ruminant blood, ruminant milk products, and plate
    waste. Since feed microscopy and PCR cannot differentiate prohibited
    material from other acceptable materials, the analytical results cannot
    be used to verify the presence of prohibited material, nor can they be
    used for confirming the adequacy of clean-out measures. When research
    identifies new or better means of identifying the agent that causes BSE
    in feed or the presence of prohibited material in feed, FDA will
    further assess how best to use sampling and testing to ensure the
    safety of animal feed.
         We have attached FDA's full response to the nine GAO
    recommendations for executive action for your information.
        Question. When does FDA intend to ban cattle feed materials that
    carry a risk of BSE transmission, such as poultry litter and plate
    waste?
        Answer. In July 2004, FDA published jointly with the USDA an
    advance notice of proposed rulemaking, ANPRM, requesting comments and
    scientific information on possible measures that would strengthen the
    animal feed regulations.
        See http://www.fda.gov/OHRMS/DOCKETS/98fr/04-15882.htm. As part of
    the ANPRM, FDA also announced that the Agency had tentatively decided
    to issue a proposed rule to implement the International Review Team's
    main recommendation to prohibit the use of specified risk materials in
    all animal feed. Such a prohibition of specified risk materials may
    preclude the need for prohibiting additional ingredients, such as
    poultry litter. The present prohibition of specified risk materials in
    foods for human consumption implemented with the rules published by
    USDA and FDA in January and July 2004, respectively, may obviate the
    need for prohibiting plate waste and other human food product waste.
    FDA analyzed the comments and information received in response to the
    ANPRM and is currently preparing a proposed regulation that would
    prohibit the use of certain cattle material that carry the risk of BSE
    transmission in all animal feed. In developing the proposed regulation,
    the agency is examining the economic and environmental effects that
    would be involved with this proposed measure. The proposed regulation
    is presently undergoing internal Agency review as part of the clearance
    process.

                                  DRUG SAFETY

        Question. Serious pain medication and antidepressant side effects
    are the latest in a series of problems that have come to light publicly
    several years after the drugs were approved by FDA. It has been
    suggested that FDA appears to be holding back on the release of
    negative information about new drugs. Companies are not required to
    publish all the drug safety studies they conduct, but they must provide
    these studies to FDA.
         While the painkillers Vioxx and Bextra have been removed from the
    market pending the inclusion of an improved warning label, what are
    FDA's plans for letting the public know in a more timely manner the
    results of drug studies that do not necessarily favor the drugs?
        Answer. FDA has authority to determine that a drug is misbranded if
    its labeling is false or misleading and can seek judicial relief to
    mandate changes to the label or take action to remove the product from
    the market. Both of these actions take time. The process would normally
    begin with a warning letter to the company expressing FDA's position,
    and the company would have a chance to respond. Unless the company
    voluntarily made the changes, FDA would then have to pursue judicial
    relief, a time-consuming process. For FDA to remove the product from
    the market over a sponsor's objections, FDA would consider whether the
    risks of marketing the product with false or misleading labeling
    outweighed the benefits for the population of patients that use the
    product. The risks may not outweigh the benefits for many drugs, and
    again, the procedures for removing a drug from the market if the
    sponsor does not agree to stop marketing are very time consuming. They
    require publication of a notice and opportunity for hearing in the
    Federal Register, and a possible administrative hearing if the sponsor
    demonstrates that there is a genuine issue of material fact to be
    decided in a hearing.
        We understand the concern regarding the time involved in
    negotiating labeling changes with the company. However, as Dr. Janet
    Woodcock emphasized in testimony before the Senate HELP Committee last
    March, another significant issue is that once a label change is made,
    old labels in paper form are still in distribution and it takes time to
    get newer labels in circulation. Dr. Woodcock testified that the new
    strategy of posting drug safety information sooner using the Drug Watch
    mechanism will help alleviate this concern because it will enable the
    FDA to get information directly to the people who need it in a timely
    manner. We are confident that the new drug safety actions we are
    implementing will help to ensure that consumers and healthcare
    practitioners will have access to the most recent safety concerns with
    drug products. As we explained in our response to a previous question,
    we are proposing a Drug Watch Web Page that would include emerging
    information for both previously and newly approved drugs about possible
    serious side effects or other safety risks that have the potential to
    alter the benefit/risk analysis of a drug, affect patient selection or
    monitoring decisions, or that could be avoided through measures taken
    to prevent or mitigate harm. FDA is also improving communication
    through more widespread development of:
        Healthcare Professional Information Sheets one-page information
    sheets for healthcare professionals for all drugs on FDA's Drug Watch
    and all drugs with Medication Guides (FDA-approved patient labeling)
    containing the most important new information for safe and effective
    product use, such as known and potential safety issues based on reports
    of adverse events, new information that may affect prescribing of the
    drug, and the approved indications and benefits of the drug.
        Patient Information Sheets one-page information sheets for patients
    containing new safety information as well as basic information about
    how to use the drug in a consumer friendly format.
        David Graham, the FDA drug safety analyst responsible for first
    raising red flags about Vioxx, suggests he was intimidated by the
    agency before giving Congressional testimony last November. His
    suggestions that Vioxx and five other new drugs were being approved
    despite serious safety concerns were recently validated in an HHS
    Inspector General Office report that indicated nearly one-fifth of FDA
    scientists surveyed said they had been pressured to approve a drug
    despite safety concerns.
        Question. What is FDA's official policy toward whistleblowers?
        Answer. On January 18, 2005, I personally issued an ``all hands''
    e-mail to Agency staff to address this matter. It specifically stated:
        ``Let me also remind all employees that, consistent with the law,
    any act of retaliation against FDA employees resulting from their
    actions within the law to criticize the agency (either internally or
    externally, including to Congress) is not acceptable. The Agency has
    consistently operated using the highest ethical standards, and I expect
    all Agency employees to continue to uphold the highest standards of
    conduct and fully comply with all relevant Federal requirements and
    government policies.''

                              DIETARY SUPPLEMENTS

        Question. Utah District Court ruled on April 13th that FDA's ban on
    ephedra and ephedra products was illegal.
        What action does the agency intend to take to appeal this decision
    and what legislative authority would be helpful to clarify that FDA has
    the authority to take deadly dietary supplements such as ephedra off
    the market?
        Answer. FDA is reviewing the decision that applies to the
    Neutraceutical Solarary product line of 10mg or less. Any final
    decision on whether or not to appeal must be made by the Solicitor
    General.
                           NONDEPARTMENTAL WITNESSES

        [The following testimonies were received by the
    Subcommittee on Agriculture, Rural Development, and Related
    Agencies for inclusion in the record. The submitted materials
    relate to the fiscal year 2006 budget request for programs
    within the subcommittee's jurisdiction.]

                   Prepared Statement of the Ad Hoc Coalition

        Mr. Chairman, Members of the Subcommittee, this statement is
    respectfully submitted on behalf of the ad hoc coalition \1\ composed
    of the organizations listed below. The coalition supports sustained
    funding for the concessional sales and Food for Progress (FFP) programs
    under Title I of Public Law 480 at a baseline level that will ensure
    the continued viability of the programs.
    ---------------------------------------------------------------------------
        \1\ The ad hoc coalition is composed of American Maritime Congress,
    American Soybean Association, International Organization of Masters,
    Mates & Pilots, Liberty Maritime Corporation, Marine Engineers'
    Beneficial Association, Maritime Institute for Research and Industrial
    Development, National Association of Wheat Growers, National Corn
    Growers Association, National Council of Farmer Cooperatives, Sealift,
    Inc., TECO Ocean Shipping, Inc., Transportation Institute, USA Dry Pea
    & Lentil Council, USA Rice Federation, U.S. Wheat Associates, Inc., and
    Wheat Export Trade Education Committee.
    ---------------------------------------------------------------------------
        In recent years, funding appropriated to the Title I account has
    declined sharply. The direct appropriation to the Title I account in
    fiscal year 2003 was $118 million. In fiscal year 2004, it declined to
    $106 million. In fiscal year 2005, it declined again to $94.2 million.
    In the administration's fiscal year 2006 budget, the requested funding
    is $65,040,000. According to the fiscal year 2006 USDA Budget Summary,
    this request, together with carryover funding, will support a fiscal
    year 2006 program level for concessional sales and FFP donations of
    $145 million in commodity and (separately funded) freight costs. Total
    Title I commodity assistance in fiscal year 2006 is estimated to be
    540,000 metric tons.
        Mr. Chairman, our coalition has noted that funding for the Title I
    account in recent years increasingly has been used to support FFP
    grants. FFP is an essential component of our overall food aid system,
    and deserves strong support. The coalition nonetheless believes that
    the Foreign Agricultural Service (FAS) should make a determined effort
    to increase participation in the traditional Title I concessional sales
    program. As discussed more fully below, Title I has important policy
    objectives that are unique and deserving of sustained funding.

                     GUIDING PRINCIPLES OF FOOD AID POLICY

        Mr. Chairman, the coalition recognizes that American food
    assistance policy is well-established and founded on certain guiding
    principles, including the following:
      --Meeting America's humanitarian obligation to sustain food
            assistance programs, U.S. participation in which should
            constitute more than 50 percent of all food aid worldwide.
      --Employing food assistance programs as stepping stones for economic
            growth and development.
      --Employing food assistance programs to promote respect worldwide for
            American values and our economic system, thereby enhancing
            goodwill toward America among disadvantaged populations that
            may be breeding grounds for terrorism.

              THE SHARP DECLINE IN OVERALL FOOD AID PROGRAM LEVELS

        Mr. Chairman, the programs needed to implement these principles
    have enjoyed broad, bipartisan support for many decades. The strength
    of our commitment has made the United States the world's leading food
    aid supplier. In the process, American agriculture is bolstered as food
    aid recipients strengthen and stabilize their economies, ultimately
    proving to be valuable long term customers for U.S. products.
        In recent years, however, food aid shipments have declined sharply.
    In fiscal year 2000, the United States programmed more than 6.7 million
    tons of food aid to 95 countries, consisting of 35 different
    commodities with a value of $1.4 billion. In fiscal year 2001, our food
    aid program declined to 6.36 million tons of assistance to 45
    countries, valued at $1.28 billion. Unfortunately, this downward trend
    has continued. For fiscal year 2006, the President's budget would
    support only 3.49 million metric tons of food assistance under all
    program authorities.

                THE ADMINISTRATION'S BUDGET FOR FISCAL YEAR 2006

        The administration proposes Title I funding that would support a
    direct loan level of only $43 million. Projected carryover funding and
    reimbursements from the Maritime Administration would supplement
    available funding, allowing the administration to project an overall
    Title I program level (including FFP donations) of $145 million. The
    fiscal year 2006 request, however, is limited to $65 million in new
    funding to the Title I account. The effect of this drastic reduction in
    the annual appropriation would be to empty the account of all reserves,
    leaving the Title I program (and Food for Progress donations) with a
    greatly diminished baseline and bleak prospects for future fiscal
    years. Our coalition regrets the continued erosion of the Title I
    program, and believes that funding should be restored to levels which
    will ensure the program's viability as a flexible and significant
    policy initiative.
        The baseline for the Food for Peace Title II program has been
    reduced from $1.185 billion in fiscal year 2005 to $885 million. This
    initiative was designated as a ``major reform'' by the administration
    on February 11, 2005. Under the president's budget, Title II food aid
    would be reduced by $300 million and USAID's International Disaster and
    Famine Assistance (IDFA) program would be increased by an equivalent
    amount. The effect of this initiative would be to reduce Title II
    shipments to about 1.75 million metric tons, far below the statutory
    level established in the authorizing law of 2.5 million metric tons.
        Mr. Chairman, our coalition strongly opposes the administration's
    proposal to convert essential American food assistance to a program
    under which USAID would use appropriated funds to procure food supplies
    in markets that are closer to their final destination. Under Public Law
    480, the United States has delivered high-quality, nutritious food to
    billions of people throughout the world for more than half a century.
    The administration seeks to reverse the longstanding policy that U.S.
    food assistance should consist of U.S. commodities, produced by
    American farmers and processed by American enterprises. If USAID
    requires increased funding for emergency requirements, such funding
    should not come at the expense of the Title II program, upon which
    American producers, processors, and shipping companies rely.
    Furthermore, transfer of Title II funding to the State Department's
    IDFA program will undermine our negotiating position in the WTO, where
    the United States has spent the last two years defending our current
    food assistance programs as a necessity if the world is committed to
    reducing hunger.
        Under authority provided by Section 416(b) of the Agricultural Act
    of 1949, the administration states that surplus nonfat dry milk will be
    made available for donation in fiscal year 2006, with a commodity value
    estimated at $151 million. This represents another year of diminished
    reliance on the 416(b) program, which is CCC-funded.
        In its fiscal year 2006 Budget Summary, the Department of
    Agriculture estimates that CCC-funded FFP shipments will be 300,000
    metric tons of grain equivalent. Unfortunately, this falls short of the
    400,000 ton level established for CCC-funded FFP shipments in the 2002
    Farm Bill.
        Finally, the administration has requested $100 million for the
    McGovern-Dole International Food for Education and Child Nutrition
    Program (IFEP), an increase of 15 percent over the fiscal year 2005
    level.
        The administration's recommendations, taken together, would lead to
    further reductions in food aid. Of even more significance, the
    administration's recommendation to reduce Title II funding in favor of
    USAID cash assistance undermines the foundation upon which U.S. food
    aid policy has been built in the post-World War II era. The coalition
    strongly urges this subcommittee to sustain Title II funding at $1.185
    billion, thus ensuring that U.S. food assistance will continue to
    consist of U.S. commodities produced and processed by Americans.

             RESTORATION OF OVERALL FOOD ASSISTANCE PROGRAM LEVELS

        Mr. Chairman, the coalition recommends that food aid be restored
    over time to sustainable levels in the range of 4.0 million to 6.0
    million metric tons of grain equivalent in each fiscal year. In fiscal
    year 2006, this would require an incremental increase in Title I
    baseline funding, restoration of the Title II baseline to $1.185
    billion and greater use of existing authorities of the Commodity Credit
    Corporation. The Title I program must be restored if the United States
    is to take full advantage of the unique potential of this historic
    initiative. The special features of Title I remain significant elements
    of U.S. food aid policy, as discussed below.

                       ADVANTAGES OF THE TITLE I PROGRAM

        Mr. Chairman, the Title I program offers countries long-term loans
    and concessional payment terms for the purchase of U.S. agricultural
    commodities. As such, Title I has advantages over other food aid
    programs.
      --Resource Efficient.--Because Title I is a concessional sales
            program, appropriations required to support Title I, under the
            terms of the Federal Credit Reform Act of 1990, cover only the
            subsidy cost, and not the full commodity value. In the
            President's budget for fiscal year 2006, the subsidy cost of
            the Title I program is established for the fiscal year at 55.40
            percent. Thus, under the Title I program, Congress ensures the
            shipment of $1.00 worth of U.S. agricultural products at an
            appropriated cost of about 55 cents. Moreover, Title I recovers
            more dollars for the U.S. Treasury in loan repayments than it
            expends in annual outlays.
      --Bridge to Economic Independence.--The Title I program is designed
            to operate in markets which are neither poor enough to warrant
            donations nor rich enough to purchase commodities on commercial
            terms. Of the top 50 consumer Nations of American agricultural
            products, 43 were once recipients of U.S. foreign aid in some
            form. The Title I program historically has been an essential
            component of our humanitarian food assistance program, and
            should be retained.
        Unfortunately, Mr. Chairman, Title I concessional sales have been
    reduced to their lowest levels in half a century. According to the
    administration's budget, Title I loans in fiscal year 2006 will
    generate only $43 million in commodity sales. Of course, the potential
    demand for donated food will always exceed the supply. The coalition
    recognizes that recipient countries would prefer grants over
    concessional sales--even sales at extremely favorable terms. In order
    to ensure that the most desperate countries have sufficient donated
    food aid, the coalition recommends that FAS aggressively market the
    Title I concessional sales program to other countries that can afford
    the terms. Among the countries receiving Title I-funded FFP grants in
    recent years, there are surely some who reasonably could afford to make
    the transition from grant assistance to concessional sales, using the
    direct loan authority of Title I.

                        CONCLUSIONS AND RECOMMENDATIONS

        Mr. Chairman, the coalition is committed to maintaining U.S. food
    assistance programs at responsible levels in order to meet humanitarian
    needs and enhance the potential for economic growth in recipient
    countries. Our recommendation is to increase over time annual food
    assistance at combined program levels of between 4.0 million and 6.0
    million metric tons of grain equivalent. This can be accomplished, as
    in the past, with a blend of programs supported by direct
    appropriations and CCC program authorities.
        The coalition recommends the following:
      --Title I program levels should be increased in fiscal year 2006, and
            responsibly increased again in succeeding years, so that the
            unique advantages of the program, highlighted above, are not
            lost. The Senate Appropriations Committee should accompany such
            increased funding with strongly-worded report language
            directing FAS to market the Title I program aggressively to
            those countries that reasonably can afford the terms.
      --The Title II program should be restored to its fiscal year 2005
            baseline level of $1.185 billion. This will ensure that funding
            is not diverted to programs relying primarily upon foreign
            commodities for food assistance. This action will also help
            ensure that the United States fulfills its moral obligation to
            provide not less than one-half of the world's donated food aid.
      --In committee report language, the Senate Appropriations Committee
            should direct the FAS to make greater use of existing CCC
            authorities to expand food aid to regions in critical need.
        Mr. Chairman, the Title I program has been a bulwark of American
    food aid policy since the days of the Marshall Plan. It deserves the
    strong support of your subcommittee, the Congress and the entire
    Nation.
        The Title I program delivers more food assistance per dollar of
    investment than any other program. The Title I program, moreover, is
    fully consistent with the administration's position that aid to
    developing countries be tied to their adoption of reforms and policies
    that make development both lasting and effective. With strong
    Congressional support, the Food for Peace Title I program will continue
    to promote American humanitarian values. The funding of Title I,
    accordingly, should be increased to ensure that this historic program
    is restored to its proper place in U.S. food assistance policy.
                                     ______

           Prepared Statement of the American Farm Bureau Federation

        The Farm Security and Rural Investment Act of 2002 (FSRIA) was
    enacted 3 years ago following 2 years of exhaustive debate in the House
    and Senate. The new farm law represents a delicate balance by
    effectively addressing the stability of our agricultural production
    base, protecting our important natural resources and enhancing
    nutrition and food assistance programs in our Nation.
        The mandatory programs administered by the Department of
    Agriculture such as commodity, conservation, crop insurance, export
    promotion programs, nutrition and forestry are of enormous importance
    to farmers, ranchers, rural businesses, low-income Americans and our
    Nation's children. Therefore, we respectfully ask the Appropriations
    Committee avoid making any changes to mandatory programs within the
    USDA budget.
        Contract-based working lands conservation programs such as the
    Environmental Quality Incentives Program (EQIP), Conservation Security
    Program (CSP), Wildlife Habitat Incentives Program and Forest Land
    Enhancement Program (FLEP) enjoy wide support within the agricultural
    and landowner community, as shown by current levels of
    oversubscription. Farm Bureau is concerned that many of these programs
    have not been funded at optimum levels, especially the Conservation
    Security Program. This has led to a level of confusion among farmers
    and ranchers of when and how the program will be implemented within
    their particular watershed, and whether or not the financial incentives
    will be adequate to encourage participation. As we move forward in this
    budget process, Farm Bureau encourages Congress to find an appropriate
    balance of funding for targeted land idling programs, such as the
    General and Continuous Conservation Reserve Programs, with our current
    working lands conservation programs.
        Farm Bureau supports the farm bill's energy title that includes
    provisions for Federal procurement of bio-based products, bio-refinery
    development grants, a biodiesel fuel education program, renewable
    energy development program, renewable energy systems, a bioenergy
    program, biomass research and development and value-added agricultural
    product development and marketing. These programs play a critical role
    in assisting in rural economic development as well as in increasing our
    Nation's energy independence and should be fully funded at authorized
    levels.
        Farm Bureau has identified three areas as priorities for
    discretionary funding in fiscal year 2006. They are: BSE and animal
    identification, programs to increase agricultural exports and crop
    protection.

           BOVINE SPONGIFORM ENCEPHALOPATHY AND ANIMAL IDENTIFICATION

        The threat of bioterrorism and the discovery of Bovine Spongiform
    Encephalopathy (BSE) in the United States has prompted increased action
    by USDA and others to step up animal disease surveillance and funding
    for critical programs such as animal identification. Farm Bureau places
    great priority on efforts to safeguard our food supply and requests
    increased resources be appropriated to APHIS and ARS for these
    activities.
        Animal Identification.--We have serious concerns about the adequacy
    of the administration's proposal for $33 million to continue
    implementation of the National Animal Identification System (NAIS).
    Industry estimates of the U.S. Animal Identification Plan (USAIP)
    forecast an ongoing cost of about $100 million per year to effectively
    implement such a system. USDA has expended just $51 million in the
    first year of development of the NAIS. When added to this year's budget
    request, the total Federal fund commitment amounts to approximately $84
    million. This is significantly short of the Department's own cost
    estimate of $550 million for the first 5 years of NAIS operation.
        If the government were to fund $33 million each year (the same as
    their fiscal year 2005 and fiscal year 2006 requests), two-thirds of
    the cost of the NAIS would be funded by producers and affected
    industries. Farmers and ranchers cannot afford to bear the brunt of the
    cost of this program, especially when most of the benefit will accrue
    to the general public. This program undoubtedly benefits consumers as
    much or more than it does producers and the industry and a larger
    portion of the cost must be borne by the government. We appreciate the
    inclusion of NAIS funding in the fiscal year 2005 agriculture funding
    bill, and strongly encourage the Committee to significantly increase
    that amount in this year's version of the agriculture appropriations
    bill. Implementation of this critical program will not only add to our
    ability to trace a diseased animal back to the source but will also
    reassure the public and our trading partners of a safe food supply.
        BSE.--Farm Bureau supports the $66 million in BSE-related funding
    proposed by USDA in their fiscal year 2006 budget request. After the
    discovery Dec. 23, 2003, of a single cow with BSE in the United States,
    a one-time, enhanced BSE surveillance program was implemented,
    beginning in June 2004. The enhanced surveillance program will exceed
    its testing goals in fiscal year 2005, providing an accurate risk
    profile of the probable prevalence of BSE. However, we must continue
    our monitoring and surveillance program to protect the health of the
    U.S. herd. We support the administration's requested $7.7 million
    increase for the Animal Health Monitoring and Surveillance (AHMS)
    program, including both program costs and employee compensation. The
    AHMS budget request includes $17.1 million for the Animal and Plant
    Health Inspection Service (APHIS) to continue BSE testing of at least
    40,000 samples (including sampling at rendering plants and on farms)
    and to continue to use the 12 State diagnostic laboratories that
    support the work of the national BSE reference lab, APHIS' National
    Veterinary Services Laboratories.
        We support an increase of $7.5 million for an enhanced BSE research
    program. The additional research funding would allow Agriculture
    Research Service (ARS) scientists to increase our understanding of the
    disease and develop the technology needed by regulatory agencies to
    establish science-based policies and control programs. This scientific
    emphasis will not only help us in our current trade negotiations to
    reopen export markets lost since December 2003, but also to focus on a
    new understanding of the disease risks in the long run.
        In addition, Farm Bureau supports funding for the Agriculture
    Research Service (ARS) to complete the National Centers for Animal
    Health (NCAH) in Ames, Iowa. The NCAH will offer facilities and
    physical resources capable of supporting internationally-recognized
    animal health research, including efforts to increase the global body
    of scientific knowledge about BSE. We appreciate the inclusion of $59
    million in the fiscal year 2006 budget request to complete construction
    of the National Centers for Animal Health. However, we believe that the
    budget request does not reflect extra-inflationary costs that have
    occurred since the original construction plan was completed. Therefore,
    we request at least $85 million be appropriated to complete the world-
    class NCAH originally envisioned.

                     CROP PROTECTION AND AGRICUTLURE INPUTS

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

                   PROGRAMS TO INCREASE AGRICULTURAL EXPORTS

        Creating new and expanding existing overseas markets for U.S.
    agricultural and food products is essential for a healthy agricultural
    economy. Continued funding of export development and expansion programs
    is essential for improving U.S. farm and food income. Farm Bureau
    recommends maximum funding of all authorized export development and
    expansion programs in a manner consistent with our commitments in the
    World Trade Organization agreement. USDA services and programs that
    facilitate U.S. exports by certifying plant and animal health to
    foreign customers, that protect U.S. agricultural production from
    foreign pests and diseases, and fight against unsound non-tariff trade
    barriers by foreign governments are also critical and should receive
    priority funding.
        Plant and Animal Health Monitoring, Pest Detection and Control.--
    Plant and animal health monitoring, surveillance and inspection are
    crucial programs. We support funding increases for improved plant pest
    detection and eradication, management of animal health emergencies and
    to increase the availability of animal vaccines. Expansion of Plant
    Protection and Quarantine personnel and facilities is necessary to
    protect U.S. agriculture from new and often-times virulent, costly pest
    problems.
        APHIS Trade Issues Resolution and Management.--Full funding is
    needed for APHIS trade issues resolution and management. As Federal
    negotiators and U.S. industry try to open foreign markets to U.S.
    exports, they consistently find that other countries are raising pest
    and disease concerns (i.e., sanitary and phytosanitary measures), real
    or contrived, to resist or prohibit the entry of American products into
    their markets. Only APHIS can respond effectively to this resistance.
    It requires however, placing more APHIS officers at U.S. ports and
    overseas where they can monitor pest and disease conditions, negotiate
    trading protocols with other countries and intervene when foreign
    officials wrongfully prevent the entry of American imports. It is
    essential that APHIS be positioned to swiftly and forcefully respond to
    such issues when and where they arise.
        Export Development and Expansion Programs.--We recommend full
    funding of all export development and expansion programs consistent
    with our WTO commitments. Farm Bureau supports General Sales Manager
    credit guarantee programs. These important export credit guarantee
    programs help to make commercial financing available for imports of
    U.S. food and agricultural products via a deferred payment plan. The
    Market Access Program, the Foreign Market Development Program, the
    Emerging Markets Program and the Technical Assistance for Specialty
    Crops program are all very important and effective export development
    and expansion programs that increase demand for the U.S. agriculture
    and food products abroad. These programs also benefit U.S. agriculture
    by recruiting far more private sector funds into development and
    expansion activities for U.S. agriculture and food products than the
    U.S. government contributes.
        Direct assistance of U.S. agricultural exports is also authorized
    by the Export Enhancement Program, a program to counter unfair trading
    practices of foreign countries. Farm Bureau supports the funding and
    use of this program in all countries, and for all commodities, where
    the United States faces unfair competition. The Dairy Export Incentive
    Programs allows U.S. dairy producers to compete with foreign nations
    that subsidize their commodity exports. The International Food for
    Education Program will be an effective platform for delivering severely
    needed food aid and educational assistance.
        Public Law 480.--We recommend fully funding Public Law 480. Public
    Law 480 programs serve as the primary means by which the United States
    provides foreign food assistance through the purchase of U.S.
    commodities. The Public Law 480 program provides humanitarian and
    public relations benefits, positively impacts market prices and helps
    develop long-term commercial export markets. We oppose any efforts to
    reduce funding of Public Law 480, especially efforts to transfer
    funding to other food aid and development programs outside the
    jurisdiction of USDA.
        APHIS Biotech Regulatory Service (BRS).--Agricultural biotechnology
    is an extremely promising technology and all reasonable efforts must be
    made to allow continued availability and marketability of biotech tools
    for farmers. BRS plays an important role in overseeing the permit
    process for products of biotechnology. Funding for BRS personnel and
    activities are essential for ensuring public confidence and
    international acceptance of biotechnology products. AFBF supports
    increased spending of $4.5 million in this area because it will enable
    the USDA to increase inspections of genetically-modified crop field
    test sites and enhance its capacity to regulate transgenic animals,
    arthropods, and disease agents.
        Foreign Agricultural Service (FAS).--The USDA's Foreign
    Agricultural Service will require sufficient funding to expand services
    to cover all existing and potential market posts.
                                     ______

        Prepared Statement of the American Forest and Paper Association

        The American Forest and Paper Association \1\ (AF&PA) supports
    sustainable forest management on all forest lands and encourages
    funding for research programs that advance sustainable forestry. In
    particular, there is a need to focus resources on research that
    addresses forest productivity, wood utilization, inventory, and
    conversion of wood to produce bioenergy/bioproducts. The following
    recommendations concern fiscal year 2006 appropriations for the U.S.
    Department of Agriculture.
    ---------------------------------------------------------------------------
        \1\ AF&PA is the national trade association of the forest, paper
    and wood products industry. AF&PA represents more than 200 companies
    and related associations that engage in or represent the manufacture of
    pulp, paper, paperboard and wood products. The forest products industry
    accounts for approximately 7 percent of total U.S. manufacturing
    output, employs 1.3 million people, and ranks among the top ten
    manufacturing employers in 42 States.
    ---------------------------------------------------------------------------
    Cooperative State Research, Education, and Extension Service Programs
        There is a critical need for practical research and outreach
    designed to produce and measure healthier, faster-growing forests. The
    USDA Cooperative State Research, Education, and Extension Service
    (CSREES) and the universities that partner with the agency play a key
    role on-the-ground in meeting this need.
      --Cooperative Forestry Research (McIntire-Stennis) Program.--AF&PA
            recommends funding of $22.2 million, keeping it at the fiscal
            year 2005 enacted level. This program is the foundation of
            forest resources research and scientist education efforts at
            universities. It provides cutting-edge research on
            productivity, technologies for monitoring and extending the
            resource base, and environmental quality. The program is a
            Federal-state-university partnership and one that has been
            highly effective in leveraging the Federal investment and
            producing results; in fact, program funding is matched more
            than three times by universities with State and non-federal
            funds. The Administration's fiscal year 2006 budget request
            would cut program funding by 50 percent compared to fiscal year
            2005. Proceeding with the Administration's request would
            devastate our national forestry research capacity; thus, we
            strongly urge restoring funding to the fiscal year 2005 enacted
            level.
      --National Research Initiative (NRI) Competitive Grants Program.--
            AF&PA supports the President's request of $250 million,
            provided at least 10 percent of the total is directed towards
            forestry research. These NRI grants are a significant source of
            funding for basic and applied research on forest resources,
            including their management and utilization. Last year, less
            than 6 percent of the $180 million funding was allocated to
            forestry research proposals. Given the considerable potential
            of the program to contribute to the nation's sustainable
            forestry research needs, that percentage should be increased to
            a minimum of 10 percent, with specific focus on grants that
            support forest productivity, wood utilization, and biorefining
            technologies.
      --Renewable Resources Extension Program (RREA).--AF&PA supports the
            President's request of $4.1 million funding, a slight increase
            over the fiscal year 2005 funding level. This program provides
            the foundation for extension and outreach efforts delivered to
            private landowners through universities. Cutting-edge forestry
            research is of limited benefit unless it can be effectively
            delivered to the nation's forest landowners.

    Agenda 2020
        Agenda 2020 began in 1994 as a partnership between the forest
    products industry and the Department of Energy's Forest Products
    Industry of the Future program to accelerate the research, development,
    and deployment of new technologies in the industry. This collaborative
    research is focused on forest productivity, and developing processes
    and technologies that can cut energy use, minimize environmental
    impacts, and improve overall productivity in the industry to make it
    more globally competitive. The partnership has expanded to include
    USDA.
      --Biomass Research and Development Initiative.--AF&PA recommends $15
            million, with increased focus on production and management of
            forests and the efficient conversion of forest biomass into
            energy. USDA funding for this initiative supports key
            components of Agenda 2020 research, development, and
            demonstration for the integrated forest products biorefinery
            (IFPB): cultivation and production of high-quality feedstocks
            engineered for both bioenergy/bioproducts and traditional
            forest products; and conversion technologies to produce
            bioenergy/bioproducts at several points during the traditional
            harvest and manufacturing process. This IFPB research helps
            ensure sustained, healthy forest productivity as the industry
            evolves into a producer of high-valued, renewable, carbon-
            positive bioenergy and bioproducts.

    Conclusion
        AF&PA appreciates the chance to provide the Subcommittee with
    testimony regarding fiscal year 2006 appropriations for the U.S.
    Department of Agriculture. The funding levels proposed for the programs
    listed above will help promote sustainable forest management on our
    nation's public and private lands.
                                     ______

      Prepared Statement of the American Honey Producers Association, Inc.

        I am Steve Park of Palo Cedro, California, and I serve as President
    of the American Honey Producers Association. The American Honey
    Producers Association (``AHPA'') is a national organization of
    commercial beekeepers actively engaged in honey production throughout
    the country. I am here today to request your assistance in continuing
    to support full funding for honeybee research.
        First, we wish to thank the Subcommittee for the strong support it
    has provided in the past for agricultural research activities on behalf
    of the beekeeping industry. For example, in the fiscal year 2003 cycle,
    the Subcommittee fully restored proposed cuts in honeybee research that
    would have resulted in the elimination of three Agricultural Research
    Service (``ARS'') laboratories that are indispensable to the survival
    of our industry. Such support has enabled the ARS to meet the critical
    needs of the industry. To continue this valuable research, the AHPA
    requests that for the fiscal year 2006 cycle Congress not only restore
    proposed rescissions of add-on funding from previous years for the two
    ARS Honey Bee Research Laboratories at Baton Rouge, Louisiana and
    Weslaco, Texas, but also approve specific funding increases proposed in
    the Administration's budget both for honey bee genome research at the
    ARS laboratory in Baton Rouge (under the category of invasive species
    affecting plants), and for invasive honey bee pest control research at
    the ARS laboratory in Beltsville, Maryland. We also urge the Congress
    to maintain honeybee research funding at current levels for the ARS
    laboratory in Tucson, Arizona.

    The President's Budget Proposal
        The American Honey Producers Association applauds the President's
    fiscal year 2006 budget proposal for recommending funding increases for
    the Honey Bee Research Laboratories located at Baton Rouge, Louisiana,
    and Beltsville, Maryland, and also for proposing a continuation of
    funding at current levels for the Honey Bee Research Laboratory in
    Tucson, Arizona. However, we are concerned that the President's budget
    also calls for significant funding decreases for the two Honey Bee
    Research Laboratories at Baton Rouge and at Weslaco. These cuts are
    proposed rescissions of funding increases included by Congress in
    previous appropriation cycles. Specifically, the Administration is
    suggesting $394,000 in cuts for the Baton Rouge facility and $246,000
    in cuts for the Weslaco facility. These cuts to the ARS Honey Bee
    Research Laboratories would have a severe effect on the honey industry
    as well as on all pollination-dependent agriculture and many native
    plants. This seems particularly inappropriate considering the
    substantial benefits that flow from this program, which helps assure
    the vitality of the American honeybee industry and U.S. agriculture.
        These four ARS laboratories provide the first line of defense
    against exotic parasite mites, Africanized bees, brood diseases and
    other new pests and pathogens that pose very serious and growing
    threats to the viability and productivity of honey bees and the plants
    they pollinate. If the rescissions proposed this year by the President
    were to be enacted, scientists at the Baton Rouge and Weslaco
    laboratories will be overburdened and forced to discontinue essential
    research, thereby jeopardizing the U.S. honey bee industry and the
    production of agricultural crops that require pollination by honey
    bees.

    The Importance of Honey Bees to U.S. Agriculture
        Honeybees fill a unique position in contemporary U.S. agriculture.
    They pollinate more than 90 food, fiber, and seed crops, valued at more
    than $20 billion a year in the United States, according to the
    Department of Agriculture. Honeybees are necessary for the production
    of such diverse crops as almonds, apples, oranges, melons, vegetables,
    alfalfa, soybeans, sunflower, and cotton, among others. In fact,
    honeybees pollinate about one-third of the human diet. In addition,
    honeybees are responsible for the production of an average of 200
    million pounds of honey annually in the United States, the sales of
    which helps sustain this Nation's beekeepers.
        Since 1984, the survival of the honey bee has been threatened by
    continuing infestations of mites and pests for which appropriate
    controls are being developed by scientists at the four ARS
    laboratories. For example, the pinhead sized Varroa mite is
    systematically destroying bee colonies and is considered by many to be
    the most serious malady of honeybees. In fact, one of the most
    publicized effects of the devastating mite infestation is the recent
    shortage of honeybees to pollinate California's almond crop--the
    biggest crop requiring honey bees for pollination and California's
    largest agricultural export. California grows 100 percent of the
    Nation's almond crop and supplies 80 percent of the world's almonds.
    More than one million honeybee hives are needed to pollinate the half a
    million acres of almond groves that line California's Central Valley.
    That means nearly half of the managed colonies in the United States are
    involved in pollinating almonds in California during February and early
    March. Having enough bees to pollinate the almond crop can mean the
    difference between a good crop and disaster. Unfortunately, we estimate
    that as many as 30 percent of California's almond groves were not
    pollinated this year due to a lack of honeybees. As one news report
    noted in January of this year, growing almonds without honeybees ``is
    like sky diving without a parachute.'' Thus, the damaging effects of
    mites and other pests reach far beyond the American honey industry.
        Tracheal mites are another contributing factor to the loss of
    honeybees. Tracheal mites infest the breathing tube of adult honeybees
    and also feed on the bees' blood. The mites essentially clog the bees'
    breathing tubes, blocking the flow of oxygen and eventually killing the
    infested bees. The industry is also plagued by a honeybee bacterial
    disease that has become resistant to antibiotics designed to control it
    and a honeybee fungal disease that has no known medication to control
    it. These pests and diseases, especially Varroa mites and the bacterium
    causing American foulbrood, are now resistant to chemical controls in
    many regions of the country. Such resistance is increasingly becoming a
    problem, as most of the major chemical controls are ineffective in
    treating such pests and diseases. Further, we have seen that these
    pests are building resistance to newly developed chemicals more quickly
    than in the past, thereby limiting the longevity of chemical controls.
        Unfortunately, there is no simple solution to these problems, and
    the honeybee industry is too small to support the cost of the needed
    research, particularly given the depressed state of the industry in
    recent years. Further, there are no funds, facilities, or personnel
    elsewhere available in the private sector for this purpose.
    Accordingly, the beekeeping industry is dependent on research from
    public sources for the scientific answers to these threats. Since the
    honeybee industry is completely comprised of small family-owned
    businesses, it relies heavily on the ARS for needed research and
    development. The key to the survival of the honey industry lies with,
    the honeybee research programs conducted by ARS.
        The sequencing of the honeybee genome at Baylor University has
    opened the door to creating highly effective solutions to these
    problems via marker-assisted breeding. Marker assisted breeding would
    permit the rapid screening of potential breeders for specific DNA
    sequences that underlie specific desirable honeybee traits. The
    sequenced honeybee genome is the necessary key that will allow
    scientists to discover the important DNA sequences. Because of the
    sequenced honeybee genome, it is now possible to apply molecular
    biological studies to the development of marker-assisted breeding of
    honeybees. Marker-facilitated selection offers the first real
    opportunity to transform the beekeeping industry from one that has been
    dependent upon a growing number of expensive pesticides and antibiotics
    into an industry that is free of chemical inputs and that is
    economically viable in today's competitive global marketplace.
        Furthermore, research on honeybees, one of five animals chosen by
    the National Institutes of Health for genome sequencing, may provide
    important insight into other areas of science. The honeybee is the
    first agricultural species to be sequenced, and such work may provide
    breakthrough advances in many areas of science. In fact, honeybees are
    being studied by the U.S. Department of Defense as sentinel species
    that could detect and locate agents of harm, such as chemical or
    biological threats. According to one researcher, it appears that
    honeybees' olfactory capabilities are at least on par with that of a
    dog, if not more sensitive. Thus, the scientific advances achieved by
    ARS will provide an array of benefits across many disciplines.

    The Work of the ARS Honey Bee Research Laboratories
        The ARS Honey Bee Research Laboratories work together to provide
    research solutions to problems facing businesses dependent on the
    health and vitality of honeybees. The findings of these laboratories
    are used by honey producers to protect their producing colonies and by
    farmers and agribusinesses to ensure the efficient pollination of
    crops. Each of the four ARS Honey Bee Research Laboratories (which are
    different in function from the ARS Wild Bee Research Laboratory at
    Logan, Utah) focuses on different problems facing the U.S. honey
    industry and undertakes research that is vital to sustaining honey
    production and assuring essential pollination services in this country.
    Furthermore, each honey bee research laboratory has unique strengths
    and each is situated and equipped to support independent research
    programs which would be difficult, and in many cases impossible, to
    conduct elsewhere.

                Research at the ARS Weslaco Laboratory
        Because the AHPA recommends that the appropriation for the Weslaco
    laboratory be approved at not less than current levels, we respectfully
    request Congress to reject the President's proposal to eliminate
    $246,000 in funding added by Congress in fiscal year 2001 for the ARS
    Honey Bee Laboratory at Weslaco, Texas. Retaining the current level of
    funding for the Weslaco laboratory will enable it to continue its work
    in finding a chemical solution to parasitic mites that are causing a
    crisis for the U.S. beekeeping and pollination industries. Varroa mites
    are causing the loss of hundreds of thousands of domestic honeybee
    colonies annually as well as devastating wild bee colonies. As noted in
    a February 2005 USA Today article, the Varroa mite has destroyed as
    much as 60 percent of the hives in some areas.
        For example, in Florida, the number of commercial bee colonies has
    fallen from approximately 360,000 hives in 1990 to just 220,000 today--
    primarily as a result of the Varroa mite. These tiny parasites--also
    known as the ``vampire mite''--attach themselves to the backs of adult
    bees and literally suck out their insides. When these mites were first
    discovered in the United States in the 1980s, beekeepers were able to
    fight them with strips of the chemical fluvalinate. However, the Varroa
    mites have evolved into a parasite seemingly immune to current
    pesticides. The ARS laboratory at Weslaco has been developing
    alternative chemicals to control the Varroa mite. Presently, there are
    no other chemicals available for controlling the Varroa mite, and the
    laboratory is working frantically to develop other means of control.
    The laboratory also is working with a potent fungus, which may kill the
    mites without impeding colony development or population size.
        Furthermore, the laboratory is researching methods that may control
    the small hive beetle. Since its discovery in Florida in 1998, this
    pest has caused severe bee colony losses in California, Florida,
    Georgia, South Carolina, North Carolina, Pennsylvania, Ohio, and
    Minnesota. Estimates put these losses in just one season at over 30,000
    colonies. The beetles are now spreading all across the United States.
    Although it seems that the chemical coumaphos may help control this
    insect as well as the Varroa mite, it has not yet received a Section 3
    registration for general use. The ARS honey bee research scientists at
    the Weslaco laboratory have been working overtime to find chemicals,
    techniques, pheromones, or other methods of controlling the beetle.
    Time is of the essence and a control must be found immediately, because
    all the bee colonies in the Western Hemisphere are at risk.
        This facility also focuses its research efforts on developing
    technologies to manage honeybees in the presence of Africanized
    honeybees, parasitic mites, and other pests. In order to ensure that
    further pests are not introduced into the United States, scientists at
    the Weslaco facility provide technical assistance to agriculture
    departments in foreign countries on the control of parasitic mites. The
    laboratory has worked with officials in Guatemala, Costa Rica, Mexico,
    and South Africa to protect the U.S. honeybee population from further
    devastation by infestation of foreign parasites, diseases, and other
    pests. This inter-governmental cooperation is necessary to ensure the
    continued viability of the U.S. honeybee industry.

                Research at the ARS Baton Rouge Laboratory
        While we are pleased that the President has requested an increased
    funding in the amount of $500,000 for honey bee genome research at the
    ARS Baton Rouge Laboratory, we are dismayed by and opposed to the
    Administration's simultaneous request for $394,000 in cuts for this
    facility, eliminating previous Congressional increases in funding. In
    light of the importance of genome research, we hope that Congress will
    support the President's recommended increase for the ARS laboratory at
    Baton Rouge, Louisiana, while opposing the rescission proposed by the
    Administration. An increase in funding will allow the vital genome
    research conducted in Baton Rouge to achieve more quickly the
    breakthrough successes that are closer than ever to realization. The
    Baton Rouge facility is the only laboratory in the United States and,
    we believe, in the world, developing long-term, genetic-based solutions
    to the Varroa mite. Existing stocks of U.S. honeybees are being tested
    to find stocks that exhibit resistance to the parasitic mites.
        Research scientists with the laboratory have also been to the far
    corners of the world looking for mite resistant bees. For example, in
    eastern Russia, they found bees that have co-existed for decades with
    the mites and survived. Using these bees, the laboratory develops
    stocks of honeybees resistant to the parasites. Before these new stocks
    are distributed to American beekeepers, the laboratory ensures that the
    resistance holds up under a wide range of environmental and beekeeping
    conditions, testing attributes such as vigor, pollination, and honey
    production. We believe recent scientific breakthroughs with this
    genomic research will allow scientists in the near future to breed
    honey bees that are resistance to the Varroa mite and other parasites.
        The Baton Rouge facility also operates the only honeybee quarantine
    and mating station approved by the Animal and Plant Inspection Service.
    These stations are necessary to ensure that new lines of bees brought
    into the United States for research and development are free of
    diseases unknown in the United States. In addition, Baton Rouge
    research scientists are focused on the applications of new technologies
    of genomics. This work has the potential to enhance the proven value of
    honeybee breeding for producing solutions to the multiple biological
    problems that diminish the profitability of beekeeping.

                Research at the ARS Tucson Laboratory
        The American Honey Producers Association supports the
    Administration's request that funding for the ARS Honey Bee Research
    Laboratory in Tucson be kept at the current level for fiscal year 2006.
    This research center is the only ARS honey bee laboratory serving the
    needs of beekeepers and farmers in the western United States. The
    facility works to improve crop pollination and honeybee colony
    productivity through quantitative ecological studies of honeybee
    behavior, physiology, pest and diseases, and feral honeybee bionomics.
    Currently, the Tucson laboratory is working to finalize the development
    of a pheromone that kills the Varroa mite.
        Because more than one million colonies are transported from across
    the country for pollination into crops grown in the western United
    States (primarily California), the Tucson research center addresses
    problems that arise from transporting and introducing colonies for
    pollination of crops such as almonds, plums, apricots, apples,
    cherries, citrus, alfalfa, vegetable seed, melons, and berries. This
    research center has been instrumental in disseminating information on
    technical issues associated with the transport of bee colonies across
    State lines. Additionally, in order to ensure that transported colony
    populations remain stable during transport and also during periods
    before the crop to be pollinated comes into bloom, scientists at the
    laboratory have developed an artificial diet that stimulates brood
    production in colonies. A large bee population is necessary to ensure
    that efficient pollination occurs, creating superior quality crops.

                Research at the ARS Beltsville Laboratory
        Again, we support the President's proposal to increase funding at
    the ARS Honey Bee Research Laboratory in Beltsville by $100,000 to
    boost current research efforts aimed at eliminating invasive honeybee
    pests. This facility, the oldest of the Federal bee research centers,
    conducts research on the biology and control of honey bee parasites,
    diseases, and pests to ensure an adequate supply of bees for
    pollination and honey production. Using biological, molecular,
    chemical, and non-chemical approaches, scientists in Beltsville are
    developing new, cost-effective strategies for controlling parasitic
    mites, bacterial diseases, and emergent pests that threaten honey bees
    and the production of honey.
        The laboratory also develops preservation techniques for honeybee
    germplasm in order to maintain genetic diversity and superior honeybee
    stock. Scientists at the facility also provide authoritative
    identification of Africanized honeybees and diagnosis of bee diseases
    and pests for Federal and State regulatory agencies and beekeepers on a
    worldwide basis. In operating this bee disease diagnosis service, the
    Beltsville facility receives over 2,000 samples annually from across
    the United States.

    Conclusion
        In conclusion, we wish to thank you again for your support of
    honeybee research in the past and for your Subcommittee's understanding
    of the importance of these laboratories. The American Honey Producers
    Association would appreciate your continued support by (1) increasing
    the level of funding for the ARS Honey Bee Research Laboratory in Baton
    Rouge, Louisiana, by $500,000, as proposed by the Administration in its
    fiscal year 2006 budget; (2) increasing the level of funding for the
    ARS Honey Bee Research Laboratory in Beltsville, Maryland, by $100,000,
    as proposed by the Administration in its fiscal year 2005 budget; (3)
    restoring the proposed rescissions from previous years of $394,000 for
    the Baton Rouge facility and $246,000 for the Weslaco, Texas, facility;
    and (4) maintaining the current level of funding for the ARS Honey Bee
    Research Laboratory in Tucson, Arizona. Only through research can we
    have a viable U.S. beekeeping industry and continue to provide stable
    and affordable supplies of bee-pollinated crops, which make up fully
    one-third of the U.S. diet.
        Furthermore, we urge you to reject any effort to cut the operating
    budgets of these vitally important research laboratories by
    consolidating their functions. Any proposed cuts and their resulting
    budget and staff reductions would significantly diminish the quality of
    research conducted by these laboratories, harming bee keepers as well
    as farmers who harvest pollination-dependent agriculture. Congress
    cannot allow these cuts to occur and must continue to provide
    sufficient funding for the ARS Honey Bee Research Laboratories to
    perform their vital role.
        I would be pleased to respond to any questions that you or your
    colleagues may have.
                                     ______

     Prepared Statement of the American Indian Higher Education Consortium

        Mr. Chairman and Members of the Subcommittee, on behalf of the
    American Indian Higher Education Consortium (AIHEC) and the 33 Tribal
    Colleges and Universities that comprise the list of 1994 Land Grant
    Institutions, thank you for this opportunity to share our funding
    requests for fiscal year 2006.
        This statement is presented in three parts: (a) a summary of our
    fiscal year 2006 funding recommendation, (b) a brief background on
    Tribal Colleges and Universities, and (c) an outline of the 1994 Tribal
    College Land Grant Institutions' plan for using our land grant programs
    to fulfill the agricultural potential of American Indian communities,
    and to ensure that American Indians have the skills and support needed
    to maximize the economic development potential of their resources.

                              SUMMARY OF REQUESTS

        We respectfully request the following funding levels for fiscal
    year 2006 for our land grant programs established within the USDA
    Cooperative State Research, Education, and Extension Service (CSREES)
    and Rural Development mission areas. In CSREES, we specifically
    request: $12 million payment into the Native American endowment fund;
    $3.3 million for the higher education equity grants; $5 million for the
    1994 institutions' competitive extension grants program; $3 million for
    the 1994 Institutions' competitive research grants program; and in the
    Rural Development--Rural Community Advancement Program (RCAP), that $5
    million for each of the next 5 fiscal years be targeted for the tribal
    college community facilities grants. RCAP grants help to address the
    critical facilities and infrastructure needs at the colleges that
    impede our ability to participate fully as land grant partners. Since
    fiscal year 2001, the RCAP tribal college competitive program has
    received an annual appropriation of $4-$4.5 million.

                 BACKGROUND ON TRIBAL COLLEGES AND UNIVERSITIES

        The first Morrill Act was enacted in 1862 specifically to bring
    education to the people and to serve their fundamental needs. Today,
    over 140 years after enactment of the first land grant legislation, the
    1994 Land Grant Institutions, as much as any other higher education
    institutions, exemplify the original intent of the land grant
    legislation, as they are truly community-based institutions.
        The Tribal College Movement was launched in 1968 with the
    establishment of Navajo Community College, now Dine College, serving
    the Navajo Nation. Rapid growth of tribal colleges soon followed,
    primarily in the Northern Plains region. In 1972, the first six
    tribally controlled colleges established the American Indian Higher
    Education Consortium to provide a support network for member
    institutions. Today, AIHEC represents 34 Tribal Colleges and
    Universities--33 of which now comprise the list of 1994 Land Grant
    Institutions located in 12 states--created specifically to serve the
    higher education needs of American Indian students. Annually, they
    serve approximately 30,000 full--and part-time students from over 250
    Federally recognized tribes.
        All of the 1994 Land Grant Institutions are accredited by
    independent, regional accreditation agencies and like all institutions,
    must undergo stringent performance reviews to retain their
    accreditation status. Tribal colleges serve as community centers by
    providing libraries, tribal archives, career centers, economic
    development and business centers, public meeting places, and child care
    centers. Despite their many obligations, functions, and notable
    achievements, tribal colleges remain the most poorly funded
    institutions of higher education in this country. Most of the 1994 Land
    Grant Institutions are located on Federal trust territory. Therefore,
    states have no obligation and in most cases, provide no funding to
    tribal colleges. In fact, most states do not even fund our institutions
    for the non-Indian state residents attending our colleges, leaving the
    tribal colleges to absorb the per student operational costs for non-
    Indian students enrolled in our institutions, accounting for
    approximately 20 percent of our student population. Under these
    inequitable financing conditions and unlike our state land grant
    partners, our institutions do not benefit from economies of scale--
    where the cost per student to operate an institution is diminished by
    the increased size of the student body.
        As a result of 200 years of Federal Indian policy--including
    policies of termination, assimilation and relocation--many reservation
    residents live in abject poverty comparable to that found in Third
    World nations. Through the efforts of Tribal Colleges and Universities,
    American Indian communities are receiving services they need to
    reestablish themselves as responsible, productive, and self-reliant
    citizens. It would be regrettable not to expand the very modest
    investment in, and capitalize on, the human resources that will help
    open new avenues to economic development, specifically through
    enhancing the 1994 Institutions' land grant programs, and securing
    adequate access to information technology.

         1994 LAND GRANT PROGRAMS--AMBITIOUS EFFORTS TO REACH ECONOMIC
                             DEVELOPMENT POTENTIAL

        Tragically, due to lack of expertise and training, millions of
    acres on our reservations lie fallow, under-used, or have been
    developed through methods that render the resources non-renewable. The
    Equity in Educational Land Grant Status Act of 1994 is starting to
    rectify this situation and is our hope for future advancement.
        Our current land grant programs are small, yet very important to
    us. It is essential that American Indians explore and adopt new and
    evolving technologies for managing our lands. We have the potential of
    becoming significant contributors to the agricultural base of the
    nation and the world.
        Native American Endowment Fund.--Endowment installments that are
    paid into the 1994 Institutions' account remain with the U.S. Treasury,
    only the annual interest, less the USDA's administrative fee, is
    distributed to the colleges. The latest gross annual interest yield
    (fiscal year 2004) is $2,180,705, after the USDA's administrative fee
    of $87,228 is deducted; $2,093,477 remains to be distributed among the
    33 tribal college Land Grant Institutions by statutory formula. While
    we have not yet been provided the breakdown of fiscal year 2004 funds
    as distributed per institution, in the prior year the USDA's
    administrative fee was larger than the interest yield payments
    distributed to 74 percent of the 1994 Land Grant Institutions. After
    the distribution amounts are determined for this year's disbursement,
    we fully expect similar results. We ask the Subcommittee to review the
    Department's administrative fee and consider reducing it for this
    program, so that more of these already limited funds can be distributed
    to 1994 Land Grant Institution community based programs.
        Just as other land grant institutions historically received large
    grants of land or endowments in lieu of land, this endowment assists
    1994 Land Grant Institutions in establishing and strengthening our
    academic programs in such areas as curricula development, faculty
    preparation, instruction delivery, and to help address critical
    facilities and infrastructure issues. Many of the colleges have used
    the endowment funds in conjunction with the Education Equity Grant
    funds to develop and implement their academic programs. As earlier
    stated, tribal colleges often serve as primary community centers and
    although conditions at some have improved substantially, many of the
    colleges still operate under deplorable conditions. Most of the tribal
    colleges cite improved facilities as one of their top priorities.
    Several of the colleges have indicated the need for immediate and
    substantial renovations to replace construction materials that have
    long exceeded their effective life span, and to upgrade existing
    buildings due to accessibility and safety concerns.
        An increased endowment payment would enhance the size of the corpus
    and thereby increase the annual interest yield available to the 1994
    land grant institutions. This additional funding would be very helpful
    in our efforts to continue to support faculty and staff positions and
    program needs within Agriculture and Natural Resources departments, as
    well as to continue to help address the critical and very expensive
    facilities needs at our institutions. Currently, the amount that each
    college receives from this endowment is not enough to adequately
    address curricula development and instruction delivery, as well as make
    even a dent in the necessary facilities projects at the colleges. In
    order for the 1994 Institutions to become full partners in this
    Nation's great land grant system, we need and frankly, under treaty
    rights, warrant the facilities and infrastructure necessary to fully
    engage in education and research programs vital to the future health
    and well being of our reservation communities. We respectfully request
    the subcommittee agree to fund the fiscal year 2006 endowment payment
    at $12 million, as included in the President's Budget recommendation.
        1994 Institutions' Educational Equity Grant Program.--Closely
    linked with the endowment fund, this program is designed to assist 1994
    land grant institutions with academic programs. Through the modest
    appropriations made available since fiscal year 2001, the tribal
    colleges have been able to begin to support courses and plan activities
    specifically targeting the unique needs of our respective communities.
        The 1994 Institutions have developed and implemented courses and
    programs in natural resource management; environmental sciences;
    horticulture; forestry; bison production and management; and especially
    food science and nutrition to address epidemic rates of diabetes and
    cardiovascular disease on reservations. If more funds were available
    through the Educational Equity Grant Program, tribal colleges could
    channel more of their endowment yield to supplement other facilities
    funds to address their critical infrastructure issues. Authorized at
    $100,000 per eligible 1994 Institutions, in fiscal year 2005,
    approximately $2,160,000 or two-thirds of the authorized level was
    available for distribution to the 1994 institutions, after across-the-
    board cuts and Department fees were applied to the initial appropriated
    level of $2,250,000. We respectfully request full funding of $3.3
    million to allow the tribal colleges to build upon the courses and
    activities that the initial funding launched.
        Extension Programs.--The 1994 Institutions' extension programs
    strengthen communities through outreach programs designed to bolster
    economic development; community resources; family and youth
    development; natural resources development; agriculture; as well as
    health and nutrition awareness.
        In fiscal year 2005, $3,273,000 was appropriated for the 1994
    Institutions' competitive extension grants, a slight increase over
    fiscal year 2004. Without adequate funding, 1994 Institutions' ability
    to maintain existing programs and to respond to emerging issues such as
    food safety and homeland security, especially on border reservations,
    is severely limited. Increases in funding are needed to support these
    vital programs designed to address the inadequate extension services
    provided to Indian reservations, by their respective state programs. It
    is important to note that the 1994 extension program is designed to
    complement the Indian Reservation Extension Agent program and does not
    duplicate extension activities. 1994 Land Grant programs are funded at
    very modest levels. The tribal college land grants have applied their
    ingenuity for making the most of every dollar they have at their
    disposal by leveraging funds to maximize their programs whenever
    possible. For example, over the last 5 years the College of Menominee
    Nation (CMN) in Keshena, Wisconsin, has leveraged funding from several
    programs to expand its extension program focusing its efforts on
    strengthening the economic capacity of the local community. Partnering
    with U.S. Department of Health and Human Services, CMN is designing a
    curriculum that involves tribal elders, relevant service providers,
    local schools, the Commission on Aging, and health clinics designed to
    encourage minority youth to enter Allied Health fields. With a grant
    from the Wisconsin Department of Transportation, the college's
    extension and outreach offers the Transportation Alliance for New
    Solutions (TrANS) program. This is a 120 hour program designed to train
    women and minorities in roads construction. In addition, the Federal
    Highway Administration and the Wisconsin Department of Transportation
    have provided grant funds to CMN extension and outreach to conduct a
    Summer Transportation Institute focusing on middle school students.
    Students spend 4 weeks exploring various careers within the
    transportation industry. To continue and expand successful programs
    such as those being conducted at CMN, we request the Subcommittee
    support this competitive program by appropriating $5 million to sustain
    the growth and further success of these essential community based
    programs.
        1994 Research Program.--As the 1994 Land Grant Institutions have
    begun to enter into partnerships with 1862/1890 land grant institutions
    through collaborative research projects, impressive efforts to address
    economic development through land use have come to light. Our research
    program illustrates an ideal combination of Federal resources and
    tribal college-state institutional expertise, with the overall impact
    being far greater than the sum of its parts. We recognize the budget
    constraints under which Congress is functioning. However, $1,087,000,
    the fiscal year 2005 appropriated level, is grossly inadequate for a
    competitive pool of 33 institutions. This research program is vital to
    ensuring that tribal colleges may finally become full partners in the
    Nation's land grant system. Many of our institutions are currently
    conducting agriculturebased applied research, yet finding the resources
    to conduct this research to meet their communities' needs is a constant
    challenge. This research authority opens the door to new funding
    opportunities to maintain and expand the research projects begun at the
    1994 Institutions, but only if adequate funds are appropriated. Project
    areas being studied include soil and water quality, amphibian
    propagation, pesticide and wildlife research, range cattle species
    enhancement, and native plant preservation for medicinal and economic
    purposes. We strongly urge the Subcommittee to fund this program at $3
    million to enable our institutions to develop and strengthen their
    research potential.
        Rural Community Advancement Program (RCAP).--In fiscal year 2005,
    $4.5 million of the RCAP funds appropriated for loans and grants to
    benefit Federally recognized Native American tribes was targeted for
    community facility grants for improvements at Tribal Colleges and
    Universities. This amounts to a $500,000 increase over the level that
    had been allocated to the program each year since fiscal year 2001.
    This program requires a minimum 25 percent non-Federal match. This has
    become a barrier for some of the colleges to even consider applying for
    these funds. Tribal colleges are chartered by their respective tribes
    which enjoy a government-to-government relationship with the Federal
    Government. Due to this relationship, tribal colleges have very limited
    access to non-Federal monies. Non-Federal matching requirements present
    a significant barrier to our colleges in their ability to compete for
    much needed funds. In the 2002 Farm Security and Rural Investment Act,
    (Public Law 107-171) language was adopted with regard to the Rural
    Cooperative Development Grants that limits non-Federal matching to no
    more than 5 percent in the case of a 1994 institution. As stated
    earlier, the facilities at many of the 1994 Land Grant Institutions are
    in serious need of repair and in many cases replacement. We urge the
    Subcommittee to designate $5 million for each of the next 5 fiscal
    years to afford the 1994 institutions the means to aggressively address
    critical facilities needs, thereby allowing them to better serve their
    students and respective communities. Additionally, we request that
    Congress include language directing the agency to limit the non-Federal
    matching requirement to no more than 5 percent, the same level as
    applied to the Rural Cooperative Development Grants program, to help
    the 1994 land grant institutions to effectively address critical
    facilities and construction issues at their institutions.

                                   CONCLUSION

        The 1994 Land Grant Institutions have proven to be efficient and
    effective vehicles for bringing educational opportunities to American
    Indians and hope for self-sufficiency to some of this Nation's poorest
    regions. The modest Federal investment in the 1994 Land Grant
    Institutions has already paid great dividends in terms of increased
    employment, education, and economic development. Continuation of this
    investment makes sound moral and fiscal sense. American Indian
    reservation communities are second to none in their potential for
    benefiting from effective land grant programs and as earlier stated no
    institutions better exemplify the original intent of the land grant
    concept than the 1994 Land Grant Institutions.
        We appreciate your support of the Tribal Colleges and Universities
    and we ask you to renew your commitment to help move our communities
    toward self-sufficiency. We look forward to continuing our partnership
    with you, the U.S. Department of Agriculture, and the other members of
    the Nation's land grant system--a partnership that will bring equitable
    educational, agricultural, and economic opportunities to Indian
    Country.
        Thank you for this opportunity to present our funding proposals to
    this Subcommittee. We respectfully request your continued support and
    full consideration of our fiscal year 2006 appropriations requests.
                                     ______

    Prepared Statement of the American Nursery & Landscape Association and
                        the Society of American Florists

        The American Nursery & Landscape Association (ANLA) and the Society
    of American Florists (SAF) welcome this opportunity to present the
    nursery and floriculture industry's views regarding the U.S. Department
    of Agriculture's (USDA) budget for the fiscal year 2006.
        ANLA is the national trade organization representing the U.S.
    nursery and landscape industry. ANLA represents 2,500 production
    nurseries, landscape firms, retail garden centers and horticultural
    distribution centers, and the 16,000 additional family farm and small
    business members of the State and regional nursery and landscape
    associations. ANLA's grower members are estimated to produce about 75
    percent of the nursery and greenhouse crops moving in domestic commerce
    in the United States that are destined for landscape use. Members also
    produce various plants used in the commercial production of tree and
    small fruits.
        SAF is the national trade association representing the entire
    floriculture industry, a $19 billion component, at retail, of the U.S.
    economy. Membership includes some 10,000 small businesses, including
    growers, wholesalers, retailers, importers and related organizations,
    located in communities nationwide and abroad. The industry produces and
    sells cut flowers and foliage, foliage plants, potted flowering plants,
    and bedding plants, which compete in the international marketplace.

                      ECONOMIC IMPORTANCE OF THE INDUSTRY

        Our industries represent the fastest-growing part of American
    agriculture. The 2002 Census of Agriculture shows a 40 percent increase
    from 1997 to 2002. According to a 2004 study by the Economic Research
    Service of USDA, floriculture and nursery crops posted total sales in
    excess of $15.3 billion, a value exceeded only by corn, soybeans, ad
    vegetable crops. Nursery and floriculture crops represent about 15
    percent of total U.S. crop receipts and are produced in every State in
    the United States.

                      AGRICULTURAL RESEARCH SERVICE (ARS)
                   FLORICULTURE & NURSERY RESEARCH INITIATIVE

        ANLA and SAF developed and jointly submitted a detailed $21 million
    proposal to Congress in 1998, establishing a coordinated Research
    Initiative for the environmental horticulture industry. We are pleased
    that Congress chose to recognize the growing importance and size of the
    industry in U.S. agriculture and has continued to increase the funding
    level of the Initiative to $6 million in fiscal year 2005. We
    respectfully request a $1 million increase in this amount, for a total
    of $7 million in fiscal year 2006. This research is currently funding
    projects of importance to the floral and nursery industry, but its
    projects are also of importance to agriculture and society in general.
        The additional funding would enhance the basic research efforts to
    address emerging imported insect and disease issues in the floral and
    nursery industry. It would also allow for the strengthening of ongoing
    research efforts--for instance, it would allow expansion of
    Phytophthora ramorum (also known as ``Sudden Oak Death'') research.
        The Initiative represents a strong and cost-effective cooperation
    between industry, ARS scientists, and existing ``university centers of
    excellence'' with experience with the industry's needs. In tight fiscal
    times, the Initiative has a proven track record of results and return
    on investment. With continued support, crucial research--ranging from
    pest and disease management to mechanization to reduced chemical use to
    reduced runoff and environmental management--will not be diminished or
    on-going projects invalidated before their results can be brought to
    bear.
        The continued funding allows us to move forward modestly on our
    crucial goals, which are:
      --Protect the environment, including human health and safety through
            research leading to reduced use of chemicals and a reduction in
            runoff and other wastes.
      --Enhance environmental remediation and cleanup, efforts on wetlands,
            post-industrial sites, air quality and other environmental
            areas through research on the ability of plants to reverse and
            mitigate environmental pollution.
      --Improve the ability to prevent the spread of plant pests and
            diseases, in international trade.
      --Contribute to the U.S. agricultural economy, and increase United
            States competitiveness in international markets by conducting
            research leading to improved nursery/greenhouse and
            floriculture products and production strategies, and by
            improving technology transfer of research results to benefit
            other U.S. agricultural sectors.
      --Strengthen rural and suburban economies across the United States by
            providing improved crop production systems and technologies to
            growers to increase production efficiency.
      --Maintain biodiversity through germplasm preservation enabling
            useful botanic traits to be transmitted to future generations.
      --Enhance Americans' quality of life by increasing the availability
            and diversity of plants and flowers for the consumers' purchase
            and enjoyment.
        The floriculture and nursery industry supports its own research,
    which is typically applied research rather than the basic, long-term
    research funded by ARS. The industry's private foundations fund an
    average of $3 million annually on research.
        However, the Federal Government also has a recognized role in
    funding research. The basic, long-term USDA-ARS funding, with projects
    at major ARS stations and land-grant universities across the country,
    has brought valuable new tools and help to a segment of agriculture
    otherwise underserved in the USDA budget. The research funded by the
    Initiative is of crucial importance to the floral and nursery
    industry--but it will also benefit other segments of agriculture, and
    will provide benefits to society at large.
        The wave of the future will be found in increased industry-
    academic-government partnerships and cooperation. The money
    appropriated by Congress in fiscal year 2005 and previous years is
    already funding long-term basic research of critical importance to the
    industry, on projects chosen to compliment industry's privately funded
    efforts and to address long-term industry needs to:
      --Help prevent and deal with the increasing import of foreign pests
            and diseases, which have a devastating impact on American
            agriculture and the environment--like Ralstonia solanacearum
            and Phytophthora ramorum are being studied and important
            projects underway will be lost, should funding not be
            continued.
      --Reduce chemical usage
      --Find ways to improve the post-harvest life of both flowers and
            plants
      --Develop disease-resistant and pest-resistant flowers and plants to
            reduce the need for pesticide application in the environment
      --Find ways to control root diseases
      --Improve spray technology and pest control in greenhouses
      --Manage nursery and greenhouse irrigation, fertilization and runoff
      --Develop better tests leading to virus-free stock
        The Agricultural Research Service, private industry, and
    universities have developed a strong program of coordination and
    cooperation to accomplish the goals of the Initiative. We ask Congress
    to continue and increase funding for this very important effort, which
    represents a new level of cooperation among industry, the Federal
    Government, and university researchers, to meet the needs of the floral
    and nursery industry. We were disappointed that the President's budget
    request for fiscal year 2006 failed to include the funding appropriated
    to the Initiative by Congress in fiscal year 2005 and previous years.
    Were the President's budget to be enacted by Congress, the current $6
    million would be cut back and valuable research efforts already in
    progress would be lost.
        We believe that these Congressional appropriations reflect the
    voices of constituents to whom this research is of very high
    importance, and we request that funding be restored. Further, we
    respectfully request a $1 million increase in the Floriculture and
    Nursery Research Initiative, through the Agricultural Research Service
    budget, for a total of $7 million in fiscal year 2006.
        We very much appreciate this opportunity to present a statement for
    the record, and will be pleased to answer any questions from the
    Subcommittee.
                                     ______

          Prepared Statement of the American Public Power Association

        The American Public Power Association (APPA) is the national
    service organization representing the interests of over 2,000 municipal
    and other State and locally owned utilities throughout the United
    States (all but Hawaii). Collectively, public power utilities deliver
    electricity to one of every seven electric consumers (approximately 43
    million people), serving some of the Nation's largest cities. However,
    the vast majority of APPA's members serve communities with populations
    of 10,000 people or less.
        We appreciate the opportunity to submit this statement outlining
    our fiscal year 2006 funding priorities within the jurisdiction of the
    Agriculture, Rural Development, and Related Agencies Subcommittee.

    Department of Agriculture: Rural Utility Service Rural Broadband Loan
            Program
        APPA urges the Subcommittee to fully fund the Rural Utility
    Service's (RUS) Rural Broadband Loan Program at $10 million, as
    authorized in the 2002 Farm Bill, and to take all appropriate steps to
    assist the RUS in facilitating the processing of loan funds provided in
    fiscal year 2002 through fiscal year 2005.
        APPA believes it is important to provide incentives for the
    deployment of broadband to rural communities, many of which lack
    broadband service. Increasingly, access to advanced communications
    services is considered vital to a community's economic and educational
    development. In addition, the availability of broadband service enables
    rural communities to provide advanced health care through telemedicine
    and to promote regional competitiveness and other benefits that
    contribute to a high quality of life. Approximately one-fourth of
    APPA's members are currently providing broadband service in their
    communities. Several APPA members are planning to apply for RUS
    broadband loans to help them finance their broadband projects.
                                     ______

         Prepared Statement of the American Sheep Industry Association

        The American Sheep Industry Association (ASI) is a federation of
    state member associations representing over 67,000 sheep producers in
    the United States. The sheep industry views numerous agencies and
    programs of the U.S. Department of Agriculture as important to lamb and
    wool production. Sheep industry priorities include building on the
    first growth in the U.S. Sheep Industry since 1990 through
    strengthening our infrastructure primarily through the programs of
    USDA, APHIS, Veterinary Services, Wildlife Services, and National Sheep
    Industry Improvement Center to fully funding critical predator control
    activities, national animal health efforts, and expanding research
    capabilities.
        We appreciate this opportunity to comment on the USDA fiscal year
    2006 budget.

                               RURAL DEVELOPMENT

        The National Sheep Industry Improvement Center is critical to the
    industry and we fully support appropriations for the balance of the
    authorized spending of $21 million. The Sheep Center is currently
    involved with an Intermediary Low Interest Direct Loan Program, which
    became operational in 2000 and has committed $14 million for lamb, wool
    and goat projects. Loans are being used to fund a variety of large and
    small projects in every region of the country with emphasis on
    targeting different marketing challenges through value added and niche
    marketing initiatives. The second focus area is a direct grant program
    that was started in 2002.
        We strongly support the appropriations level of fiscal year 2005
    and urge the Subcommittee to continue funding at that level for fiscal
    year 2006.
        We understand that loan proposals currently under consideration
    will fully use the available funds. The demand for the Center's funds
    is increasing and additional appropriations will be required to meet
    the new project requests.

               ANIMAL AND PLANT HEALTH INSPECTION SERVICE (APHIS)

    Scrapie
        The American Sheep Industry Association is very appreciative for
    the increased appropriations approved in fiscal year 2005 of $17.5
    million. USDA/APHIS, along with industry and State regulatory efforts,
    is now in the position to eradicate scrapie from the United States with
    a multi-year attack on this animal health issue. As the collective and
    aggressive efforts of Federal and State eradication efforts are
    expanding into slaughter-surveillance and other methods and systems,
    the costs are, as expected, escalating. We urge the Subcommittee to
    support the President's request of $19 million for scrapie eradication
    in the 2005 budget.
        Scrapie is one of the families of transmissible spongiform
    encephalopathies (TSEs), all of which are the subject of great
    importance and interest around the globe. USDA/APHIS, along with the
    support and assistance of the livestock and allied industries, began an
    aggressive program to eradicate scrapie in sheep and goats 3 years ago.
    The plan USDA/APHIS is implementing will eradicate scrapie by 2010 and
    with subsequent monitoring and surveillance would allow the United
    States to be declared scrapie-free by 2017. Becoming scrapie-free will
    have significant positive economic impact to the livestock, meat and
    feed industries and, of course, rid our flocks and herds of this fatal
    animal disease.
        Essential to the eradication effort being accomplished in a timely
    manner is adequate appropriated funds. The program cannot function
    properly without additional personnel, diagnostic support and
    surveillance activities that depend upon appropriated funds. We
    strongly urge you to support the level of funding that is specified for
    scrapie in the President's budget request. Funding of $19 million will
    provide for an achievable scrapie eradication program and the eventual
    scrapie-free status for the United States. As with the other successful
    animal disease eradication programs conducted by USDA/APHIS in the
    past, strong programs at the State level are key. We therefore urge the
    Subcommittee to send a clear message to USDA to budget significant
    funding toward cooperative agreements with the State animal health
    regulatory partners.

    Wildlife Services
        With well over one-quarter million sheep and lambs lost to
    predators each year, the Wildlife Services (WS) program of USDA-APHIS
    is vital to the economic survival of the sheep industry. The value of
    sheep and lambs lost to predators and predator control expenses are
    second only to feed costs for sheep production. Costs associated with
    depredation currently exceed our industry's veterinary, labor and
    transportation costs.
        Wildlife Service's cooperative nature has made it the most cost
    effective and efficient program within the Federal Government in the
    areas of wildlife management and public health and safety. Wildlife
    Services has more than 2,000 cooperative agreements with agriculture,
    forestry groups, private industry, State game and fish departments,
    departments of health, schools, county and local governments to
    mitigate the damage and danger that the public's wildlife can inflict
    on private property and public health and safety.
        ASI strongly supports the fiscal year 2005 appropriations for
    Wildlife Services operations and methods development programs,
    particularly as related to livestock protection. We request the
    Committee to restore the funding levels that are decreased in the
    Administration's fiscal year 2006 budget and approve an increase to the
    livestock protection program of Wildlife Services operations of $9
    million. We encourage and support continued recognition in the
    appropriations process for fiscal year 2006 of the importance of aerial
    hunting as one of Wildlife Service's most efficient and cost-effective
    core programs. It is used not only to protect livestock, wildlife and
    endangered species, but is a crucial component of the Wildlife Services
    rabies control program.
        Similar to the increasing needs in the aerial hunting program, we
    encourage continued emphasis in the programs to assist with management
    of wolf depredation in the States of Montana, Idaho, Wyoming,
    Minnesota, Wisconsin, Michigan, New Mexico and Arizona. Additionally,
    program expenses are expected in the States surrounding the Montana,
    Idaho and Wyoming wolf populations. It is strongly supported that
    appropriations be provided for $586,000 for additional wolf costs
    anticipated in Washington, Oregon, Nevada, Utah, Colorado and North
    Dakota.
        Federal funding available for livestock predation management by the
    Western Region program has remained relatively constant for
    approximately 16 years. WS program cooperators have been forced to fund
    more and more of the costs of the program. WS Western Region base
    funding has increased only 5.6 percent in the past 10 years while
    cooperative funding has increased 110 percent (see chart). This
    increase has primarily come from individual livestock producers,
    associations, counties, and States.
        Additionally, new Federal mandates and program investments such as
    narrow-banding of radios, computer record keeping and compliance with
    the Endangered Species Act are requiring a larger portion of the
    already stretched budget and negatively impacting the amount of
    livestock predation management work that WS can conduct.

    Economics of Predation Management
        The WS Western Region predation management program is one of the
    few government sponsored programs that is cost-shared, and this
    provides a significant benefit to both the producers and the
    government. Predation management, as conducted by the WS program, is
    cost effective and returns more money to the U.S. treasury than it
    costs. An analysis of 1998 data shows that for every dollar spent for
    predation management, $3 worth of livestock were saved. In that same
    year the total investment in just the predation management program was
    $20 million ($9 million Federal and $11 million cooperative funds);
    therefore, the full impact of this investment was a $250 million net
    increase in economic activity. Using today's values for livestock,
    every Federal dollar spent on predation management results in $10.84 in
    livestock saved, conservatively, $97.5 million in livestock saved
    ($52.5 million in calves, $34 million in sheep and lambs, $11 million
    in goats). When cooperative funding is included with Federal funds, the
    benefit cost ratio is $4.87:1.

    ----------------------------------------------------------------------------------------------------------------
                                                                                                      Total value of
                            Type of Livestock                             Number       Number saved      livestock
                                                                         protected    from predators       saved
    ----------------------------------------------------------------------------------------------------------------
    Calves..........................................................       2,500,000          70,000     $52,500,000
    Adult Sheep.....................................................       2,000,000          82,000       8,200,000
    Lambs...........................................................       1,850,000         214,600      25,752,000
    Goats...........................................................         292,000         110,960      11,096,000
    ----------------------------------------------------------------------------------------------------------------

        The value of livestock saved is much greater in rural economies
    than any other type of economic development. Livestock dollars, that
    would have been lost without adequate predation management, generate an
    additional three fold increase in non-agricultural economic activity in
    rural America. The total economic activity (both agriculture and non-
    agricultural sectors) generated by predation management is $390.2
    million.

    Emerging Issues
        Additional issues are emerging in the West that will challenge the
    Federal WS program.
      --Wolves.--Recently a Federal judge struck down the threatened
            species status for wolves in the Western Distinct Population
            area eliminating the ability of private land ranchers to deal
            with wolves, thus requiring additional government intervention.
      --Wildlife.--The declines in predation management that have already
            occurred, and that will continue to occur without additional
            Federal funding, have resulted in negative impacts on many
            native wildlife populations. Several western States currently
            need to fund predation management to prevent the listing of
            sage grouse as an endangered species or to recover mule deer
            herds.
        Without additional Federal funding to support existing western
    livestock protection programs, predation management expertise will be
    lost and livestock grazing in some areas will be jeopardized. Rural
    economies need this support, and the return for the investment exceeds
    the requested assistance.
        ASI urges the Subcommittee to provide USDA, APHIS, WS, Western
    Region an additional $9 million of Federal funds for livestock
    protection. At a nominal 16 percent tax rate on the economic activity
    generated by the investment would result in over $62 million to the
    Treasury.

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

    ------------------------------------------------------------------------
    Total Livestock Protected...............................       6,642,000
    Total Value of Livestock Saved (Using $10.84:1 Ratio)...     $97,548,000
    Value incl. Multiplier..................................    $390,192,000
    16 percent Nominal Tax rate.............................     $62,430,720
    ------------------------------------------------------------------------

      Chart 1. Ten Year Comparison--WR Federal Base and Cooperative Funds
                       (Including Livestock Protection)

                     FARM AND FOREIGN AGRICULTURAL SERVICES

    Foreign Agricultural Service (FAS)
        The sheep industry participates in FAS programs such as the Market
    Access Program (MAP), Quality Samples Program (QSP) and the Foreign
    Market Development Program (FMD). ASI strongly supports appropriations
    at the full authorized level for these critical Foreign Agricultural
    Service programs. ASI is the cooperator for American wool and sheep
    pelts and has achieved solid success in increasing exports of domestic
    product. Exports of American wool have increased dramatically with
    approximately 60 percent of U.S. production now competing overseas.
    Risk Management Agency (RMA)
        Through ASI, the U.S. sheep industry is working with RMA on the
    development of ``Livestock Risk Protection'' for lamb (LRP-Lamb), a
    price-risk insurance product to help sheep producers manage the primary
    factor in their operation's financial exposure. The sheep industry is
    very anxious to begin a pilot project with LRP-Lamb with the goal of
    providing a market-based, user-friendly risk management tool that
    effectively and efficiently protects against price downswings,
    providing producers and their lenders with a critically needed
    financial management tool.
        We note that the Administration's budget request supports the
    expanded use of crop insurance and recommends an increase in the crop
    insurance budget. While we appreciate the Administration request
    focusing on the traditional crops and crop insurance, the livestock
    sector and the sheep industry in particular will be well-served to have
    the opportunity to participate in crop insurance programs. ASI urges
    the Subcommittee to support the President's request and recommend
    additional funding especially in the ``Delivery and other
    Administrative Expenses'' to help cover the research and developmental
    costs to design creative new programs for the livestock sector as well
    as in the ``Administrative and Operating Expenses'' category to enable
    RMA to deliver these products, including appropriate maintenance
    expenses.
        ASI understands and supports USDA's goal to provide innovative
    price protection products for livestock producers. The 2000 Crop
    Insurance Reform Act authorized funding for fiscal year 2006 at $20
    million and if necessary, we recommend the Subcommittee to approve an
    increase in the dollars allocated for each year by a nominal amount to
    provide pilot program monies for LRP-Lamb while continuing to
    adequately fund pilot programming for cattle and swine.

                 NATURAL RESOURCES CONSERVATION SERVICE (NRCS)

        ASI urges increased appropriations for the range programs of the
    Soil Conservation Service to benefit the private range and pasture
    lands of the United States with conservation assistance. We support the
    budget item and recommend an increased level for the Grazing Lands
    Conservation Initiative, which ASI has worked with, along with other
    livestock and range management organizations, to address this important
    effort for rangelands in the United States.

                       RESEARCH, EDUCATION AND ECONOMICS

        Our industry is striving to be profitable and sustainable as a user
    of and contributor to our natural resource base. Research, both basic
    and applied, and modern educational programming is essential if we are
    to succeed. We have been disappointed in the decline in resources USDA
    has been targeting toward sheep research and outreach programs. In
    order for the sheep industry to continue to be more globally
    competitive, we must invest in the discovery and adoption of new
    technologies for producing, processing and marketing lamb and wool. We
    urge the Subcommittee to send a strong message to USDA supporting sheep
    research and education funding increases.

    Agricultural Research Service
        We continue to vigorously support the administration's funding of
    research concerning emerging and exotic diseases. Emerging and exotic
    diseases continue to have significant impact on our industry due to
    animal health and trade issues. The animal disease portion should be
    substantial and is urgently needed to protect the U.S. livestock
    industry. We note the President's request for fiscal year 2006 includes
    $7.5 million for BSE research. We agree that BSE is an extremely
    important disease issue globally and believe that research is needed.
    With this in mind, we remind the Subcommittee that scrapie is a TSE
    that is endemic in the United States and we recommend that these monies
    for BSE research be utilized in such a manner that the resultant
    research assists with scrapie eradication needs. As the Subcommittee is
    aware unlike scrapie which transmits from sheep to sheep within flocks,
    BSE doesn't transmit from cow to cow in the absence of recycled
    protein. This difference between BSE and scrapie transmission explains
    the need for continuing to concentrate research efforts on scrapie
    detection and control methods. We also respectively remind the
    Subcommittee that scientists in the Animal Disease Research Unit
    (ADRU), ARS, Pullman Washington, have made significant progress in the
    early diagnosis of TSEs, in understanding genetic resistance to TSEs
    and in understanding mechanisms of TSE transmission, which are
    important in eradication of all TSEs. The programs of these scientists
    at ADRU should be enhanced and expanded to include, for instance, the
    development of further improvements in rapid and accurate TSE detection
    methods and to provide an understanding of the role of environmental
    sources of the TSE agent in the transmission of TSEs within the United
    States and world and to further understand the basis of genetic
    resistance and susceptibility to these devastating diseases.
        Since 2001, Congress has had the foresight to appropriate $764,195
    each year to this unit for ``Microbial Genomics.'' Microbial genomics
    is the cornerstone project for their genomic research infrastructure
    and has resulted in very important genome projects for infectious
    diseases of livestock such as scrapie and Ovine Progressive Pneumonia
    virus (OPPv). Scrapie remains endemic within the United States; however
    ongoing research efforts continue to provide tools necessary for
    control and eventual eradication. OPPv causes life-long infection which
    continues to have significant economic impact for U.S. Sheep producers.
    Very promising on-going genomic research efforts are directed at early
    determination of which sheep are susceptible to disease and responsible
    for economic losses. Early detection of susceptibility and resistance
    will lead to practical intervention strategies. We respectively request
    the Subcommittee to recommend the restoration of $764,195 to ADRU for
    the fiscal year 2006 budget.
        We also urge the Subcommittee to recommend the restoration of
    $489,183 for Malignant Catarrhal Fever (MCF) at the ARS/ADRU in Pullman
    for the fiscal year 2006 budget. MCF is a viral disease of ruminants
    that is of great concern to our livestock industries. The exotic
    variant of MCF is considered a high priority select agent. This funding
    is provided for collaborative research with the U.S. Sheep Experiment
    Station, Dubois ID, for vaccine development directed at preventing
    transmission and economic losses caused by MCF.
        Research into Johne's disease has received additional funding
    through ARS over the past several years, focusing on cattle. Johne's
    disease is also endemic in the U.S. sheep population and is not well
    understood as a sheep disease. The same food safety concerns exist in
    both sheep and cattle; other countries are also very concerned about
    Johne's in sheep. We urge the Subcommittee to send a strong message to
    ARS that Johne's disease in sheep should receive more attention at the
    National Animal Disease Research Center (NADC) with an emphasis on
    diagnostics.
        We note that the President's fiscal year 2006 includes an increase
    of $2.5 million in the ``Product Quality/Value Added'' category for
    ``Bioenergy and Biobased Products'' research. Within this category, the
    budget request recommends a portion of these funds be used for the
    development of ``technologies leading to new value added products from
    food animal byproducts''. We agree that this is an important area of
    research and urge the Subcommittee to recommend that a significant
    proportion of funds for this category, as supported by ARS, be directed
    toward research on wool at the molecular level focusing on flame
    retardation, and enhancement of fiber properties through enzyme
    treatments targeting military needs and other niche consumer
    applications.

    Cooperative State Research, Education, and Extension Service (CSREES)
        The Minor Use Animal Drug Program is funded through a ``Special
    Research Grant'' that has had great benefit to the U.S. sheep industry.
    The research under this category is administered as a national program
    ``NRSP-7'' cooperatively with FDA/CVM to provide research information
    for the approval process on therapeutic drugs that are needed. Without
    this program, American sheep producers would not have effective
    products to keep their sheep healthy. We appreciate the
    Administration's request of $588,000 for this program, and we urge the
    Subcommittee to recommend that it be funded at least at this level to
    help meet the needs of our rapidly changing industry and increasing
    costs for research necessary to meet the requirements for approving
    additional therapeutics for sheep.
        On-going funding for the Food Animal Residue Avoidance Databank
    (FARAD) program is critically important for the livestock industry in
    general and especially for ``minor species'' industries such as sheep
    where extra-label use of therapeutic products is more the norm rather
    than the exception. We appreciate the Administration's request of
    $1,000,000 for this program in the USDA budget, and urge the
    Subcommittee to recommend that it be funded at least at this level to
    help meet the needs of the animal industries. FARAD provides
    veterinarians the ability to accurately prescribe products with
    appropriate withdrawal times protecting both animal and human health.
        On-going research in wool is critically important to the sheep and
    wool industry. ASI urges the Subcommittee's support to restore and
    continue the CSREES special grants program for wool research at least
    to the fiscal year 2005 level of $300,000 for fiscal year 2006.
        Research for the Montana Sheep Institute is important to the sheep
    and wool industry. Sheep grazing is being used as an important tool for
    natural resource management to improve the competitiveness of lamb and
    wool in the marketplace. ASI encourages the Subcommittee's support to
    continue funding at the fiscal yeaer 2005 level of $574,000 for 2006.
        The research and education programs conducted through the Joe Skeen
    Institute for Rangeland Restoration provide valuable information for
    sheep producers in the western United States. ASI urges the
    Subcommittee to continue the funding for this program to $1,000,000 for
    fiscal year 2006.

    Grants to Train Farm Workers in Technologies and to Train Farm Workers
            in Specialized Skills Necessary for Higher Value Crops
        The shortage of skilled sheep shearers has increasingly become a
    problem for U.S. sheep producers and strong interest has been expressed
    in utilizing this grant program through USDA as authorized in section
    6025 of the 2002 Farm Security and Rural Investment Act. Grant funds
    are authorized; however appropriations would be necessary for the
    program to allow the U.S. sheep industry the opportunity to apply for
    funds to train U.S. workers as sheep shearers.
                                     ______

          Prepared Statement of the American Society for Microbiology

        The American Society for Microbiology (ASM) appreciates the
    opportunity to submit testimony on the fiscal year 2006 appropriation
    for the United States Department of Agriculture (USDA). The ASM is the
    largest single life science organization in the world, with more than
    43,000 members who work in academic, industrial, medical, and
    governmental institutions. The ASM's mission is to enhance the science
    of microbiology, to gain a better understanding of life processes, and
    to promote the application of this knowledge for improved plant, animal
    and human health, and for economic and environmental well-being.
        The USDA sponsors research and education programs which contribute
    to solving agricultural problems of high national priority and ensuring
    food availability, quality and safety, as well as a competitive
    agricultural economy. U.S. agriculture faces new challenges, including
    threats from emerging infectious diseases in plants and animals,
    climate change, and public concern about food safety and security. It
    is critical to increase the visibility and investment in agriculture
    research to respond to these challenges. ASM urges Congress to provide
    increased funding for research programs within the USDA in fiscal year
    2006.
        Microbiological research in agriculture is vital to understanding
    and finding solutions to foodborne diseases, endemic diseases of long
    standing, new and emerging plant and animal diseases, development of
    new agriculture products and processes and addressing existing and
    emerging environmental challenges. Unfortunately, Federal investment in
    agricultural research has not kept pace with the need for additional
    agricultural research to solve emerging problems. According to National
    Science Foundation (NSF) data, agriculture research makes up only 4
    percent of Federal funds devoted to basic research. According to the
    USDA Economic Research Service (ERS) report, Agricultural Research and
    Development: Public and Private Investments Under Alternative Markets
    and Institutions, the rate of return on public investment in basic
    agricultural research is estimated to be between 60 and 90 percent.
    USDA National Research Initiative Competitive Grants Program
        The National Research Initiative Competitive Grants Program (NRI)
    was established in 1991 in response to recommendations outlined in
    Investing in Research: A Proposal to Strengthen the Agricultural, Food
    and Environmental System, a 1989 report by the National Research
    Council's (NRC) Board on Agriculture. This publication called for
    increased funding of high priority research that is supported by USDA
    through a competitive peer-review process directed at:
      --Increasing the competitiveness of U.S. agriculture.
      --Improving human health and well-being through an abundant, safe,
            and high-quality food supply.
      --Sustaining the quality and productivity of the natural resources
            and the environment upon which agriculture depends.
        Continued interest in and support of the NRI is reflected in two
    subsequent NRC reports, Investing in the National Research Initiative:
    An Update of the Competitive Grants Program of the U.S. Department of
    Agriculture, published in 1994, and National Research Initiative: A
    Vital Competitive Grants Program in Food, Fiber, and Natural Resources
    Research, published in 2000.
        Today, the NRI, housed within USDA's Cooperative State Research,
    Education, and Extension Service (CSREES), supports research on key
    problems of national and regional importance in biological,
    environmental, physical, and social sciences relevant to agriculture,
    food, and the environment on a peer-reviewed, competitive basis.
    Additionally, NRI enables USDA to develop new partnerships with other
    Federal agencies that advance agricultural science. An example of such
    collaboration is USDA's partnership with the NSF on the Microbe
    Project.
        In fiscal year 2004, NRI was able to fund only 11 percent of the
    grant proposals it received, while agencies such as the National
    Institutes of Health (NIH) and the NSF fund between 20-30 percent. ASM
    urges Congress to fund NRI at the President's requested level of $250
    million in fiscal year 2006. NRI's requested increase comes from the
    proposal to shift CSREES Integrated Activities, such as food safety and
    water quality, making up $40 million of the proposed $70 million
    increase, and to reallocate funds from the CSREES formula grants to the
    NRI in the administration's effort to eliminate the formula grant
    programs by fiscal year 2007. If new funds cannot be found, ASM
    supports the proposed 50 percent reduction of formula grant funds, part
    of which will be redirected to the NRI, and the remaining 50 percent be
    phased out over a 3-year period rather than a 1-year period of time,
    giving the institutions currently receiving formula grants time to
    adjust. ASM supports the Administration's effort to increase
    competitively awarded funding mechanisms and believes that competitive
    grants ensure the best science.
        Additional funding for the NRI is needed to expand research in
    microbial genomics and to provide more funding for merit reviewed basic
    research with long-term potential for new discoveries and products. ASM
    supports the President's requested level of $250 million for NRI.

    USDA Food and Agriculture Defense Initiative
        The Food and Agriculture Defense Initiative is an interagency
    initiative to improve the Federal Government's capability to rapidly
    identify and characterize a bioterrorist attack, by improving the
    national surveillance capabilities in human health, food, agriculture,
    and environmental monitoring. ASM supports the President's request for
    this initiative within the USDA budget of $376 million for fiscal year
    2006, an increase of $78 million over fiscal year 2005. Of this total,
    $59 million is for the completion of the USDA's National Centers for
    Animal Health in Ames, Iowa. This funding will go towards:
        Enhancing food defense by:
      --Expanding the Food Emergency Response Network (FERN) with
            participating laboratories including implementation of the
            Electronic Laboratory Exchange Network (eLEXNET) and an
            electronic methods repository;
      --Upgrading laboratory capabilities to quickly identify chemical and
            radiological threats to the food supply; and
      --Strengthening research on diagnostic methods for quickly
            identifying various pathogens and contaminated foods and
            innovative biosecure foods.
        Enhancing agriculture defense by:
      --Strengthening research on rapid response systems for bioterror
            agents, improved vaccines, and identifying genes affecting
            disease resistance;
      --Expanding the National Plant Disease Recovery System to ensure
            disease resistant seed varieties are continually developed and
            made available to producers in the event of a natural or
            intentional catastrophic disease or pest outbreak;
      --Substantially expanding the Regional Diagnostic Network with links
            to the National Agricultural Pest Information System;
      --Establishing a Higher Education Agrosecurity Program for capacity
            building grants to universities for interdisciplinary degree
            programs to prepare food defense professionals;
      --Substantially enhancing the monitoring and surveillance of pests
            and diseases in plants and animals, including targeted National
            wildlife surveillance;
      --Establishing connectivity with the Department of Homeland Security
            (DHS) integration and analysis to improve biosurveillance of
            pests and diseases in plants;
      --Increasing activities to safeguard plants from intentional threats
            to spread pests and diseases;
      --Strengthening the system to track biological disease agents;
      --Improving USDA's ability to respond to a disease outbreak,
            including increasing supplies of vaccines for the National
            Veterinary Stockpile;
      --Providing funds for completing the consolidated state-of-the-art
            BSL-3 animal research and diagnostic laboratory at Ames, Iowa;
            and
      --Improving biocontainment safeguards at the Foreign Disease Weed
            Science Laboratory in Frederick, MD.
        ASM believes there should be greater emphasis on research in the
    Food and Agriculture Defense Initiative. ASM recommends an increase in
    funding, both extramurally and intramurally, for research on pathogenic
    microorganisms as part of the Food and Agriculture Defense Initiative.

    Food Safety
        Each year foodborne pathogens cause 76 million human illnesses,
    325,000 hospitalizations, 5,200 deaths, and an unknown number of
    chronic conditions, according to the CDC (ERS: Economics of Foodborne
    Disease: Feature, 2005). The USDA's Economic Research Service (ERS)
    estimates that the medical costs, productivity losses, and costs of
    premature deaths for diseases caused by just five foodborne pathogens
    exceeds $6.9 billion per year in the United States. The USDA plays a
    vital role in the government's effort to reduce the incidence of
    foodborne illness. Continued and sustained research is important to
    safeguarding the Nation's food supply and focusing on methods and
    technologies to prevent microbial foodborne disease and emerging
    pathogens. The most significant outcome of food safety research is to
    provide greater public health protection which, in part, can be
    measured by reductions in the incidence of foodborne illnesses. The
    Centers for Disease Control and Prevention reports that the 2003
    incidence of illness caused by four major foodborne pathogens exceed
    the levels outlined in the National Health Objectives for 2010 (CDC:
    MMWR, April 30, 2004). Although increases are requested for the Food
    and Agriculture Defense Initiative and the Food Safety and Inspection
    Service, we note that a reduction in funding for food safety within ARS
    has been proposed, and level funding is requested within CSREES.
    Without a sustained significant increase in the level of food safety
    research funding, meeting the National Health Objectives for 2010 in
    all likelihood will not become reality. ASM recommends a substantial
    increase in food safety research, which is essential to ensure the
    protection of the Nation's health.

    Genomics Initiative
        The NRI and the ARS fund USDA collaborative efforts in the field of
    genomics. There are opportunities to leverage USDA investments with
    those of the NIH, the Department of Energy, and the NSF in projects to
    map and sequence the genomes of agriculturally important species of
    plants, animals, and microbes. Determining the function of the
    sequenced genomes (functional genomics) and analyses of the data
    (bioinformatics) now need investment for new management techniques and
    tools. USDA plays an important role in coordinating and participating
    in interagency workgroups on domestic animal, microbial, and plant
    genomics. Access to genomic information and the new tools to utilize it
    have implications for virtually all aspects of agriculture. An increase
    of $11 million has been requested for the NRI in fiscal year 2006 to
    support investments in the sequencing and annotation of the maize and
    swine genomes. A $9.2 million increase in animal and plant genomics
    research within the ARS has been requested. ASM supports the requested
    increases for the genomics initiative and USDA.
    Emerging Infectious Diseases in Plants and Animals
        The food production and distribution system in the United States is
    vulnerable to the introduction of pathogens and toxins through natural
    processes, global commerce, and intentional means. The ASM supports
    increases in the USDA research budget for emerging diseases and
    invasive species. Nearly 200 zoonotic diseases can be naturally
    transmitted from animals to man and opportunistic plant pathogens and
    soil inhabiting microorganisms can be causal agents of infection and
    disease in humans. For emerging diseases to be effectively detected and
    controlled the biology, ecology, and mechanisms for pathogenicity of
    the causal pathogens must be understood and weaknesses exploited to
    limit their impact. This research will help address the risk to humans
    from emerging diseases and opportunistic pathogens, and will ensure the
    safety of plant and animal products. Additionally, expanded research is
    needed to accelerate the development of information and technologies
    for the protection of United States agricultural commodities,, wildlife
    and human health against emerging diseases.

    Antimicrobial Resistance Research
        The USDA plays a key role in addressing the national and global
    increase in antimicrobial resistance and the complex issues surrounding
    this public health threat. The ARS Strategic Plan for 2003-2007 States
    the need to ``determine how antimicrobial resistance is acquired,
    transmitted, maintained, in food-producing animals, and develop
    technologies or altered management strategies to control its
    occurrence.'' In 1996, the Department of Health and Human Services
    (HHS) and the USDA established the National Antimicrobial Resistance
    Monitoring System (NARMS) to monitor trends in antimicrobial resistance
    in foodborne pathogens; the USDA has expanded monitoring to include the
    Collaboration on Animal Health Food Safety Epidemiology (CAHFSE)
    program. USDA support for these projects should continue. USDA research
    also has a vital role to play in controlling the emergence of
    resistance in pathogens associated with food through NRI funded grants.
    USDA research also has a vital role to play in controlling the
    emergence of resistance in pathogens associated with food through NRI
    funded grants. ASM urges Congress to increase support for antimicrobial
    resistance surveillance, research, prevention, and control programs.

    Conclusion
        The USDA's mission and goals of leadership on food, agriculture,
    and natural resources, based on sound public policy, the best available
    science, and efficient management should be supported. With a
    significant investment in research, USDA will be better able to meet
    its goals. ASM urges Congress to provide sufficient funding for
    research at USDA by increasing funding for agricultural research
    programs, including providing $250 million for NRI in fiscal year 2006.
        The ASM appreciates the opportunity to provide written testimony
    and would be pleased to assist the Subcommittee as the Department of
    Agriculture bill is considered throughout the appropriations process.

                                                                SCHEDULE OF FEDERAL AWARDS--2005
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Grants        Receipts or                       Grants
      Federal Grantor/Pass-through Grantor/     Cost Center    Federal CFDA     Program or    Receivable 1/1/     Revenue     Disbursements/   Recivable 12/
                  Program Title                                   Number       Award Number        2005         Recognized     Expenditures       31/2005
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    MAJOR PROGRAMS: Resident Postdoctoral                783           93.28    1,157,764.00       83,055.50  ..............  ..............       83,055.50
     Research...............................
                                             ---------------------------------------------------------------------------------------------------------------
          Total Major Programs..............  ..............  ..............    1,157,764.00       83,055.50  ..............  ..............       83,055.50
                                             ===============================================================================================================
    OTHER FEDERAL ASSISTANCE:
        HHS:
            NIGMS-MARC......................             789           93.88      431,300.00      155,195.00  ..............  ..............      155,195.00
            DNA Repair and Mutagenesis......             457           93.39       25,000.00       25,000.00  ..............  ..............       25,000.00
            Candida and Candidiasis.........             434           93.12       10,000.00       10,000.00  ..............  ..............       10,000.00
            ASM Conf New phage Biology......             430           93.86       10,000.00       10,000.00  ..............  ..............       10,000.00
            ASM Conf Cell Cell..............             470           93.86       18,000.00       17,000.00  ..............  ..............       17,000.00
            ASM Conf Signal Transduction....             429           93.86       20,000.00       20,000.00  ..............  ..............       20,000.00
            ASM Conf Viral Immune Evasion...             428           93.86       20,000.00  ..............  ..............  ..............  ..............
        National Science Foundation:
            Plant Biotechnology.............             678           47.07       15,000.00  ..............  ..............  ..............  ..............
            Pathogens.......................             697           47.07      110,000.00  ..............  ..............  ..............  ..............
            Cell-Cell Communications........             470           47.07        5,000.00        5,000.00  ..............  ..............        5,000.00
            Colloquium Genome Annotation....             672           47.07       63,408.00        2,421.00  ..............  ..............        2,421.00
        U.S. Department of Energy:
            DNA Repair and Mutagenesis......             457           81.05       20,000.00       20,000.00  ..............  ..............       20,000.00
            Prokaryotic Development.........             472           81.05       10,000.00  ..............  ..............  ..............  ..............
            Geobiology......................             675           81.05       15,000.00  ..............  ..............  ..............  ..............
            Microbial Ecology and Genomics..             676           81.05       25,000.00  ..............  ..............  ..............  ..............
            Multicellular Cooperation.......             671           81.05       15,000.00  ..............  ..............  ..............  ..............
            Integrating Metabolism..........             477           81.05       10,000.00       10,000.00  ..............  ..............       10,000.00
            Beyond Microbial Genomics.......             691           81.05       94,520.00  ..............  ..............  ..............  ..............
        USDA: Conf Salmonella Pathogenesis..             421           10.21       10,000.00  ..............  ..............  ..............  ..............
        EPA:
            Microbial Eolocy................             676           66.50       20,000.00  ..............  ..............  ..............  ..............
            Infectious Disease GI Tract.....             670           66.61       50,000.00  ..............  ..............  ..............  ..............
                                             ---------------------------------------------------------------------------------------------------------------
              Total Other Awards............  ..............  ..............      997,228.00      274,616.00  ..............  ..............      274,616.00
                                             ---------------------------------------------------------------------------------------------------------------
              Total Federal Awards..........  ..............  ..............    2,154,992.00      357,671.50  ..............  ..............      357,671.50
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                     ______

          Prepared Statement of the American Society for Microbiology

        The American Society for Microbiology (ASM), the largest single
    life science society with over 43,000 members, is pleased to submit a
    statement on the fiscal year 2006 appropriation for the Food and Drug
    Administration (FDA). The proposed fiscal year 2006 budget request of
    $1.9 billion for the FDA represents a 4.5 percent increase over the
    fiscal year 2005 appropriation. Much of the $81 million dollar increase
    is allocated to defending the Nation's food supply and further
    improving FDA evaluation of medical devices and health care products.
        The ASM recommends a 6 percent increase for FDA's budget in fiscal
    year 2006. FDA is the principal guardian of consumer and medical
    product safety in the United States. FDA regulations encompass human
    and veterinary drugs, biological products, cosmetics, medical devices,
    products that emit radiation, and a wide range of food products.
    Increased funding will strengthen FDA's responsibilities to ensure safe
    and effective medical products, food safety, accurate consumer product
    information and safe and effective drug and device evaluations.

                         NATIONAL SECURITY AND THE FDA

        FDA researchers and field officers are collaborating with other
    Federal, State, and local agencies to implement the Bioterrorism Act of
    2002. The fiscal year 2006 budget proposes $244 million for FDA
    activities to prevent or mitigate bioterrorism, including $180 million
    for food defense. Protecting the Nation's food supply from intentional
    contamination is an ongoing responsibility of the FDA, which now
    coordinates these efforts with the U.S. Department of Agriculture
    (USDA) and the Department of Homeland Security (DHS) under the Homeland
    Security Presidential Directive (HSPD-9) of 2004. Last September, the
    FDA, DHS, and USDA signed an agreement with the National Association of
    State Departments of Agriculture to improve cooperation among all
    levels of government when responding to food and agricultural
    emergencies, with technical expertise provided by the Federal entities.
        Two-thirds of the proposed funding increase would enhance the
    multi-agency Food Emergency Response Network (FERN), a relatively new
    nationwide consortium of Federal and State laboratories capable of
    testing thousands of food samples for biological, chemical, or
    radiological agents. The network, which continues to add laboratories,
    incorporates detection and reporting systems that are more
    comprehensive and better coordinated than previous surveillance and
    monitoring systems. A variety of FDA programs address the network's
    objectives of prevention, preparedness, response, and recovery in the
    event of terrorism. Last year FDA personnel, for instance, conducted
    training seminars on optimal detection methods for the pathogens
    Bacillus anthracis and Salmonella. If approved, the fiscal year 2006
    budget request will help elevate FERN's surge capacity, as well as add
    nineteen additional FDA funded State laboratories to the six funded in
    fiscal year 2005, joining the ten laboratories already in place.
        Data collected from FERN activities are quickly available across
    the country through the Electronic Laboratory Exchange Network
    (eLEXNET), one of several surveillance information systems supported by
    the FDA. Together, the FERN and eLEXNET networks are FDA's contribution
    to the National Biosurveillance Integration System, developed by the
    DHS to coordinate health, environment, and intelligence information
    systems against terrorist threats. Part of the requested fiscal year
    2006 increase for food security would underwrite another FDA component
    as well, the Emergency Operations Network Incident/Management System
    (EON IMS) managed by the agency's Office of Crisis Management. Its
    mission is to integrate multiple electronic data systems (e.g., FERN,
    eLEXNET, Epidemic Information Exchange) into formats conducive to rapid
    decision making during crisis situations. Among its components is a
    Geographic Information System (GIS) for mapping and impact assessments.
    Last year, the system was pilot tested successfully during several
    outbreaks of foodborne salmonellosis in 15 States.
        Basic and applied research projects linked to food defense also
    would benefit from the proposed fiscal year 2006 increase, in
    particular those useful in prevention or detection of pathogenic
    bioagents in food supplies. Subsequent discoveries undoubtedly will
    benefit the understanding of infectious diseases in general. Among the
    areas included in the FDA research agenda are population susceptibility
    factors, new food security technologies to protect particularly
    vulnerable foods, tamperproof packaging, rapid test methodologies to
    strengthen a currently overloaded field testing system, and innovative
    sensor technologies to detect bioagents in consumer products.
        Within the FDA mission to protect public health, the agency
    reinforces the Nation's drug preparedness against bioterrorism, by
    evaluating and approving vaccines and therapeutics included in the
    Strategic National Stockpile. Among the counterterrorism therapeutics
    evaluated by the FDA are improved smallpox vaccines and treatments for
    anthrax infections. As with its other national security efforts, the
    FDA cooperates with other Federal agencies in development, production,
    and approval of critical vaccines and therapeutics to be used against
    possible biological weapons. The agency also informs the public with
    science based updates on candidate countermeasures, explaining the
    benefits and possible side effects of their use.
        After September 11, 2001, the FDA assessed the Nation's food
    production, transport, and import systems for vulnerability to
    intentional release of microbial, chemical, or radiological agents. The
    FDA subsequently hired 655 new employees for its Office of Regulatory
    Affairs (ORA). Most were given food safety assignments, many at border
    or port entry locations or otherwise dealing with imports. The ORA's
    thirteen laboratories analyze more than 41,000 product samples
    annually, often from inspected import shipments. The number of FDA
    regulated products imported to the United States each year has exploded
    from about 1.5 million in 1992 to nearly 10 million today. Under the
    Bioterrorism Act of 2002, new regulations effective December 2004
    require the registration of food facilities, both foreign and domestic,
    that manufacture, process, or hold food for human or animal consumption
    in the United States. The agency expects more than 400,000 facilities
    to register. The new regulations also require prior notification of
    imported food shipments, an estimated 25,000 notifications daily, to
    help alert FDA inspectors to suspicious or otherwise questionable
    shipments.

                         FOOD SAFETY AND PUBLIC HEALTH

        The FDA's Center for Food Safety and Applied Nutrition (CFSAN)
    oversees our entire food supply, excluding meat, poultry, and some egg
    products regulated by USDA programs. According to the FDA, about $417
    billion worth from U.S. agriculture and an additional $49 billion
    imported from worldwide sources, pass through 60,000 businesses that
    manufacture, process, and store and transport food products. Given the
    size and complexity, there are multiple possibilities for negligent or
    accidental contamination. The Centers for Disease Control and
    Prevention (CDC) estimates that foodborne microbial diseases cause
    approximately 76 million illnesses, 325,000 hospitalizations, and 5,000
    deaths in the United States each year. In 2000, the USDA's Economic
    Research Service (ERS) estimated the annual cost from just five
    bacterial foodborne pathogens as $6.9 billion, including medical costs,
    lost productivity, and premature death. About one-third of total costs
    are the result of illnesses in children under the age of ten. Working
    to update costs, the ERS now calculates that 1.4 million cases due to
    Salmonella alone cost $3 billion annually.
        In the 1990s, the FDA boosted food safety efforts through numerous
    initiatives and new regulations, after several outbreaks of foodborne
    illnesses related to Escherichia coli O157:H7, Listeria and Salmonella
    raised public concerns about food safety. Federal statistics indicated
    a 20 percent decline in the incidence of several foodborne diseases
    from 1997 to 1999. Today CFSAN personnel both instigate and implement
    improved regulations, among them the requirement that more production
    plants adopt Hazard Analysis and Critical Control Points (HACCP)
    procedures that prevent problems at the most contamination prone steps
    in a production process. The center also participates in nationwide
    surveillance networks, such as FoodNet and PulseNet, that detect
    disease outbreaks. Prevention goals guide many of the CFSAN programs;
    e.g., a 50 percent reduction in all salmonellosis cases by 2010.
        While the FDA steadily makes advances in preserving food safety,
    new challenges routinely face agency personnel. The volume and
    diversity of imported foods continue to expand rapidly, creating new
    food types and sources to be regulated and evaluated. The dramatic
    growth of the dietary supplements industry (already $17 billion in
    2000) creates additional demand on FDA resources. The U.S. population
    continues to age, adding more individuals most susceptible to foodborne
    illnesses. Scientists are identifying new foodborne pathogens and other
    contaminants, as well as new routes of transmission through the food
    chain. Bioengineering of agricultural products and irradiation of
    processed foods will continue to push FDA oversight duties into unique
    directions. Most recently the FDA is confronting the economic,
    political, and public health ramifications of a group of diseases known
    as transmissible spongiform encephalopathies, thought to be associated
    with contaminated meat products.
        The most controversial and well known of these is bovine spongiform
    encephalopathy (BSE), more commonly called ``mad cow disease.'' Fifteen
    years ago, after cases of BSE in Great Britain were linked to eating
    contaminated beef, the FDA established its first anti-BSE regulations
    through controls on live cattle imports. In 1997, the agency banned the
    use of mammalian animal products in ruminant animal feed, to prevent
    the spread of BSE. Thus far, there has been one proven case of a BSE-
    infected, Canadian raised cow in this country, in late December 2003.
    Thirty FDA employees along with State inspectors rapidly mobilized to
    trace products from the cow to twenty-two facilities, retrieving meat
    materials from a range of businesses in the meat processor pipeline.
    During 2004, the agency further strengthened its safeguards against BSE
    with additional animal feed restrictions, recordkeeping requirements
    for meat growers and processors, and scientific studies of rapid
    diagnostic kits that detect animal protein in ruminant feed. The agency
    also increased its inspections of feed mills and renderers, expecting
    to conduct 2,800 visits itself and process information from an
    additional 3,800 State based inspections. Thus far, no additional case
    of BSE contamination has been detected in this country.

           CONSUMER PRODUCT SAFETY, MEDICAL DEVICES AND PUBLIC HEALTH

        Recently publicized problems with some FDA approved prescription
    drugs refocused attention on the extent to which FDA regulatory
    activities affect our daily lives. In addition to the Nation's food
    supply, the agency evaluates the safety and efficacy of human and
    veterinary drugs, biological products such as blood and human vaccines,
    medical devices, and products that emit radiation, as well as
    cosmetics. The agency rigorously tests drugs and devices in its
    laboratories, ensures that products are truthfully and clearly labeled
    for users, and conducts post-market surveillance on approved products.
    In 2003, for example, the agency handled more than 370,000 reports of
    adverse effects related to use of pharmaceuticals, a third of which
    were serious in nature. In fiscal year 2004, the FDA approved 534 new
    and generic drugs and biological products. The fiscal year 2006 budget
    proposes significant increases for the FDA's Human Drugs and Biologics
    program and for the Office of Drug Safety. A $19 million increase is
    proposed for the human drugs program and a $7 million increase is
    requested for the biologics program. Increased resources will in part
    be used to access a wide range of databases containing information
    related to drug safety. The fiscal year 2006 budget also proposes an
    increase of $12 million for the safety and efficacy of medical devices.
    The increase will help improve the device application review process as
    well as post-market surveillance efforts. Collaboration between the FDA
    and the National Institutes of Health will develop standards for
    electronic reporting of adverse events in clinical trials, to eliminate
    inferior products much earlier in their development.
        ASM appreciates the opportunity to comment on the fiscal year 2006
    budget request which supports science based FDA activities that will
    ensure both homeland security and public health.
                                     ______

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

        Mr. Chairman and Members of the Subcommittee: On behalf of the
    California Industry and Government Central California Ozone Study
    (CCOS) Coalition, we are pleased to submit this statement for the
    record in support of our fiscal year 2006 funding request of $500,000
    from the Department of Agriculture for CCOS. These funds are necessary
    for the State of California to address the very significant challenges
    it faces to comply with new national ambient air quality standards for
    ozone and fine particulate matter. The study design incorporates recent
    technical recommendations from the National Academy of Sciences (NAS)
    on how to most effectively comply with Federal Clean Air Act
    requirements.
        First, we want to thank you for your past financial support of the
    Central California Ozone Study (CCOS) and California Regional
    PM10/PM2.5 Air Quality Study (CRPAQS). Your
    support of these studies has been instrumental in improving the
    scientific understanding of the nature and cause of ozone and
    particulate matter air pollution in Central California and the nation.
    Information gained from these two studies is forming the basis for the
    8-hour ozone, PM2.5, and regional haze State Implementation
    Plans (SIPs) that are due in 2007 (ozone) and 2008 (particulate matter/
    haze). As with California's previous SIPs, the 2007-2008 SIPs will need
    to be updated and refined due to the scientific complexity of our air
    pollution problem. This request would fund the extension of CCOS to
    address important questions that won't be answered with results from
    previously funded research projects.
        To date, our understanding of air pollution and the technical basis
    for SIPs has largely been founded on pollutant-specific studies, like
    CCOS. These studies are conducted over a single season or single year
    and have relied on modeling and analysis of selected days with high
    concentrations. Future SIPs will be more complex than was anticipated
    when CCOS was originally designed and involve new technical challenges.
    The National Academy of Sciences (NAS) is now recommending a weight-of-
    evidence approach that will involve utilizing more broad-based,
    integrated methods, such as data analysis in combination with seasonal
    and annual photochemical modeling, to assess compliance with Federal
    Clean Air Act requirements. This will involve the analysis of a larger
    number of days and possibly an entire season. In addition, because
    ozone and particulate matter are formed from some of the same emissions
    precursors, there is a need to address both pollutants in combination,
    which CCOS will do.
        Consistent with the new NAS recommendations, the extended CCOS
    study will involve the conduct of corroborative analyses with the
    extensive data provided by past studies, advance the state-of-science
    in air quality modeling, and improve our understanding of multi-
    pollutant, multi-year air pollution. In addition, it will facilitate
    continuous data collection, using an expanded monitoring network, over
    a three-year period. Access to data over a multi-year timeframe will
    enable us to perform seasonal and annual modeling of all pollutants. It
    will also allow us to consider year-to-year variations in air quality.
    The study will incorporate further refinements to emission inventories,
    develop observation-based analyses with sound theoretical bases, and
    include the following five general components:

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

    ------------------------------------------------------------------------
    Conducting weight-of-evidence data analyses.............       2006-2008
    Developing an enhanced monitoring network...............       2006-2007
    Making emission inventory improvements..................       2006-2010
    Collecting enhanced monitoring data.....................       2007-2009
    Performing seasonal and annual modeling.................       2008-2011
    ------------------------------------------------------------------------

        As with CCOS and CRPAQS, Policy and Technical Committees consisting
    of representatives from Federal, State and local governments, as well
    as private industry, would direct the new study elements. Under CCOS
    and CRPAQS, these committees set landmark examples of collaborative
    environmental management. The proven methods and established teamwork
    provide a solid foundation for this study.
        For Fiscal Year 2006, our Coalition is Seeking Funding of $500,000
    From the Department of Agriculture/CSREES in Support of CCOS.--Domestic
    agriculture is facing increasing international competition. Costs of
    production and processing are becoming increasingly more critical. With
    the current SJV PM10 SIP and the upcoming ozone and
    PM2.5 SIPs, the agricultural industry within the study area
    is facing many new requirements to manage and reduce their air quality
    impacts. The identification of scientifically validated, cost-effective
    options for reducing the environmental impacts of on-field and
    livestock related air emissions will contribute significantly to the
    long-term health and economic stability of local agriculture. Funding
    will support livestock and crop-related research that will help
    maintain a vital agricultural industry within the State. Research will
    be focused to measure baseline emissions, and to study the most
    economical and effective approaches for reducing the impacts of
    agriculture on air quality. These studies also have nationwide
    benefits.
        The funding request is for: (1) Development and evaluation of
    methods and equipment to reduce on-field particulate matter emissions,
    (2) Evaluation of baseline livestock emissions (VOCs, PM10,
    ammonia) and effective methods to reduce these emissions, (3)
    Development of livestock facility emissions models that are based on
    individual processes emissions, as recommended by the National Academy
    of Sciences, and (4) Study of agricultural VOC emissions from pesticide
    application. This work will help answer questions that will be relevant
    to farmers and regulators throughout the Nation.
        Thank you very much for your consideration of our request.
                                     ______

              Prepared Statement of the City of Avondale, Arizona

        Chairman Bennett, Ranking Member Kohl, thank you for allowing me to
    testify in support of $3 million in funding for the expansion of the
    City of Avondale's waste water treatment facility through the Rural
    Development Agency's Water and Waste Disposal Grants program in the
    fiscal year 2006 Agriculture, Rural Development and Related Agencies
    Appropriations bill.
        Mr. Chairman, let me state it bluntly--we are in a desperate
    situation. The City of Avondale has experienced exponential growth as
    the sixth fastest growing city in the second fastest growing state in
    the Nation. In 1990, the population was approximately 16,800. Today,
    the City has nearly tripled in size to more than 50,000 residents. It
    is estimated that the population will almost double to 80,000 by 2010.
    In 1995, it was estimated that the City's population growth would not
    reach 80,000 until 2020. This rapid and sudden expansion, in
    conjunction with the city's economic malaise, has placed our finances
    at a premium to meet our needs to provide water and wastewater capacity
    that serves the expected population growth. As you may know, Avondale
    has a majority of minority races (overwhelmingly Hispanic), and a
    population that is moderate to low-income. Fourteen percent of
    Avondale's residents live at or below the poverty line.
        The City of Avondale has exhausted all state and local funding
    options prior to seeking Federal assistance. In fact, in 2000, the city
    passed a one-half of one cent sales tax to fund street, water and sewer
    projects. The City used this funding source for the first expansion of
    the Wastewater Treatment Plant, which was completed in January 2003.
    The previous 2 years economic downturn, resulting in declining sales
    tax revenue, has left the city with limited local funds for the next
    expansion of the Treatment Plant, and the City does not have voter
    authorization to issue bonds required by the State Revolving Fund.
        As you know, the EPA mandates that current treatment facilities
    must be expanded once they reach 80 percent capacity. Even with the
    recently completed expansion of the facility, it is estimated that the
    Avondale facility will reach over 80 percent by 2008. Knowing that time
    and money is needed to design such a large project, the City has begun
    the necessary preliminary permitting, environmental and pre-design
    processes in anticipation of the master plan and construction, which
    will be aided by the $850,000 of Federal funds received in fiscal year
    2004 and 2005. With Federal funding, the city will increase the current
    6.4 MGD capacity of the plant to 10 to 12 MGD, while also increasing
    the capacity of the plant to reuse treated water for irrigation or
    recharge purposes, and allow the plant to treat effluent to supplement
    the city's potable water supply.
        Furthermore, under the Clean Water Act's outdated formula Arizona
    ranks last in per-capita and per-need funding under the State Revolving
    Fund that is designed to help communities finance infrastructure
    projects. This funding inequity has created problems for communities
    like Avondale that have limited means but that must still meet Federal
    water quality standards. The only fair way to rectify this inequity
    would be for the Federal Government to provide the necessary funds to
    complete the mandated expansion of the facility.
        It is important to note that the City of Avondale's improved and
    expanded wastewater treatment facility will do more than provide
    wastewater services to the residents. It will also provide treated
    effluent that will dramatically reduce its need for potable water
    supplies. The expansion will also enable the City to better meet its
    state-mandated 100-year water supply by recharging the remaining
    effluent into the ground for future use, allowing nature to further
    purify the water in order for it to be used for future potable
    purposes.
        Not only will this expansion allow the City to remain in compliance
    with strict local, state and Federal regulatory requirements, it will
    also add treatment processes that will allow the City to reuse the
    treated wastewater for irrigation purposes, thereby recharging this
    valuable resource. Recharging treated wastewater will allow the City to
    reduce its dependence on imported water sources such as the Colorado
    River, which benefits all municipalities relying on the river.
        Finally, it is important to note that $850,000 included in the last
    2 fiscal years was a critical first step because the waste water plant
    is reaching full capacity. However, it is critically important to keep
    this project on an optimal funding schedule to ensure the project is
    completed before the treatment plant reaches maximum capacity. With
    that in mind, we can utilize $3 million in fiscal year 2006 through the
    Rural Development Agency's Water and Waste Disposal Grants program
    toward completion of this $20 million project of which the City will
    provide 53 percent of the funding.
        This Project Serves a Broad Public Purpose in Three Ways.--(1) it
    will allow the City to continue to provide the necessary sewer service
    for our residents; (2) will benefit the rest of Arizona by helping to
    cut down on the amount of scarce water the City uses, because the plant
    also treats the water to allow it to be re-used for irrigation
    purposes; and, (3) will allow the city to treat the effluent to bring
    it up to Class A standards and to recharge it into the ground to be
    withdrawn later as potable water.
        Therefore, I ask that you support the City's request for $3 million
    for the expansion of our waste water treatment plant through the Rural
    Development Agency's Water and Waste Disposal Grants program in the
    fiscal year 2006 Agriculture, Rural Development and Related Agencies
    Appropriations bill.
                                     ______

     Prepared Statement of the Coalition on Funding Agricultural Research
                                    Missions

        Dear Mr. Chairman, Ranking Member Kohl and Members of the
    Subcommittee: The Coalition on Funding Agricultural Research Missions
    (CoFARM) appreciates the opportunity to submit testimony on the fiscal
    year 2006 appropriation for the United States Department of
    Agriculture. CoFARM is a coalition of 23 professional scientific
    organizations with 130,000 members dedicated to advancing and
    sustaining a balanced investment in our Nation's research portfolio.
    CoFARM understands the challenges the Senate Agriculture Appropriations
    Subcommittee faces with this year's (fiscal year 2006) tight
    agriculture budget. We also recognize that the Agriculture
    Appropriations bill has many valuable and necessary components, and we
    applaud the efforts of the Subcommittee to fund mission-critical
    research through the USDA-Cooperative State, Research, Education and
    Extension Service. We are particularly grateful to the Subcommittee for
    funding the NRI at $180 million in fiscal year 2005. Below we have
    highlighted recommendations for the fiscal year 2006 appropriations
    cycle.
        National Research Initiative.--CoFARM strongly endorses the
    President's proposed fiscal year 2006 budget of $250 million for the
    National Research Initiative Competitive Grants Program (NRI).
    According to the USDA's Economic Research Service (Agricultural
    Economic Report Number 735), publicly funded agricultural research has
    earned an annual rate of return of 35 percent. This rate of return
    suggests that additional allocation of funds to support research in the
    food and agricultural sciences would be beneficial to the U.S. economy.
        NRI Integrated Research.--CoFARM requests that any new monies
    appropriated for the NRI, as requested by the administration, allow the
    Secretary the discretion to apply up to 30 percent towards carrying out
    the NRI integrated research, extension and education competitive grants
    program.
        Indirect Costs.--CoFARM applauds the administration's proposal to
    eliminate the indirect cost cap on the NRI, set at 20 percent for
    fiscal year 2005, which will broaden its appeal by putting the NRI on
    equal footing with other Federal competitive grants programs such as
    those of NSF and NIH.
        Formula Funding.--CoFARM believes that cuts to and proposed
    elimination of CSREES' formula-funded research programs can be
    detrimental to the entire USDA research portfolio. Because of their
    timing and potential regional and intra-state impacts, much of the
    infrastructure needed to conduct competitively funded research would be
    compromised if formula funds were to be cut. To cut Hatch, McIntire-
    Stennis, and Animal Health & Disease in a single fiscal year would
    irreparably harm those projects. This would mean a huge and potentially
    damaging loss of research data nationwide.
        Food and Agriculture Defense Initiative.--CoFARM supports the
    request of the administration that $30 million be provided for the
    Homeland Security Program to facilitate protecting America's
    agricultural production systems. Recent security threats facing America
    require new and expanded agricultural research to protect our Nation's
    natural resources, food processing and distribution network, and rural
    communities that will secure America's food and fiber system.
        A balance of funding mechanisms, including competitive and formula
    funding, is essential if the capacity of the United States to conduct
    agricultural research, both basic and applied, is to be maintained and
    the country is to continue to improve crop and livestock quality, and
    the processes that deliver safe and nutritious food products from farm
    to table while protecting and enhancing the Nation's environment and
    natural resources. In order to address these challenges and maintain
    our position in an increasingly competitive world, we must continue to
    support research programs funded through CSREES.
        Past investments in agricultural research have yielded many
    breakthroughs in American agricultural productivity, including these
    few Hatch and NRI funded research success stories:
      --Pennsylvania researchers are developing rapid diagnostic tests to
            curb avian influenza, a disease that could cripple the state's
            $700 million poultry industry.
      --University of Maryland researchers have created an advanced machine
            vision technology to detect bone fragments and foreign objects
            in meat.
      --Researchers in Florida have tested a common fern's ability to soak
            up arsenic, a cancer-causing heavy metal, from contaminated
            soils. The market for plant-based remediation of wastes is
            estimated to be $370 million in 2005.
      --NRI funded research supported research by a University of
            California scientist who has genetically engineered a breed of
            corn with half the usual amount of carbohydrates and double the
            protein, which should lead to the development of new crops that
            will help alleviate protein deficiencies in children in
            developing countries.
      --Entomologists and Nematologists developed a vaccine for the
            protection of cattle from the horn fly, a major insect pest in
            many parts of the world costing the North American cattle
            industry alone more than $1 billion annually.
      --As a result of NRI funding, a group of economists found that the
            competitive environment of supermarket retailers encourages
            patterns of adoption of food products using technologies that
            are new to the market.
      --Through NRI funded research, scientists developed a new assay that
            allows for rapid identification of Clostridium perfringens,
            which is associated with common food-borne illness, in hospital
            outbreaks and has resulted in improved diagnostic procedures.
      --Florida family and youth researchers have shed light on crime and
            violence trends in schools and evaluated prevention programs.
            The result has been a decline in disruptive behavior in
            classrooms by 40 percent over 2 years. The work is a national
            model for improving school safety.
        Congress must enhance funding for agricultural research to assure
    Americans of a safe and nutritious food supply and to provide for the
    next generation of research scientists.
        As you lead the Congress in deliberation on funding levels for
    agricultural research, please consider CoFARM as a supportive resource.
    We hope you will call on our membership and scientific expertise.
                                     ______

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

        As members of the Coalition to Promote U.S. Agricultural Exports,
    we commend the Chairman and members of the Subcommittee for their
    interest and support of U.S. agriculture and express our appreciation
    for this opportunity to share our views.
        The Coalition to Promote U.S. Agricultural Exports is an ad hoc
    coalition of over 80 organizations, representing farmers and ranchers,
    fishermen and forest product producers, cooperatives, small businesses,
    regional trade organizations, and the State Departments of Agriculture
    (see attached). We believe the United States must continue to have in
    place policies and programs that help maintain the ability of American
    agriculture to compete effectively in a global marketplace still
    characterized by highly subsidized foreign competition.
        During consideration of the 2002 Farm Bill, Congress sought to
    bolster U.S. trade expansion efforts by approving an increase in
    funding for the Market Access Program (MAP) and the Foreign Market
    Development (FMD) Program, which will begin to reverse the decline in
    funding for these important export programs that occurred over the
    previous decade. For fiscal year 2006, the Farm Bill authorizes funding
    for MAP at $200 million, and FMD is authorized at $34.5 million. The
    Coalition strongly urges that both programs be funded at the full
    authorized levels in order to carry out important market development
    activities.
        Farm income and agriculture's economic well-being depend heavily on
    exports, which account for one-third or more of domestic production,
    provide jobs for millions of Americans, and make a positive
    contribution to our Nation's overall trade balance. In fiscal year
    2005, U.S. agriculture exports are projected to reach $59 billion,
    which would make the current year the 3rd highest export sales year
    ever following fiscal year 2004 at $62.3 billion and fiscal year 1996
    at $59.8 billion. However, exports could be significantly higher if it
    were not for a combination of factors, including continued high levels
    of subsidized foreign competition and related steep artificial trade
    barriers. Agricultural imports are also forecast to be a record $58
    billion, continuing a 35-year upward trend that has increased at a
    faster pace recently. If these projections hold, then agriculture's
    trade surplus is only expected to be about $1 billion, a huge decline
    from the roughly $27 billion surplus of fiscal year 1996. In fiscal
    year 1999, the United States recorded its first agricultural trade
    deficit with the EU of $1 billion. In fiscal year 2005, USDA forecasts
    that the trade deficit with the EU will grow to $6 billion, the largest
    agriculture deficit the United States runs with any market.
        According to recent information from USDA, the European Union (EU)
    spent more than $3.25 billion on agricultural export subsidies in 2003,
    compared to approximately $30 million by the United States. In other
    words, the United States is being outspent by more than 100 to 1 by the
    EU alone with regard to the use of export subsidies.
        In recent years, the EU, the Cairns group, and other foreign
    competitors also devoted approximately $1.2 billion on various market
    development activities to promote their exports of agricultural,
    forestry, and fishery products. A significant portion of this is
    carried out in the United States. Because market promotion is permitted
    under World Trade Organization (WTO) rules, with no limit on public or
    producer funding, it is increasingly seen as a centerpiece of a winning
    strategy in the future trade battleground. Many competitor countries
    have announced ambitious trade goals and are shaping export programs to
    target promising growth markets and bring new companies into the export
    arena. European countries are expanding their promotional activities in
    Asia, Latin America, and Eastern Europe. Canada, Australia, New
    Zealand, and Brazil have also budgeted significant investments in
    export promotion expenditures worldwide in recent years. As the EU and
    our other foreign competitors have made clear, they intend to continue
    to be aggressive in their export efforts.
        Both MAP and FMD are administered on a cost-share basis with
    farmers and other participants required to contribute up to 50 percent
    of their own resources. These programs are among the few tools
    specifically allowed in unlimited amounts under WTO rules to help
    American agriculture and American workers remain competitive in a
    global marketplace still characterized by highly subsidized foreign
    competition. The over 70 U.S. agricultural groups that share in the
    costs of the MAP and FMD programs fully recognize the export benefits
    of market development activities. Since 1992, MAP participants have
    increased their contributions from 30 percent (30 cents for every
    dollar contributed by USDA) to 166 percent ($1.66 in industry funds for
    every USDA dollar). For FMD, the contribution rate has risen from 76
    percent to the current level of 139 percent. By any measure, such
    programs have been tremendously successful and extremely cost-effective
    in helping maintain and expand U.S. agricultural exports, protect
    American jobs, and strengthen farm income.
        Competing in the agricultural export market carries new challenges
    and opportunities for U.S. agriculture. Not only is the competition
    becoming more intense with increased funding being brought to bear, but
    we also face a world where new trade agreements are being developed
    almost daily. The United States is also negotiating trade agreements
    with the goal of opening new market opportunities for U.S. agriculture.
    In addition, the opening of the Iraq market and the markets of other
    previously sanctioned countries will offer further opportunities and
    challenges.
        For all these reasons, we want to emphasize again the need to
    strengthen the ability of U.S. agriculture to compete effectively in
    the global marketplace. American agriculture is among the most
    competitive industries in the world, but it cannot and should not be
    expected to compete alone in export markets against the treasuries of
    foreign governments. As a Nation, we can work to export our products,
    or we can export our jobs. USDA's export programs, such as MAP and FMD,
    are a key part of an overall trade strategy that is pro-growth, pro-
    trade and pro-job.
        Again, as members of the Coalition to Promote U.S. Agricultural
    Exports, we appreciate very much this opportunity to share our views
    and we ask that this statement be included in the official hearing
    record.

                 COALITION TO PROMOTE U.S. AGRICULTURAL EXPORTS

    Alaska Seafood Marketing Institute
    American Feed Industry Association
    American Forest and Paper Association
    American Hardwood Export Council
    American Meat Institute
    American Peanut Council
    American Quarter Horse Association
    American Seed Trade Association
    American Sheep Industry Association
    American Soybean Association
    Blue Diamond Growers
    Calcot, Ltd.
    California Agricultural Export Council
    California Asparagus Commission
    California Association of Winegrape Growers
    California Canning Peach Association
    California Cling Peach Board
    California Dried Plum Board
    California Fig Institute
    California Kiwifruit Commission
    California Pistachio Commission
    California Plum Marketing Board
    California Strawberry Commission
    California Table Grape Commission
    California Tomato Commission
    California Walnut Commission
    Cherry Marketing Institute
    CoBank
    Diamond of California
    Florida Citrus Commission
    Florida Citrus Mutual
    Florida Citrus Packers Association
    Florida Citrus Processors Association
    Florida Department of Citrus
    Food Export USA--Northeast
    Georgia Poultry Federation
    Ginseng Board of Wisconsin
    Hop Growers of America
    Indian River Citrus League
    Kansas Livestock Association
    Kentucky Distillers Association
    Land O'Lakes, Inc.
    Mid-America International Agri-Trade Council
    Mohair Council of America
    National Association of State Departments of Agriculture
    National Association of Wheat Growers
    National Barley Growers Association
    National Cattlemen's Beef Association
    National Chicken Council
    National Confectioners Association
    National Corn Growers Association
    National Cotton Council
    National Council of Farmer Cooperatives
    National Grain Sorghum Producers
    National Grange
    National Grape Cooperative Association, Inc.
    National Milk Producers Federation
    National Oilseed Processors Association
    National Pork Producers Council
    National Potato Council
    National Renderers Association
    National Sunflower Association
    National Turkey Federation
    NORPAC Foods, Inc.
    North American Millers' Association
    Northwest Horticultural Council
    Ocean Spray Cranberries, Inc.
    Pet Food Institute
    Produce Marketing Association
    Softwood Export Council
    Southern Forest Products Association
    Southern U.S. Trade Association
    Sunkist Growers
    Sun Maid Growers of California
    Sunsweet Growers, Inc.
    Texas Cattle Feeders Association
    The Catfish Institute
    The Popcorn Institute
    Tree Top, Inc.
    United Egg Association
    United Egg Producers
    United Fresh Fruit and Vegetable Association
    USA Dry Pea and Lentil Council
    USA Poultry & Egg Export Council
    USA Rice Federation
    U.S. Apple Association
    U.S. Dairy Export Council
    U.S. Dry Bean Council
    U.S. Hides, Skins & Leather Association
    U.S. Livestock Genetics Export, Inc.
    U.S. Meat Export Federation
    U.S. Rice Producers Association
    U.S. Wheat Associates
    Valley Fig Growers
    Vinifera Wine Growers Association
    Virginia Wineries Association
    Welch's
    Western Growers Association
    Western Pistachio Association
    Western U.S. Agricultural Trade Association
    Wheat Export Trade Education Committee
    WineAmerica (The National Association of American Wineries)
    Winegrape Growers of America
    Wine Institute
                                     ______

     Prepared Statement of the Colorado River Basin Salinity Control Forum

            COLORADO RIVER BASIN SALINITY CONTROL PROGRAM, TITLE II

        Forum's Recommendation Concerning: Funding for Environmental
    Quality Incentives Program.
        Support funding of this nationwide program at the President's
    requested amount of $1 billion for fiscal year 2006.
        Request there be designated to the Colorado River Basin Salinity
    Control Program 2.5 percent of the EQIP funding.
        The Congress concluded that the Colorado River Basin Salinity
    Control Program (Program) should be implemented in the most cost-
    effective way. Realizing that agricultural on-farm strategies were some
    of the most cost-effective strategies, the Congress authorized a
    program for the United States Department of Agriculture (USDA) through
    amendment of the Colorado River Basin Salinity Control Act in 1984.
    With the enactment of the Federal Agriculture Improvement and Reform
    Act of 1996 (FAIRA), the Congress directed that the Program should
    continue to be implemented as one of the components of the
    Environmental Quality Incentives Program (EQIP). Since the enactment of
    the Farm Security and Rural Investment Act (FSRIA) in 2002, there have
    been, for the first time in a number of years, opportunities to
    adequately fund the Program within the EQIP.
        The Program, as set forth in the Colorado River Basin Salinity
    Control Act, is to benefit Lower Basin water users hundreds of miles
    downstream from salt sources in the Upper Basin as the salinity of
    Colorado River water increases as the water flows downstream. There are
    very significant economic damages caused by high salt levels in this
    water source. Agriculturalists in the Upper Basin where the salt must
    be controlled, however, don't first look to downstream water quality
    standards but look for local benefits. These local benefits are in the
    form of enhanced beneficial use and improved crop yields. They submit
    cost-effective proposals to the State Conservationists in Utah, Wyoming
    and Colorado and offer to cost share in the acquisition of new
    irrigation equipment. The Colorado River Basin Salinity Control Act
    provides that the seven Colorado River Basin States will also cost
    share with the Federal funds for this effort. This has brought together
    a remarkable partnership.
        After longstanding urgings from the States and directives from the
    Congress, the USDA has concluded that this program is different than
    small watershed enhancement efforts common to the EQIP. In this case,
    the watershed to be considered stretches more than 1,200 miles from the
    river's headwater in the Rocky Mountains to the river's terminus in the
    Gulf of California in Mexico and receives water from numerous
    tributaries. The USDA has determined that this effort should receive a
    special funding designation and has appointed a coordinator for this
    multi-State effort.
        In fiscal years 2003, 2004 and 2005, the Natural Resources
    Conservation Service (NRCS) directed $13.6 million, $19.8 million and
    $19.5 million respectively to be used for the Program. The Forum
    appreciates the efforts of the NRCS leadership and the support of this
    subcommittee. The plan for water quality control of the Colorado River
    was prepared by the Colorado River Basin Salinity Control Forum
    (Forum), adopted by the States, and approved by the United States
    Environmental Protection Agency (EPA). In the water quality plan it is
    required that the USDA (Federal) portion of the effort be funded at a
    level of at least $17.5 million annually. Over the last three fiscal
    years, for the first time, funding reached this level on an average
    annual basis. State and local cost-sharing is triggered by the Federal
    appropriation. In fiscal year 2005, it is anticipated that the States
    will cost share with about $8.3 million and local agriculture producers
    will add another $7.5 million. Hence, it is anticipated that in fiscal
    year 2005 the State and local contributions will be 45 percent of the
    total program.
        Over the past few years, the NRCS has designated that about 2.5
    percent of the EQIP funds be allocated to the Colorado River salinity
    control program. The Forum believes this is the appropriate future
    level of funding as long as the funding does not drop below $17.5
    million. Funding above this level assists in offsetting pre-fiscal year
    2003 funding below this level. The Basin States have cost sharing
    dollars available to participate in funding on-farm salinity control
    efforts. The agricultural producers in the Upper Basin are waiting for
    their applications to be considered so that they might improve their
    irrigation equipment and also cost share in the Program.

                                    OVERVIEW

        The Program was authorized by the Congress in 1974. The Title I
    portion of the Colorado River Basin Salinity Control Act responded to
    commitments that the United States made, through a Minute of the
    International Boundary and Water Commission, to Mexico specific to the
    quality of water being delivered to Mexico below Imperial Dam. Title II
    of the Act established a program to respond to salinity control needs
    of Colorado River water users in the United States and to comply with
    the mandates of the then newly-enacted Clean Water Act. This testimony
    is in support of funding for the Title II program.
        After a decade of investigative and implementation efforts, the
    Basin States concluded that the Salinity Control Act needed to be
    amended. The Congress agreed and revised the Act in 1984. That
    revision, while keeping the Department of the Interior as lead
    coordinator for Colorado River Basin salinity control efforts, also
    gave new salinity control responsibilities to the USDA. The Congress
    has charged the Administration with implementing the most cost-
    effective program practicable (measured in dollars per ton of salt
    controlled). It has been determined that the agricultural efforts are
    some of the most cost-effective opportunities.
        Since Congressional mandates of nearly three decades ago, much has
    been learned about the impact of salts in the Colorado River system.
    The Bureau of Reclamation (Reclamation) has conducted studies on the
    economic impact of these salts. Reclamation recognizes that the damages
    to United States' water users alone are hundreds of millions of dollars
    per year.
        The Forum is composed of gubernatorial appointees from Arizona,
    California, Colorado, Nevada, New Mexico, Utah and Wyoming. The Forum
    has become the seven-State coordinating body for interfacing with
    Federal agencies and the Congress in support of the implementation of
    the Salinity Control Program. In close cooperation with the EPA and
    pursuant to requirements of the Clean Water Act, every three years the
    Forum prepares a formal report evaluating the salinity of the Colorado
    River, its anticipated future salinity, and the program elements
    necessary to keep the salinity concentrations (measured in Total
    Dissolved Solids--TDS) at or below the levels measured in the river
    system in 1972 at Imperial Dam, and below Parker and Hoover Dams.
        In setting water quality standards for the Colorado River system,
    the salinity concentrations at these three locations in 1972 have been
    identified as the numeric criteria. The plan necessary for controlling
    salinity and reducing downstream damages has been captioned the ``Plan
    of Implementation.'' The 2002 Review of water quality standards
    includes an updated Plan of Implementation. In order to eliminate the
    shortfall in salinity control resulting from inadequate Federal funding
    for a number of years from the USDA, the Forum has determined that
    implementation of the Program needs to be accelerated as the President
    has requested. The level of appropriation requested in this testimony
    is in keeping with the agreed upon plan. If adequate funds are not
    appropriated, significant damages from the higher salt concentrations
    in the water will be more widespread in the United States and Mexico.
        Concentrations of salts in the river cause $330 million in damage
    in the United States and result in poorer quality water being delivered
    by the United States to Mexico. Damages occur from:
      --a reduction in the yield of salt sensitive crops and increased
            water use for leaching in the agricultural sector,
      --a reduction in the useful life of galvanized water pipe systems,
            water heaters, faucets, garbage disposals, clothes washers, and
            dishwashers, and increased use of bottled water and water
            softeners in the household sector,
      --an increase in the use of water for cooling, and the cost of water
            softening, and a decrease in equipment service life in the
            commercial sector,
      --an increase in the use of water and the cost of water treatment,
            and an increase in sewer fees in the industrial sector,
      --a decrease in the life of treatment facilities and pipelines in the
            utility sector,
      --difficulty in meeting wastewater discharge requirements to comply
            with National Pollutant Discharge Elimination System permit
            terms and conditions, and an increase in desalination and brine
            disposal costs due to accumulation of salts in groundwater
            basins, and
      --increased use of imported water for leaching and cost of
            desalination and brine disposal for recycled water.
        For every 30 mg/L increase in salinity concentrations, there is $75
    million in additional damages in the United States. The Forum,
    therefore, believes implementation of the USDA program needs to be
    funded at 2.5 percent of the total EQIP funding.
        Although the Program thus far has been able to implement salinity
    control measures that comply with the approved plan, recent drought
    years have caused salinity levels to rise in the river. Predictions are
    that this will be the trend for the next several years. This places an
    added urgency for acceleration of the implementation of the Program.

                  STATE COST-SHARING AND TECHNICAL ASSISTANCE

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

       Prepared Statement of the New Mexico Interstate Stream Commission

                                    SUMMARY

        This Statement is submitted in support of appropriations for the
    Department of Agriculture's Colorado River Basin salinity control
    program. Prior to the enactment of the Farm Security and Rural
    Investment Act (FSRIA) in 2002, the salinity control program had not
    been funded at the level necessary to control salinity with respect to
    water quality standards since the enactment of the Federal Agriculture
    Improvement and Reform Act (FAIRA) of 1996. Inadequate funding of the
    salinity control program also negatively impacts the quality of water
    delivered to Mexico pursuant to Minute 242 of the International
    Boundary and Water Commission. Adequate funding for the Environmental
    Quality Incentives Program (EQIP), from which the Department of
    Agriculture funds the salinity program, is needed to implement salinity
    control measures. FSRIA authorized a funding level of at least $1.2
    billion for EQIP in fiscal year 2006, and the President's budget for
    fiscal year 2006 requests an appropriation of $985 million for EQIP. I
    urge the Subcommittee to support funding from Commodity Credit
    Corporation (CCC) of at least $985 million to be appropriated for EQIP.
    I request that the Subcommittee designate 2\1/2\ percent of the EQIP
    appropriation, but no less than $17.5 million, for the Colorado River
    Basin salinity control program. I request that adequate funds be
    appropriated for technical assistance and education activities directed
    to salinity control program participants.

                                   STATEMENT

        The seven Colorado River Basin States, in response to the salinity
    issues addressed by Clean Water Act of 1972, formed the Colorado River
    Basin Salinity Control Forum (Forum). Comprised of gubernatorial
    appointees from the seven Basin States, the Forum was created to
    provide for interstate cooperation in response to the Clean Water Act,
    and to provide the States with information to comply with Sections 303
    (a) and (b) of the Act. The Forum has become the primary means for the
    seven Basin States to coordinate with Federal agencies and Congress to
    support the implementation of the salinity control program.
        The Colorado River Basin salinity control program was authorized by
    Congress in the Colorado River Basin Salinity Control Act of 1974.
    Congress amended the Act in 1984 to give new responsibilities to the
    Department of Agriculture. While retaining the Department of the
    Interior as the lead coordinator for the salinity control program, the
    amended Act recognized the importance of the Department of Agriculture
    operating under its authorities to meet the objectives of the salinity
    control program. Many of the most cost-effective projects undertaken by
    the salinity control program to date have occurred since implementation
    of the Department of Agriculture's authorization for the program.
        Bureau of Reclamation studies show that damages from the Colorado
    River to United States water users are about $330,000,000 per year.
    Damages are estimated at $75,000,000 per year for every additional
    increase of 30 milligrams per liter in salinity of the Colorado River.
    It is essential to the cost-effectiveness of the salinity control
    program that Department of Agriculture salinity control projects be
    funded for timely implementation to protect the quality of Colorado
    River Basin water delivered to the Lower Basin States and Mexico.
        Congress concluded, with the enactment FAIRA in 1996, that the
    salinity control program could be most effectively implemented as a
    component of the Environmental Quality Incentives Program (EQIP).
    However, until 2004, the salinity control program since the enactment
    of FAIRA was not funded at an adequate level to protect the Basin
    State-adopted and Environmental Protection Agency approved water
    quality standards for salinity in the Colorado River. Appropriations
    for EQIP prior to 2004 were insufficient to adequately control salinity
    impacts from water delivered to the downstream States, and hampered the
    required quality of water delivered to Mexico pursuant to Minute No.
    242 of the International Boundary and Water Commission, United States
    and Mexico.
        EQIP subsumed the salinity control program without giving adequate
    recognition to the responsibilities of the Department of Agriculture to
    implement salinity control measures per Section 202(c) of the Colorado
    River Basin Salinity Control Act. The EQIP evaluation and project
    ranking criteria target small watershed improvements that do not
    recognize that water users hundreds of miles downstream are significant
    beneficiaries of the salinity control program. Proposals for EQIP
    funding are ranked in the States of Utah, Wyoming and Colorado under
    the direction of the respective State Conservationists without
    consideration of those downstream, particularly out-of-State, benefits.
        Following recommendations of the Basin States to address the
    funding problem, the Department of Agriculture's Natural Resources
    Conservation Service (NRCS) designated the Colorado River Basin an
    ``area of special interest'' including earmarked funds for the salinity
    control program. The NRCS concluded that the salinity control program
    is different from the small watershed approach of EQIP. The watershed
    for the salinity control program stretches almost 1,200 miles, from the
    headwaters of the river through the salt-laden soils of the Upper Basin
    to the river's termination at the Gulf of California in Mexico. NRCS is
    to be commended for its efforts to comply with the Department of
    Agriculture's responsibilities under the Colorado River Basin Salinity
    Control Act of 1974. Irrigated agriculture in the Upper Basin realizes
    significant local benefits of improved irrigation practices, and
    agricultural producers have succeeded in submitting cost-effective
    proposals to NRCS.
        The Basin States, including New Mexico, were very dismayed that
    funding for EQIP since the 1996 enactment of FAIRA was inadequate until
    2004. Years of inadequate Federal funding for the Department of
    Agriculture prior to 2004 resulted in the Forum finding that the
    salinity control program needs acceleration to maintain the water
    quality criteria of the Colorado River water quality standards for
    salinity. Since the enactment of the Farm Security and Rural Investment
    Act in 2002, an opportunity to adequately fund the salinity control
    program now exists. The President's budget request of $985 million
    accomplishes the needed acceleration of the NRCS salinity control
    program if the USDA continues its practice of designating 2\1/2\
    percent of the EQIP funds appropriated. The requested funding of 2\1/2\
    percent of the EQIP funding or no less than $17.5 million will continue
    to be needed each year for at least the next few fiscal years.
        State and local cost-sharing is triggered by and indexed to the
    Federal appropriation. Federal funding for the NRCS salinity control
    program of about $19.5 million for fiscal year 2005 has generated about
    $15.8 million in cost-sharing from the Colorado River Basin States and
    agricultural producers, or roughly an 80 percent match of the Federal
    funds appropriated for the fiscal year.
        The Department of Agriculture salinity control projects have proven
    to be the most cost-effective component of the salinity control
    program. The Department of Agriculture has indicated that a more
    adequately funded EQIP program would result in more funds being
    allocated to the salinity program. The Basin States have cost-sharing
    dollars available to participate in on-farm salinity control efforts.
    The agricultural producers in the Upper Basin are willing to cost-share
    their portion and waiting for adequate funding for their applications
    to be considered.
        I urge the Congress to appropriate at least $985 million from the
    CCC in fiscal year 2006 for EQIP. Also, I request that Congress
    designate 2\1/2\ percent of the EQIP appropriation, but no less than
    $17.5 million, for the Colorado River Basin salinity control program.
        Finally, I request that adequate funds be appropriated to NRCS
    technical assistance and education activities directed to the salinity
    control program participants, rather than requiring the NRCS to borrow
    funds from CCC for these direly needed and under-funded support
    functions. Recent history has shown that inadequate funding for NRCS
    technical assistance and education activities has been a severe
    impediment to successful implementation of the salinity control
    program. The Basin States parallel funding program, implemented as a
    means of cost sharing with NRCS, expends 40 percent of the States'
    funds available to meet the needs of NRCS for technical assistance and
    education activities because of the inadequacy imposed by Federal
    limitations on funding for these needed activities. I urge the Congress
    to appropriate adequate funds for these support activities essential to
    the successful implementation of the salinity control program.
                                     ______

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

        Dear Mr. Chairman, Ranking Member Kohl and Members of the
    Subcommittee: The Council on Food, Agricultural, and Resource Economics
    (C-FARE) and the Consortium of Social Science Associations (COSSA)
    appreciate the opportunity to submit testimony on the fiscal year 2006
    appropriation for the United States Department of Agriculture. C-FARE
    is a non-profit, non-partisan organization dedicated to strengthening
    the presence of the agricultural, natural resources, and applied
    economics profession to matters of science policy and Federal budget
    determination, and we represent approximately 3,500 economists
    nationwide. COSSA is an advocacy organization for the social and
    behavioral sciences supported by more than 100 professional
    associations, scientific societies, universities and research
    institutions.
        Our organizations understand the challenges the Senate Agriculture
    Appropriations Subcommittee faces given the tight fiscal year 2006
    agriculture budget. We also recognize that the Agriculture
    Appropriations bill has many valuable and necessary components, and we
    applaud the efforts of the Subcommittee to fund mission-critical
    research. Below are listed recommendations for the fiscal year 2006
    appropriations cycle.

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

    National Research Initiative
      --C-FARE and COSSA endorses funding for the National Research
            Initiative Competitive Grants Program (NRI). The NRI encourages
            high quality research that is conducted through a peer reviewed
            format. In particular, the research issues addressed by Markets
            and Trade and Rural Development are diverse and multi-faceted.
            Social Science research also enhances ideas and technologies
            from other fields of science and research which adds value to
            their role in the NRI.
      --C-FARE and COSSA requests that any new monies appropriated for the
            NRI, as requested by the administration, allow the Secretary
            the discretion to apply up to 30 percent towards carrying out
            the NRI integrated research, extension and education
            competitive grants program.
      --Our organizations applaud the administration's proposal to
            eliminate the indirect cost cap on the NRI, set at 20 percent
            for fiscal year 2005, which will broaden its appeal by putting
            the NRI on equal footing with other Federal competitive grants
            programs.
      --Social Science research is highly valued by USDA and much of what
            our scientists offer can help meet the strategic goals of
            CSREES. For example, social science research meets CSREES
            strategic goal number 1, ``Enhance Economic Opportunities for
            Agricultural Producers'' by providing science-based
            information, knowledge, and education to help farmers and
            ranchers understand risk management, and the long-term impacts
            of trade barriers. Research by our members also meets CSREES
            goal number 2, ``Support Increased Economic Opportunities and
            Improved Quality of Life in Rural America,'' by providing
            information to help inform decisions affecting the quality of
            life in rural America. Therefore, we request that the Committee
            encourage CSREES to fund the social science research components
            of the NRI at a level sufficient to allowing scientists address
            these unmet research needs.
        Formula Funding.--Cuts to and proposed elimination of CSREES'
    formula-funded research programs can be detrimental to the entire USDA
    research portfolio. Formula Funds support the continuing costs of
    research activities while providing for long-term commitments to
    research that is often essential. Because of their timing and potential
    regional and intra-state impacts, much of the infrastructure needed to
    conduct competitively award research would be compromised if formula
    funds were cut. This would mean a huge and potentially damaging loss of
    research data nationwide. A balance of funding mechanisms, including
    competitively awarded and formula funding, is essential if the capacity
    of the United States to conduct agricultural research, both basic and
    applied, is to be maintained and the country is to continue to excel in
    areas such as agricultural production and expanding the quality of
    rural life.

                       REGIONAL RURAL DEVELOPMENT CENTERS

        C-FARE and COSSA endorse the continued funding as requested by the
    President for the RRDCs (Regional Rural Development Centers). They are
    an important avenue for supporting research and extension work.
    Utilizing social and economic research, the RRDCs help the engagement
    of rural people and organizations in the civic life of their
    communities, promote sound rural economic and workforce development
    strategies that improve job quality and the competitiveness of workers
    in rural areas, and they assist rural communities in developing
    strategies for addressing the challenges associated with the expansion
    of urban and suburban localities into rural areas.

                      USDA ECONOMIC RESEARCH SERVICE (ERS)

        C-FARE and COSSA applaud the House and Senate for their support in
    the fiscal year 2005 Appropriations Bill of the Flexible Consumer
    Behavior Survey. The funding from last year helped lay the foundation
    for this much needed data program. C-FARE and COSSA support the
    President's proposed funding level of $5.8 million to continue the
    development of the data and analysis framework of the post-farm gate
    food system. If fully funded it will help identify, understand, and
    track changes in food supply and consumption patterns. Such information
    is essential for use in making policy decisions in the food, health and
    consumer arenas. These funds will help implement the system by creating
    and developing a rapid consumer response module which will allow USDA
    to link consumer reactions to food purchases, sales, consumption and
    price information. It will also help develop a behavioral economic
    research program, the implementation of system surveys, and a web-based
    data dissemination program. These surveys and information will provide
    knowledge for producers to better target products to consumer behavior,
    while providing policymakers with a better basis for formulating
    effective nutritional policy.

              USDA NATIONAL AGRICULTURAL STATISTICS SERVICE (NASS)

        C-FARE and COSSA recommend supporting the President's priority
    activities for NASS. These include:
      --Agricultural Estimates ($7.0 million).--This increase will build on
            2004 and 2005 efforts to restore and modernize NASS's core
            survey and estimation program, which covers most agricultural
            commodities produced in the United States and encompasses
            economic, environmental and rural data With these funds a
            restored sample size, and other positive attributes will be
            utilized by agencies and constituents alike.
      --Locality Based Agricultural County Estimation Program ($1.9
            million).--This funding supports the NASS goal to improve
            statistically defensible survey precision for small area
            statistics.
      --Census of Agriculture ($6.5 million).--The Census of Agriculture
            provides comprehensive data on the agricultural economy with
            national, State, and county level details. This increase
            supports the normal increase in activity levels due to the
            cyclical nature of the 5-year Census program. Funding will be
            used to prepare for the 2007 Census of Agriculture and to
            conclude analysis and publication of the Census of Aquaculture
            in December 2006.

                    USDA AGRICULTURE MARKETING SERVICE (AMS)

        C-FARE and COSSA encourage Congress to continue supporting USDA's
    AMS at a level that will allow them to continue offering the high value
    programs they provide. As economists and social scientists we
    appreciate that the AMS programs promote a competitive and efficient
    marketplace. AMS services such as standardization, grading, market
    news, commodity procurement, and other market-facilitating activities
    benefit both consumers and producers. For the research community
    specifically, AMS market news services provide in-depth data regarding
    a wide range of commodities and modes of transportation; such basic
    information is invaluable for analysis. AMS also supports research on
    marketing and transportation issues through cooperative agreements and
    through the Federal-State Marketing Improvement Program.

     USDA GRAIN INSPECTION, PACKERS, AND STOCKYARDS ADMINISTRATION (GIPSA)

        C-FARE and COSSA also value the vital work of GIPSA to help USDA
    enhance economic opportunities for agricultural producers by promoting
    fair and competitive trade practices and financial integrity in the
    grain, livestock, meat and poultry industries. GIPSA reports provide
    information that aid in the development of industry standards and
    policy decision-making. Several of these reports are used in the
    research conducted by social scientists. In particular, the Packers and
    Stockyards Statistical Report provides researchers with data on
    industry concentration, plant size, and other industry economic
    information. The data helps social science researchers study important
    social and economic issues, including concentration in the meat packing
    industry. We encourage Congress to continue providing appropriate
    support for GIPSA and their important programs.

               USDA NATURAL RESOURCES CONSERVATION SERVICE (NRCS)

        Our organizations also support sustained investment in our Nation's
    natural resources and environment. We applaud USDA NRCS for promoting
    conservation and sustainable use of natural resources on the Nation's
    private lands. NRCS helps provide science-based knowledge to improve
    the management of forests, rangelands, soil, air and water resources.
    Social science researchers use this vital information to develop policy
    recommendations that impact the future of our agricultural sector, as
    well as life in rural America.

                                   CONCLUSION

        Recent security threats facing America require new and expanded
    agricultural research to protect our Nation's forests, water supplies,
    food processing and distribution network, and rural communities and
    insure the future security, safety and sustainability of America's food
    and fiber system. In order to address these challenges and maintain our
    position in an increasingly competitive world, we must continue to
    support research programs such as the NRI and those supported through
    formula funding.
        Thank you for the opportunity to present our recommendations. As
    you know, past investments in agricultural research have yielded many
    breakthroughs in American agricultural productivity. If you have any
    questions or concerns regarding our priorities please do not hesitate
    to contact us.
                                     ______

                  Prepared Statement of Defenders of Wildlife

        On behalf of our members and supporters, Defenders of Wildlife
    appreciates the opportunity to comment upon the fiscal year 2006 budget
    for the U.S. Department of Agriculture. Defenders of Wildlife is a
    national nonprofit conservation organization committed to preserving
    the integrity and diversity of natural ecosystems, preventing the
    decline of native species, and restoration of threatened habitats and
    wildlife populations.
        Defenders of Wildlife has significant concerns about the
    administration's fiscal year 2006 budget and we strongly oppose a
    number of changes the Bush Administration's proposed fiscal year 2006
    budget would make to Farm Bill conservation programs. The Bush
    Administration's proposal attempts to rewrite the Farm Bill to the
    great detriment of USDA voluntary conservation programs. We make
    recommendations in the following priority areas.

    2002 Farm Bill Conservation Title Programs
        Resource conservation programs within the Farm Security and Rural
    Investment Act of 2002 (Public Law 107-171) (Farm Bill) provide an
    integrated approach, through incentives and technical assistance, to
    both production and stewardship of farm and ranch lands and the
    environment. Further, these programs have been particularly valuable in
    providing resources for addressing threatened and endangered species
    conservation issues. The 2002 Farm Bill tried to achieve a balance
    between farm commodity provisions and critical conservation, nutrition,
    research and rural development programs that reach far more Americans
    than the traditional commodity programs. But, in every year since the
    passage of the Farm Bill, these conservation programs continue to be
    funded well under authorized levels. This comes at the expense of
    meaningful benefits to both sustainable farmers and ranchers and the
    environment.
        The conservation title specifically has bourn the brunt of the
    cuts. Since the farm bill passed, the combination of congressional and
    administrative actions has re-opened the farm bill to reduce promised
    conservation title funding for programs administered by the National
    Resource Conservation Service (NRCS) by $3.7 billion. This includes
    nearly $800 million from the fiscal year 2003 through fiscal year 2005
    funding cycles, plus an additional $2.9 billion from the Conservation
    Security Program (CSP) alone in the out years.
        For fiscal year 2006, President Bush is again proposing a cut to
    conservation programs that will result in a 28 percent decrease in
    funding originally promised by the 2002 Farm Bill. The 2002 Farm Bill
    promised mandatory conservation funding in fiscal year 2006 of $2.435
    billion. Yet, the total amount in the President's fiscal year 2006
    budget request for all programs is $1.739 billion, $700 million less
    than was promised and is needed. The fiscal year 2005 appropriations
    bill already drastically scaled back the mandatory farm bill spending
    for oversubscribed programs by nearly $500 million. The President's
    fiscal year 2006 budget request programs would scale them back again.
    This despite the fact that the USDA's voluntary conservation programs
    continue to be in demand and oversubscribed, Nationally, there are over
    150,000 qualified farmers and ranchers interested in implementing
    conservation practices to improve soil, water and air quality and add
    wildlife habitat through the conservation programs, who are waiting for
    funding; the value of the backlog of these qualified applicants exceeds
    $2 billion.
        Defenders of Wildlife urges Congress to restore balance to the Farm
    Bill and to not shortchange progressive voluntary conservation
    programs. National Farm Bill legislation has a profound impact on
    native species and wildlife habitat conservation choices of individual
    private landowners who practice crop, livestock, and forestry
    activities. Almost 60 percent of at risk species (as defined by The
    Nature Conservancy) are on private or State lands. Nearly 40 percent of
    plant and animal species listed as threatened or endangered are found
    only on private or State lands. Seventy percent of the land in the
    United States is held in private ownership in the form of range,
    forestry, or agricultural use. As of 1995, nearly 84 percent of the
    plants and animals listed as endangered or threatened were listed in
    part due to agricultural activities. Specifically, we urge Congress to
    restore balance by protecting funding allocations for the following
    programs:

    The Conservation Security Program
        The Bush Administration's proposed fiscal year 2006 budget
    continues to cripple the landmark Conservation Security Program (CSP).
    CSP supports farmers who implement and maintain effective stewardship
    practices on their working farm lands. The President's fiscal year 2006
    budget reduces the CSP substantially below the level authorized in the
    Farm Bill with a 58 percent decrease. Moreover, because a significant
    portion of fiscal year 2006 funding will go to fund the continuation of
    contracts signed in 2004 and 2005, the proposed funding level will
    severely curtail the number of watersheds where the program can be
    offered in 2006 to well below the intent of the 2002 Farm Bill. Current
    funding levels have permitted enrollment of only about 10 percent of
    the Nation's watersheds in the first 2 years of program implementation.
    The President's budget suggests a rollout rate that will result in 10
    to 12 year cycle for reaching all of the Nation's farmers. That means
    many contracts will expire long before farmers get their next chance to
    re-enroll, which risks the loss of the environmental benefits of the
    program and turns away many good stewards of the land.
        The Conservation Security Program offers long term benefits for
    continued management of lands to promote environmental health. CSP is
    structured to reward farmers who have already invested in environmental
    stewardship, and to encourage them to go even farther to implement
    stewardship practices on their working lands through the enhancement
    payment structure. CSP is an essential part of the USDA portfolio of
    conservation programs to protect our water, soil, and wildlife
    resources. In order to achieve its promise of continuous income support
    to all of the country's best stewards, the program must be available to
    all producers nationwide, and must be implemented on a schedule that
    permits farmers to re-enroll when their contracts are up. Defenders
    urges Congress to consider the benefits that these programs can provide
    to sustainable farmers in all types of agriculture and in all regions
    of the country, and authorize at appropriated levels. At this point,
    perpetual cuts seems to have the effect of rewriting the Farm Bill and
    changing CSP from the first-ever working lands conservation entitlement
    program envisioned by Congress, to a program with limited enrollment,
    preferential bidding, and waiting lists.
        This program can provide great benefits if funded as intended by
    the 2002 Farm Bill.

    The Wildlife Habitat Incentives Program
        In the President's fiscal year 2006 budget the Wildlife Habitat
    Incentives Program (WHIP) gets slashed by 29 percent, a $25 million cut
    below the authorized level mandated in the 2002 Farm Bill and was
    already cut by 45 percent below farm bill authorized levels in 2005.
    WHIP provides cost sharing and technical assistance for the development
    of wildlife habitat on private lands. Though small in size, the program
    provides significant benefits for wildlife and wildlife habitat and
    provides proactive solutions to dealing with endangered habitat and
    species issues before they become critical. More than 8,400 projects
    affecting some 1.4 million acres have been approved under WHIP (source:
    National Wildlife Federation fact sheet). There is demand for more as
    backlog statistics from NRCS show us. Nationwide, over 3,000 qualified
    applicants, likely small farmers and ranchers, are being turned away.
    The value of the backlogged applications that could be going to these
    stewards totals $10 million.
        Agriculture Secretary Johanns recently lauded the performance
    benefits WHIP saying that, ``More than $27 million funded over 3,000
    private landowners create, restore and enhance wildlife habitat for
    upland wildlife; wetland wildlife; threatened, endangered or at-risk
    species and fisheries as well as other types of wildlife. Of the more
    than 430,000 acres enrolled in the program last year, 21,000 acres will
    help threatened and endangered species.'' Defenders urges Congress to
    restore full funding to this program and protect the allocation of this
    program to continue to provide meaningful benefits to sustainable
    farmers and ranchers and to wildlife.

    The Wetland Reserve Program
        President Bush has stated as a priority his commitment to a goal of
    ``no net loss'' of wetlands, yet one of the most progressive and
    meaningful programs that works towards that goal, the Wetlands Reserve
    Program (WRP) is slated in the President's budget to be cut by 20
    percent. On April 22, 2004 the President announced his commitment to
    provide funding for an overall increase of wetlands each year and
    stated he would seek to ``create, improve, and protect at least three
    million wetland acres over the next 5 years in order to increase
    overall wetland acres and quality.'' (source: White House Press
    Release, April 22, 2004) To meet this goal the President called on
    Congress to fund conservation programs--specifically the Wetlands
    Reserve Program, yet his fiscal year 2006 budget cuts that program by
    $80 million dollars.
        WRP provides farmers with cost-share assistance and easements to
    take wetlands converted for agricultural purposes out of production and
    to restore them to beneficial wetlands. According to statistics by U.S.
    Fish and Wildlife service, one-third of all bird species, 190 species
    of amphibians and 5,000 species of plants depend on wetlands habitat.
    Along with WHIP, WRP has contributed the most to the creation and
    improvement of habitat for at-risk and declining species. Yet, WRP saw
    a 38 percent reduction in its acreage allotment in 2005 and, again
    faces a 20 percent reduction in 2006. This despite a demand that has
    led to a backlog of over 3,100 applicants nationwide, that would have
    provided restoration to almost 536,000 acres across the country. This
    is a substantial amount when one considers that, according to the USDA,
    overall annual wetlands losses are estimated at some 60,000 acres.
    Defenders urges Congress to take up the President's promise to conserve
    wetlands, and restore funding to this program which is integral to the
    success of that goal.

    The Grasslands Reserve Program
        The Grasslands Reserve Program (GRP) is a voluntary program
    offering landowners the opportunity to protect, restore and enhance
    grasslands on their property. The program received $254 million over
    the life of the Farm Bill, and that money has been widely used for
    projects that benefit wildlife, particularly grassland birds like the
    sage grouse, and is important to addressing endangered species issues.
    However, GRP is predicted to use up its entire Farm Bill allocation by
    the end of 2005, so there is no money in the budget for GRP in 2006.
    Defenders urges Congress to consider the benefits of this program for
    addressing threatened and endangered species issues and note that if
    this amount is capped, it will be more critical then ever to fund other
    similar conservation programs such as WHIP to help continue the work
    started under the GRP.

    Other Important Conservation Programs in the Farm Bill
        Several other critical programs, that are part of the forward
    thinking conservation initiatives in the Farm Bill, will also be
    significantly cut, which in turn will undermine progressive efforts by
    farmers and ranchers to steward land, conserve soil and water, and
    provide habitat for wildlife. The Environmental Quality Incentives
    Program (EQIP), which provides technical assistance, cost-share/
    incentive funding to assist crop and livestock producers with
    environmental and conservation improvements on their farms and ranches,
    is cut by 17 percent. And the Farm and Ranch Land Protection Program
    (FRPP), which keeps working farms and ranches in production and puts
    cash in the pockets of farmers and ranchers, will suffer a 17 percent
    cut. Defenders again urges Congress to protect the restore funding and
    protect the allocation for these programs, as well as the Conservation
    Reserve program. Farm Bill conservation programs should be appropriated
    at authorized levels as intended by the 2002 Farm Bill.

    Farm Bill Energy Title Programs
        Inclusion of an Energy Title in the 2002 Farm Bill was a huge
    bipartisan victory for renewable energy and for rural America. However,
    the program was allocated $23 million per year in mandatory funding for
    fiscal years 2003-2007. The President's fiscal year 2006 budget request
    provides only $10 million in discretionary funding. This title provides
    programs to spur the growth of renewable energy within the agriculture
    sector, an immense potential energy source. Sec. 9006 is the only
    provision specific to renewable energy project development within the
    Farm Bill. It provides grants, and eventually loans and loan
    guarantees, to farmers, ranchers, and rural small businesses for the
    development of renewable energy projects and energy efficiency
    improvements. The program is designed to help farmers develop much
    needed new income streams from renewable energy generation, including
    wind, biomass, geothermal, hydrogen and solar energy, as well as
    helping to meet the Nation's critical energy needs in an
    environmentally sustainable way, and generate economic development in
    every region of the country. Defenders urges Congress to restore full
    funding to the Renewable energy program as mandated by the Farm Bill.

    Wildlife Services
        The Wildlife Services (WS) program housed under the Animal and
    Plant Health and Inspection Service (APHIS) is tentatively funded,
    under the President's fiscal year 2006 budget, at a program level of
    approximately $76 million. Defenders of Wildlife is pleased to see more
    engagement in the invasive species issue by APHIS in general and
    Wildlife Services in particular, as we have been advocating for just
    such a policy change for many years.

    Invasive Species
        Defenders of Wildlife recognizes that exotic invasive species are
    an enormous threat to native ecosystems and biological diversity and
    urges full funding of efforts to control invasive species. They are
    also a source of huge economic losses; the Asian longhorned beetle, for
    instance, potentially threatens maple syrup and tourism industries, as
    well as street trees, and could cause damage in the hundreds of
    billions of dollars. Therefore, we urge full funding of efforts to
    exclude, control, and halt the spread of invasive species.
    Specifically, we urge the Subcommittee to fund control efforts for the
    Asian longhorned beetle and the emerald ash borer at $40 million each
    in fiscal year 2006; to fund APHIS's work to halt Sudden Oak Death at
    $40 million; to fully fund the cactus moth sterile release program at
    $1.5 million; to fully fund the Noxious Weed Control and Eradication
    Act at the $15 million authorized level; and to fully fund the
    Department of Agriculture's portion of the Interdepartmental National
    Invasive Species Crosscut Budget.

    Livestock Protection
        However, it also appears that the agency continues to spend a
    disproportionate amount of its annual allocation for livestock
    protection activities, which translates generally into the killing of
    predators. The allocation to livestock protection is particularly
    troubling because a close analysis reveals that in fiscal year 2001,
    Wildlife Services killed 88,868 coyotes, 386 mountain lions, and 2,467
    bobcats. While the agency no longer keeps detailed records on the
    reported value of resources damaged by livestock, in fiscal year 1997
    (the last year for which WS collected such information) WS spent $9.8
    million in response to a reported $7.7 million in livestock-related
    damages and spent just $9.5 million to address the more than $63
    million in damages reported in the 6 other program categories.
    Considering that in fiscal year 2001, 49 percent of its budget on
    agriculture-related activities ($15 million), and divided the remaining
    51 percent between human health and safety ($10.4 million), property
    ($2.99 million) and natural resource protection ($2.26 million)
    expenditures, the trend suggests that Wildlife Services could expend up
    to $38 million for agriculture protection this year. Continuing to
    increase the amount of money used to kill predators to protect
    livestock is an inefficient use of taxpayer resources, given that
    national sheep inventories are declining by roughly 200,000 head per
    year, and cattle inventories are declining by nearly 600,000 per year.
    These declines are greatest in the twelve western States where Wildlife
    Services allocates nearly 63 percent of its agriculture protection
    dollars.
        Defenders is concerned with the consistent lack of attention paid
    to the directives by Wildlife Services which deal with modernizing the
    field activities of its staff. Defenders recommends that Congress ask
    for a report on Wildlife Services' implementation of the directives
    dealing with the increased use of non-lethal methods.
        Defenders of Wildlife requests also that the Committee's report
    language follow the model of previous years and revise the directive as
    follows, ``The Committee expects that Wildlife Services will make use
    of the non-lethal methods developed by the National Wildlife Research
    Center and will make non-lethal controls as the method of choice and
    resort to lethal means only as a last resort.''
        Defenders of Wildlife appreciates this opportunity to provide
    testimony on the fiscal year 2006 USDA budget. Thank you for your
    consideration of these comments.
                                     ______

                       Prepared Statement of Easter Seals

        Easter Seals appreciates the opportunity to report on the notable
    accomplishments of the USDA Cooperative State Research, Education, and
    Extension Service (CSREES) AgrAbility Program and request that funding
    for the AgrAbility Program be increased to $5 million in fiscal year
    2006.
        The AgrAbility Program is an essential, unduplicated, hands-on
    resource for farmers, ranchers, and farmworkers with disabilities and
    their families. AgrAbility is the only USDA program dedicated
    exclusively to helping agricultural producers with disabilities. It
    demonstrates the value of public-private partnership by securing
    donations of funds, talent, and materials to magnify the impact of a
    modest Federal investment. The fiscal year 2005 appropriation of $4.6
    million is funding 24 State projects.

    What is AgrAbility?
        AgrAbility is a program authorized through a provision in the 1990
    Farm Bill that provides information and technical assistance to
    farmers, ranchers, and farmworkers with disabilities. Congress began
    funding the project in 1991 and has continued to do so each year since.
    The U.S. Department of Agriculture Cooperative State Research,
    Education, and Extension Service (CSREES)--a network that links
    research, science, and technology to meet the needs of people where
    they live and work--administers the AgrAbility Program. CSREES awards
    program funds though a competitive grant process to land-grant
    universities that have partnered with at least one nonprofit disability
    service provider to provide education and assistance to agricultural
    workers with disabilities and their families.
        A network comprised of a National AgrAbility Project and numerous
    State AgrAbility Projects provides program services in over half of the
    States in the United States. The National AgrAbility Project partners,
    University of Wisconsin-Extension, Cooperative Extension Service and
    Easter Seals, collaborate to support State AgrAbility Project
    activities. The State projects provide the direct on-site services to
    farmers, ranchers, and farmworkers with disabilities and other chronic
    health conditions. AgrAbility Project services are available to people
    of all races, creeds, genders, abilities, and national origins. The
    project staff works with operators regardless of the size of their
    operations or extent of their resources.

    Why is AgrAbility Needed?
        Agricultural production is hazardous. Over 700 farmers and ranchers
    die in work-related incidents yearly and another 120,000 workers
    sustain disabling injuries from work-related incidents (National Safety
    Council, 2002). In addition, the USDA National Agricultural Statistics
    Service estimates that more than 200,000 farmers, ranchers, and other
    agricultural workers experience lost-work-time injuries and
    occupational illnesses every year, approximately 5 percent of which
    have serious and permanent results. Off-farm incidents; health
    conditions, such as heart disease, arthritis, or cancer; and aging
    disable tens of thousands more. Nationwide, approximately 288,000
    agricultural workers between the ages of 15 and 79 have a disability
    that affects their ability to perform one or more essential tasks
    (Bureau of Labor Statistics, 1999).
        Additionally, like their urban counterparts, approximately 20
    percent of children and other family members in agricultural families
    have disabilities, such as cerebral palsy, mental retardation, and
    epilepsy. Physical and attitudinal barriers often prevent these
    children and adults from participating fully in farm and ranch
    operations, and from engaging in social and recreational activities
    enjoyed by other rural residents.
        For most of the over 3 million Americans earning their livings in
    agriculture, the work is not just their livelihood--it is their way of
    life--a productive and satisfying way of life of which they are very
    proud. This is also true for the majority of people with disabilities
    or chronic health conditions who work or live in agricultural settings.
    These people want to find ways to accommodate their disabilities and
    continue to farm. All too often, however, they are frustrated in their
    attempts. Rural isolation, limited personal resources, limitations in
    rural health delivery systems, and inadequate access to agriculture-
    oriented assistance, are among the obstacles they face.

    How Does AgrAbility Help?
        The AgrAbility Project offers education and assistance to help
    identify ways to accommodate disabilities and chronic health
    conditions, eliminate barriers, and create a favorable climate among
    rural service providers for people with disabilities. AgrAbility helps
    to prevent people from being forced out of agriculture because of their
    disabilities and provides them with ideas for safe, affordable
    solutions that allow them to maintain their businesses and rural
    lifestyles.

    Who Does AgrAbility Serve?
        Farmers, ranchers, and farmworkers involved in all types of
    production agriculture who have any type of disability (physical,
    cognitive, or sensory) or chronic health condition may receive
    services. Family members who have a disability or chronic health
    condition may also receive assistance.

    Who are the AgrAbility Clients?
        Juan Padron, AGE, a dairy farmer, sustained a spinal cord injury
    that left him paralyzed from the chest down in 2001 while helping a
    neighbor unload large square hay bales. AgrAbility staff recommended
    purchasing a heavy-duty wheelchair that could navigate farm terrain and
    adding hand controls to the tractor. In addition, his son, who
    originally contacted AgrAbility on his father's behalf, has developed a
    unique chute for restraining cows making it possible for his father to
    continue to artificially insemination them.
        Daun Koke, AGE, is a wife and mother of five and has cerebral
    palsy. She and her husband have a 100-head beef operation and over 600
    acres of row crops. She heard about AgrAbility on television and
    contacted the project immediately. AgrAbility staff has helped her
    obtain funding for adding a lift, wide mirrors, and hand controls to
    the tractor and automatic livestock gates. These changes have increased
    Daun's ability to work alongside her husband on their operation.
        Tyler McElwee, 16, has always been actively involved in his
    family's beef and crop operation. After sustaining a spinal cord injury
    (on the farm) 4 years ago, he and his family learned about AgrAbility
    from a school advisor. AgrAbility provided information on adding lifts
    and hand controls to the farm equipment. He now is able to help out by
    cleaning pens, feeding cattle, and working in the fields. He also shows
    beef cattle and is actively involved in FFA. His plans to one day own
    his own beef operation.
        Randy Jiminez, AGE, who has post-polio syndrome, has what he calls
    a ranchette with ducks and geese, and teaches gun safety courses. With
    the assistance of AgrAbility staff and the Department of Vocational
    Rehabilitation (DVR), his house was to accommodate his wheelchair and a
    golf cart was obtained and modified to increase his outdoor mobility. A
    business loan was also secured through DVR for setting-up the gun
    safety program.
        Brenda Besse, AGE, has a purebred Brown Swiss dairy farm and a
    2,000-acre grain operation. She lost her right leg above the knee in an
    entanglement with a combine head. AgrAbility staff helped her get a
    utility vehicle for hauling feed, wood shavings, hay, straw, and calf
    bottles around the farm. She now helps other AgrAbility clients learn
    about the various resources available to them. When Brenda is not
    farming, you can find her on the golf course where she is ranked the #1
    female amputee golfer in the United States.
        Bobby Clay, AGE, has a pastured poultry and vegetable farm and also
    operates a poultry processing enterprise. Following a spinal cord
    injury, he contacted his local extension agent who, with AgrAbility
    staff, assisted him in modifying his operation including the addition
    of 2,000 feet of water lines, chicken tractors, 20 water hydrants, and
    a front end-loader. With these modifications, Bobby can still maintain
    his agricultural enterprise and locally market his own poultry.
        Larry LeMasters, AGE, and his wife have a 200-head dairy operation,
    several flocks of chickens, and a ``herd of six kids.'' In 2000, he
    began having problems getting around the farm and doing his chores due
    to pain. Larry was diagnosed with fibromyalgia, a form of muscular and
    soft tissue rheumatism that has limited his mobility, strength, and the
    amount of bending and lifting he can do. They decided to contact
    AgrAbility after reading an article about it and reviewing the project
    website. AgrAbility staff recommended changes to the milking system to
    alleviate the need for constant bending and reaching.

    What Services Do AgrAbility Clients Receive?
        AgrAbility clients benefit from partnerships between the extension
    services at land-grant universities and nonprofit disability service
    organizations. Together members of each AgrAbility Project staff
    provide clients with direct on-site assistance that includes the
    following activities.
      --Assessing agricultural tasks and providing guidance on how to
            restructure them to accommodate the clients' disabilities.
      --Reviewing agricultural worksites and equipment and making
            suggestions for modifications.
      --Identifying ways to prevent secondary injuries and disabilities.
      --Coordinating needed community resources and services by
        --putting them in touch with community volunteers who have the
                ingenuity and contacts to augment AgrAbility project
                support;
        --linking them to a network of engineers, health and rehabilitation
                service providers, agricultural experts, product
                manufacturers and suppliers, educators, skilled tradesmen,
                and other rural resources; and
        --helping them access existing services within public agencies,
                including State vocational rehabilitation agencies and
                assistive technology centers, to maximize benefits
                available to them.
      --Referring individuals and family members to and facilitating
            participation in peer support groups.

    How Does Collaboration Benefit Clients?
        The AgrAbility projects build collaborations with State offices of
    vocational rehabilitation, State assistive technology projects, and
    farm and community business organizations, such as agricultural
    cooperatives, Farm Bureau, or Lion's Club. AgrAbility clients benefit
    from the added expertise and resources such collaborations bring to the
    projects. Many AgrAbility projects have developed contractual
    arrangements with their State's vocational rehabilitation office that
    provide a win-win for the client, the project, and the State.

    What Services Does the National AgrAbility Project Provide?
        The National AgrAbility Project staff provides training and
    technical assistance, and information on available resources to the
    State AgrAbility project staffs through a variety of means, including
      --annual National AgrAbility Project Training Workshops,
      --toll-free telephone consultations,
      --an online library of technical resources, and
      --collaboration on and presentations at statewide educational
            activities.
        In addition, the National AgrAbility Project staff
      --provides direct technical consultation on developing assistive
            technology solutions to clients, rehabilitation engineers, and
            fabricators;
      --presents information about AgrAbility at national agricultural and
            health-related events; and
      --develops and disseminates new educational materials relevant to
            farming and ranching with disabilities.
        These and other activities all help to meet the goal of promoting
    awareness that with technical assistance, information, and education
    farmers, ranchers, and farmworkers with disabilities can successfully
    continue to do the work they know and love.

    How are Federal Resources Maximized and New Resources Secured?
        National and State project staffs seek to form partnerships and
    alliances with corporations and organizations that will help expand the
    reach and services of the program. Additional efforts are made to
    secure financial and in-kind contributions to augment the base funds
    provided through the USDA-CSREES grants. These efforts help maximize
    the Federal support and invest community and corporate leaders in the
    mission and work of the AgrAbility Project--Promoting success in
    agriculture for farmers, ranchers, and farmworkers with disabilities.
    Such efforts also provide these leaders with a tangible way to give
    back to the rural communities in which they live and/or conduct
    business. By supporting the AgrAbility Project, they are helping their
    customers who face the challenges of accommodating their disabilities
    while continuing to work in agricultural production.

    Funding Request
        The need for AgrAbility services has never been greater, and its
    accomplishments to date are remarkable by any standard. Easter Seals is
    proud to contribute to the ongoing success of the USDA-CSREES
    AgrAbility Program. Please support the allocation of at least $4.6
    million for AgrAbility in fiscal year 2005 to ensure that this valuable
    public-private partnership continues to serve rural Americans with
    disabilities and their families. Thank you for this opportunity to
    share the successes and needs of the USDA AgrAbility Program
                                     ______

       Prepared Statement of the Farmer-Rancher/Oklahoma Farmers Union,
                               Ringling, Oklahoma

      INVASIVE SPECIES AFFECTING ANIMALS AND PLANTS IMPORTED RED FIRE ANT
                                  ARS-RESEARCH

        Mr. Chairman and members of the Subcommittee, I appreciate the
    opportunity to submit testimony with respect to the increasing invasive
    species funding of the red imported fire ant. I am an agriculture
    producer in southern Oklahoma, employed with the Oklahoma Farmers Union
    and a 20-year advocate for research initiatives to combat this growing
    problem impacting both agriculture and the daily lives of citizens in
    affected States and counties. Oklahoma Farmers Union is a general farm
    organization representing over 100,000 families in the State of
    Oklahoma.
        My work on this issue goes back to the 1980's as a House
    Agriculture Appropriations Subcommittee associate staff member, later
    as an agriculture producer/research cooperator and now as an
    association representative and participant in numerous committees and
    fire ant conferences and meetings.

    The Red Imported Fire Ant Problem
        The imported fire ants now inhabit more than 320 million acres in
    the southern United States (13 states) and Puerto Rico. The average
    densities of fire ant populations in the United States are more than 5
    times higher than in their native South America, where natural enemies
    keep the fire ant population under control. Imported fire ants destroy
    many other ground-inhabiting arthropods and other small animals,
    reducing the biological diversity in many areas. Fire ants cause a
    multitude of problems for humans, domestic animals, and agriculture.
    Between 30 percent and 60 percent of the people in the infested areas
    are stung each year. More than 200,000 persons per year may require a
    physician's aid for fire ant stings. Anaphylaxis occurs in 1 percent or
    more of those people as a result of stings.
        The fire ant impact on the American economy is approximately $5
    billion per year. Agriculture producers are economically hurt by the
    loss of animals due to stings, short-circuiting of electrical equipment
    as a result of ant buildup in switch boxes, damage to farm equipment
    from ant mounds in pastures and fields and personal discomfort and risk
    to life from frequent exposure and contact with the ants in the normal
    course of working on the farm or ranch. Total annual fire ant losses to
    U.S. agriculture are estimated at $750 million.
        This past year in the State of Oklahoma we saw the spread of fire
    ants during research surveys in counties where citizens had reported
    possible fire ant mounds. Because of the intensity of the fire ant
    problem within our State, a special State legislature directed fire ant
    task force is being formed. While 9 Oklahoma counties are currently
    quarantined from selling products to non-quarantined areas, we
    anticipate that number to rise given an additional 31 counties now have
    fire ant populations for a total of 40 impacted counties. Over one-
    third of our State is now impacted while in 1984 that number was zero!

    The Research Solution
        The lead research agency on the national level for this issue is
    the USDA-Agricultural Research Service with most work centered at the
    Center for Medical, Agricultural and Veterinary Entomology in
    Gainesville, Florida. I have the highest respect and admiration for the
    scientists, the administration and the methods of basic and applied
    research utilized by this agency and this research location.
        I and others have advocated for many years the need to increase
    funding for the site where key research for red imported fire ants is
    conducted and from where field activities across the United States is
    directed. While the Administration budget included a request for
    funding this activity last year, no additional funds were appropriated
    for the program. We are delighted to see that the President's fiscal
    year 2006 budget request includes $600,000 for fire ant research for
    the Gainesville location for molecular research work, including
    pathogen discovery as part of an Administration request of $10 million
    for Invasive Species Affecting Animals and Plants.
        The proposed increase will allow ARS to target its research with
    respect to the fire ant by studying its genomics and developing more
    effective pesticides and biological control agents. Additionally, this
    will allow ARS to continue to develop biologically-based integrated
    pest management components. The latter has shown a marked impact on
    fire ant research locations but more work must be continued in this
    area to identify more cold-hardy species that can be utilized in more
    northern environments where the advancing fire ant line continues to
    spread.
        To date, the researchers in the USDA-ARS Imported Fire Ant Research
    Unit in Gainesville, FL, have continued to search for new biological
    control agents that could be used as self-sustaining bio-control agents
    against the imported fire ants. Biological control agents are the only
    long-term and self-sustaining solution for the fire ant problem in the
    United States.
        Self-sustaining biological control agents cause direct mortality
    and/or stress, reducing the ecological dominance of fire ants and can
    be useful in natural habitats where pesticide use is not tolerated. The
    successful establishment of biological control agents of fire ants
    would be a major benefit throughout the southern United States.
    Biological control has the potential to offer long-term suppression of
    fire ants over large areas in the United States and save millions of
    dollars annually by reducing the use of pesticides.
        Biological control agents could also help slow the spread of these
    pests into other susceptible States, such as Kentucky, Maryland,
    Virginia, Delaware, New Mexico, Arizona, Nevada, other parts of
    California, and up the Pacific Coast.
        For long-term success, investment in genomics research to develop
    more effective pesticides and pathogens is crucial if biological
    controls are to be fully effective. Contributing to the overall effort
    is the continued development of novel uses for pheromones in fire and
    control and technology transfer of repellent and attractant technology
    to commercial interests.

    New Developments in Fire Ant Biological Control
        I'm excited about new developments in fire ant biological control.
    The protozoan Vairimorpha invictae, a specific pathogen of fire ants in
    South America, is being tested in quarantine in Gainesville, FL. This
    disease should be released in the field in the future.
        A new isolate of the fire ant pathogen Thelohania solenopsae is
    being tested in quarantine in Gainesville, FL. This isolate may be
    better adapted to black and hybrid fire ants, than the present isolate
    found in the United States. It may also have a more detrimental effect
    on the ants than the United States isolate. Scientists hope to have
    this new isolate released in the field in the coming years.
        Viruses have been identified from fire ant populations in Florida.
    Molecular biology studies may reveal opportunities for the use of these
    viruses as biological agents against fire ants. Besides the viruses,
    during the past 3 years, three other new diseases of fire ants have
    been identified from ants in Florida. These discoveries serve as
    indications that new diseases can be identified in the South American
    range of the fire ants, and developed for use in the biological control
    of U.S. fire ants.
        Three different species of the fire ant decapitating flies have
    been released so far in the United States. Two species are established
    in Florida and South Carolina. One species is established in other
    southeastern States. New decapitating fly species are being tested in
    quarantine in Gainesville, FL, and should be ready for field release in
    the coming months. Other species collected in South America, will be
    quarantine tested and evaluated for use.
        Area-wide suppression of fire ants research programs are being
    conducted at locations In Florida, Texas, Mississippi, Oklahoma, and
    South Carolina. These research efforts combine both biological and
    chemical methods to achieve an integrated pest management approach.

    Conclusion and Request for Funding
        Much progress has been made but to continue this aggressive,
    results-oriented research at the same or perhaps excelled pace, it is
    imperative that additional funding be directed--preferably in permanent
    base funding to the Gainesville, FL location. On behalf of the
    producers and consumers who make up the membership of the Oklahoma
    Farmers Union, we support the Administration's $10 million research
    initiative contained in the ARS budget for further targeted research
    for Invasive Species Affecting Animals and Plants and specifically the
    $600,000 directed to Gainesville site.
        Thank you for this opportunity. I would appreciate the
    Subcommittee's consideration of this most important issue.
                                     ______

                 Prepared Statement of Florida State University

        Mr. Chairman, I would like to thank you and the Members of the
    Subcommittee for this opportunity to present testimony before this
    Committee. I would like to take a moment to briefly acquaint you with
    Florida State University.
        Located in Tallahassee, Florida's capitol, FSU is a comprehensive
    Research I university with a rapidly growing research base. The
    University serves as a center for advanced graduate and professional
    studies, exemplary research, and top quality undergraduate programs.
    Faculty members at FSU maintain a strong commitment to quality in
    teaching, to performance of research and creative activities and have a
    strong commitment to public service. Among the current or former
    faculty are numerous recipients of national and international honors
    including Nobel laureates, Pulitzer Prize winners, and several members
    of the National Academy of Sciences. Our scientists and engineers do
    excellent research, have strong interdisciplinary interests, and often
    work closely with industrial partners in the commercialization of the
    results of their research. Florida State University had over $182
    million this past year in research awards.
        Florida State University attracts students from every county in
    Florida, every state in the nation, and more than 100 foreign
    countries. The University is committed to high admission standards that
    ensure quality in its student body, which currently includes National
    Merit and National Achievement Scholars, as well as students with
    superior creative talent. We consistently rank in the top 25 among U.S.
    colleges and universities in attracting National Merit Scholars to our
    campus.
        At Florida State University, we are very proud of our successes as
    well as our emerging reputation as one of the nation's top public
    research universities.
        Mr. Chairman, let me tell you about a project we are pursuing this
    year through the U.S. Department of Agriculture.
        In fiscal year 2001, Congress passed the Federal Crop Insurance
    Act, which included funding of partnerships for Risk Management
    Development and Implementation. This legislation authorized the USDA,
    working with NOAA, to enter into partnerships for the purpose of
    increasing the availability of tools for crop loss mitigation. The
    partnerships give priority for producers of agricultural commodities
    for specialty crops and under-served agricultural commodities. Congress
    authorized the program through fiscal year 2008.
        The Federal Government can utilize new cost-effective ways to
    reduce risk by using modern ideas such as decision support tools and
    using El Nino and La Nina to predict climate variability. This allows
    for fair pricing of premiums for crop insurance. The Southeast Climate
    Consortium (SECC), which consists of Florida State University, the
    University of Florida, the University of Miami, the University of
    Georgia, Auburn University, and University of Alabama at Huntsville,
    has been at the forefront of climate prediction work. The SECC has
    worked throughout the Southeastern United States, with support from
    NOAA and USDA, to develop new methods to predict the consequences of
    climate variability for agricultural crops, forests, and water
    resources. More recently, in actual real-life tests, these methods have
    been applied to the problems that farmers raising specialty crops face
    relative to rainfall, temperature and assessing the risk of wild fires.
    By the use of these methods, these challenges have been successful.
        In the SECC, Florida State University provides the climate
    forecasts and risk reduction methodology, the University of Florida
    translates this climate information into risks associated environmental
    impacts and work with Extension Services to provide information to the
    agricultural community, and the University of Miami provides the
    economic modeling of the agricultural system. Utilization of these
    tools and their application to agricultural problems in this project
    has the strong support of extension managers.
        The new tasks for fiscal year 2006 will be to develop drought
    forecasting methods to help farmers and producers plan for reducing
    risks of economic losses, develop best management practices (BMPs) that
    incorporate climate forecasts to give farmers options for compliance
    with water quality standards, and investigate the possible applications
    of using climate forecasts to guide disaster preparedness, such as for
    hurricanes.
        FSU, on behalf of the Southeastern Climate Consortium, is
    requesting $4,000,000 for this important activity in fiscal year 2006.
        Mr. Chairman, this is just one of the many exciting activities
    going on at Florida State University that will make important
    contributions to solving some key concerns our nation faces today. Your
    support would be appreciated, and, again, thank you for an opportunity
    to present these views for your consideration.
                                     ______

      Prepared Statement of Friends of Agricultural Research--Beltsville,
                                      Inc.

        Mr. Chairman, and Members of the Subcommittee, thank you for this
    opportunity to present our statement regarding funding for the
    Department of Agriculture's Agricultural Research Service (ARS), and
    especially for the Agency's flagship research facility, the Henry A.
    Wallace Beltsville Agricultural Research Center (BARC), in Maryland.
    Our organization--Friends of Agricultural Research--Beltsville--
    promotes the Center's current and long-term agricultural research,
    outreach, and educational missions.
        Our testimony addresses three main themes:
        We begin with our highest recommendation for any item in the
    President's fiscal year 2006 budget--Systematics Research at the
    Beltsville Agricultural Research Center.
        The Department of Agriculture recently named systematics research
    at BARC the Department's Number One priority for addressing problems
    with invasive species. The President's fiscal year 2006 budget
    recommends $1 million for systematics research at BARC within $1.8
    million for Invasive Species (Home Land Security). We strongly support
    approval.
        If the proposed $1 million is approved, BARC capabilities in plant
    pathogenic fungi, whiteflies, thrips, weevils, and animal parasites
    will improve substantially. All of these organisms pose serious threats
    to U.S. agricultural production, yet all are tiny and hard to identify.
    About 80 percent of the Department's systematics programs are based at
    BARC. Systematics scientists make up about 10 percent of the BARC
    scientific staff.
        Systematics has suffered from attrition and inflation for the past
    20 years. Staff sizes are probably only about half of what they were 20
    years ago. Systematics identification depends on priceless BARC
    collections--some entries being more than a century old. These
    collections are critical to accurate identifications. Systematics is
    essential for identifying exotic or new species, for barring invasive
    species from entering the United States. Amazingly, only about 10
    percent of all insects and fungi have been named and described as to
    how they relate to other organisms.
        Dr. John Marburger, Presidential Science Advisor and Director of
    the Office of Science and Technology Policy, has said that systematics
    is part of the Nation's critical scientific infrastructure. Because
    systematics is critical to foreign trade as well as domestic
    production, the Department has the largest systematics program in the
    Federal Government. Authoritative sysematics not only protects the
    United States against invasive species, it also assures our trading
    partners that United States exports are free of invasive species. At
    least once, systematics enabled the United States to successfully
    refute an accusation of biowarfare, an accusation that the United
    States had deliberately introduced an invasive insect into another
    country
        Long-term needs for ARS systematics research may exceed $30
    million, not including modernization of facilities. The $1 million in
    the President's fiscal year 2006 budget would be an important step
    toward meeting the needs for this fundamentally important research.
        Next, we turn to the urgent need to continue support for specific
    research areas that the Congress has mandated at BARC in previous
    fiscal years. These mandates address research that has enormous
    national impact. The mandates have been strongly endorsed and supported
    by this Subcommittee and others. We list them below with brief
    descriptions and our recommendations for continued funding.
        Dairy Genetics.--For over 75 years, the Animal Improvement Programs
    Laboratory has created statistical genetic predictions to aid the dairy
    industry in identifying the best bulls for dairy breeding. Genetic
    improvement in dairy cattle has steadily increased milk yield per cow
    and feed efficiency (milk produced per pound of feed) over many years.
    The result is lower milk prices for consumers and less animal waste to
    contaminate the environment because fewer cows are needed to produce
    the Nation's milk supply. We confirm that this mission critical
    research should continue.
        Barley Health Food Benefits.--Barley contains soluble fiber
    compounds called beta-glucans that are beneficial for health. Beta-
    glucans can lower cholesterol and improve control of insulin and blood
    sugar. These funds support human-volunteer studies designed to help us
    better understand how barley could be used in a healthful diet to
    reduce the incidence of chronic disease. We recommend continued
    support.
        Biomineral Soil Amendments for Control of Nematodes.--Plant
    nematodes are microscopic worms that feed on the roots of plants.
    Nematodes can cause substantial losses in crop yields. This research
    focuses on using such industrial byproducts as environmentally benign
    soil additives for controlling nematodes. We recommend funding for
    these promising approaches.
        Foundry Sand Byproducts Utilization.--Waste sands from the metal-
    casting industry currently are dumped in landfills. This project is
    working with industry on guidelines for beneficial uses of these sands.
    We recommend continuation.
        Poultry Disease (Avian Coccidiosis).--Coccidiosis, a parasitic
    poultry disease, costs the industry $2-3 billion per year. This
    research focuses on understanding the genetics of both the parasite and
    the host chicken to identify targets that will allow better disease
    control. We recommend this funding.
        Biomedical Materials in Plants.--Plants can be used as factories to
    manufacture vaccines and other pharmaceuticals for both animals and
    humans. This research focuses on development of tobacco as a crop with
    this beneficial use. This research should continue.
        National Germplasm Resources Program.--Sources of germplasm for all
    agricultural crops are maintained either as seed or live plant material
    at several locations across the country. Much of this germplasm is the
    result of plant exploration around the world. This group maintains the
    computer database that indexes all crop germplasm in our repositories
    with critical information as to where it was obtained, the specific
    scientific identification, and information on useful traits for plant
    breeding. We strongly support continued funding for this mission-
    critical program.
        Bovine Genetics.--This research focuses on bovine functional
    genomics, especially for dairy cattle. Scientists are identifying
    specific genes for quality traits such as easier calving, higher milk
    production, and resistance to mastitis. We recommend this funding.
        Minor-use Pesticides (IR-4).--``Minor-use'' pesticides are those
    that are used on crops such as fruits and vegetables that are not one
    of the ``big four'' crops like corn, wheat, and soybeans, and cotton.
    Because markets are much smaller than for major crops, chemical
    manufacturers have little incentive to obtain all the safety data
    needed to obtain EPA registration for pesticides used on minor crops.
    Nevertheless, producers of minor crops find certain agrochemicals to be
    essential. This project produces the data needed for EPA registration
    of minor-use pesticides. We recommend continued funding.
        National Nutrition Monitoring System.--Scientists at BARC have the
    unique responsibility of carrying out the national surveys of food
    consumption by individuals. This is now done in collaboration with
    HHS's health surveys. BARC scientists also maintain the National
    Nutrient Database, which includes information on 126 nutrients in
    thousands of foods. This work supports the school lunch program, WIC,
    Food Stamps, senior nutrition programs, food labeling, dietetic
    practices, and even the EPA. We urge continuation of this funding.
        Coffee and Cocoa.--Producers of chocolate candy are the single
    largest users of fluid milk, sugar, peanuts, and almonds in the United
    States. United States specialty coffee shop chains also are one of the
    major markets for fluid milk. Events that limit the availability of
    cocoa or coffee can have significant impacts on major U.S. commodity
    markets. Candy producers need a stable supply of cocoa, but
    smallholders in developing countries produce most cocoa. Several
    devastating diseases and insects threaten cocoa. This research is aimed
    at developing environmentally friendly ways to control pests and
    diseases. Coffee is threatened by insects very similar to those that
    infest cacao; thus, work on the two crops benefits from being co-
    located We recommend continuation of this funding.
        Johne's Disease.--Johne's disease is a contagious bacterial disease
    of the intestinal tract of ruminants. It occurs most often in dairy
    cattle, causing weight loss and diarrhea. Nearly one-fourth of dairy
    herds are infected. Producers lose $54 million annually from reduced
    milk production. The disease is spread in manure. This research focuses
    on disease control. We recommend continuation of this funding
        Food Safety--Listeria, E.Coli, and Salmonella.--Food-borne illness
    annually costs $3 billion in health-care costs, and annually costs the
    economy up to $40 billion in lost productivity. This research focuses
    on diagnostics for food-borne pathogens, and on ways to control
    pathogens in fruits and vegetables. We recommend continuation of this
    funding
        Weed Management Research.--All farmers must contend with weeds. For
    organic farmers, weeds are the single biggest challenge to crop
    production. This research, in collaboration with the Rodale Institute
    and Pennsylvania State University, focuses on developing systems for
    controlling weeds in organic production systems. Organic crop
    production was valued at $400 million per year in the 2002 Census of
    Agriculture. These research funds will improve non-chemical weed
    control.
        Last, we turn to our recommendation for construction funds to
    complete Phase III of the Beltsville Human Nutrition Research Center
    and construction of a combined facility for swine and other research.
        The most urgent facilities need at BARC is funds to modernize
    building 307--the final phase of the three-phase process to modernize
    the Beltsville Human Nutrition Research Center. Phases I and II funded
    two new human nutrition research buildings. Both buildings have been
    completed, are fully functional, and are contributing to the research
    mission of the Beltsville Human Nutrition Research Center. Congress
    provided design money for modernizing building 307, or Phase III,
    several years ago. We recommend full funding to complete Phase III
    construction. An estimated $27 million is needed.
        Also, we recommend $10 million for the construction of a combined
    research facility for swine, certain related human nutrition research,
    immunology (human and animal), and parasitological research.
        Mr. Chairman, that concludes our statement. We again thank you for
    the opportunity to present our testimony and for your generous support.
                                     ______

        Prepared Statement of the Great Lakes Indian Fish and Wildlife
                                   Commission

        Summary of fiscal year 2006 Testimony:
      --Re-affirm Support for Local Decision Making.--The success of the
            U.S. Department of Agriculture's Environmental Quality
            Incentives Program (EQIP) and Wildlife Habitat Incentives
            Program (WHIP) is due in large part to a program structure that
            stresses local decision making.
      --Restore $275,000 for the Wisconsin Tribal Conservation Advisory
            Council.--GLIFWC requests Congress restore $275,000 in funding
            for the Wisconsin Tribal Conservation Advisory Council (WTCAC)
            eliminated by the Administration in fiscal year 2006.
      --Maintain EQIP and WHIP Program Funding.--GLIFWC supports the
            Administration's budget request for $1 billion for the
            Environmental Quality Incentives Program (EQIP) and $60 million
            for Wildlife Habitat Incentives Program (WHIP).
        Disclosure of USDA Grants Contracted.--GLIFWC is an intertribal
    organization which, under the direction of its member tribes,
    implements Federal court orders governing tribal harvests of off-
    reservation natural resources and the formation of conservation
    partnerships to protect and enhance natural resources within the 1836,
    1837, and 1842 ceded territories (See map). Under the USDA's
    Environmental Quality Incentives Program, GLIFWC contracted $10,000 in
    fiscal year 1998 and an additional $40,000 in fiscal year 1999. In
    addition, GLIFWC also contracted EQIP Education Grants funded by USDA
    and the University of Wisconsin Extension Service for $29,940 in fiscal
    year 1998 and $20,000 in fiscal year 2001. Under the WHIP program,
    GLIFWC contracted $2,400 in fiscal year 2003.
        Mr. Chairman, Members of the Committee, my name is James H.
    Schlender. I am the Executive Administrator of the Great Lakes Indian
    Fish and Wildlife Commission (GLIFWC). Our eleven member tribal
    governments thank you for considering our testimony regarding programs
    funded by USDA's Natural Resource Conservation Service. GLIFWC's
    testimony stresses three major objectives: (1) Re-affirm support for
    local decision making in EQIP and WHIP programs; (2) restore funding
    for the Wisconsin Tribal Conservation Advisory Council (WTCAC) at
    $275,000 annually; and (3) provide funding for the Environmental
    Quality Incentives Program (EQIP) at $1 billion and Habitat Incentives
    Program at $60 million and support intertribal and tribal efforts to
    participate in conservation partnerships.
        Background.--GLIFWC is comprised of eleven (11) sovereign tribal
    governments located throughout Minnesota, Wisconsin, and Michigan. The
    Commission's purpose is to protect and enhance treaty-guaranteed rights
    to hunt, fish, and gather on inland territories ceded under the
    Chippewa treaties of 1836, 1837, and 1842; to protect and enhance
    treaty guaranteed fishing on the Great Lakes; and to provide
    cooperative management and protection of these resources. The
    Commission participates in a wide range of cooperative management
    activities with local, State, Federal, and foreign governments. Some of
    these activities arise from court orders, while others are developed in
    general government-to-government dealings between tribes and other
    governments.
        Re-affirm Support for Local Decision Making.--GLIFWC's success in
    contracting and implementing USDA's EQIP and WHIP programs is due in
    large part to a program structure that stresses local decision making.
    This local decision making process includes: (1) identification of
    local conservation problems; (2) establishment of local priorities,
    ranking systems, and cost share rates; and (3) selection of options
    that best solve problems based upon local environmental conditions.
    GLIFWC requests Congress reaffirm its support for community based
    decision making structures within USDA's EQIP and WHIP programs and
    closely scrutinize any proposals to impose top down ranking systems
    that may attempt to mandate a one size fits all philosophy.
        Local Decision Making Within the EQIP Program Results in Successful
    Efforts to Control Purple Loosestrife in the Bad River and Chequamegon
    Bay Watersheds and Built Conservation Partnerships.--Purple loosestrife
    (Lythrum salicaria L.) is an exotic perennial plant first recorded in
    Wisconsin in 1940. As purple loosestrife spread throughout wetland
    ecosystems, it reduced carrying capacities for muskrats, water birds,
    and mink and degraded the quality of migratory waterfowl production
    sites.
        GLIFWC completed a 5 year EQIP project to control purple
    loosestrife in the Bad River and Chequamegon Bay watersheds at a cost
    of $50,000. GLIFWC incorporated a watershed strategy utilizing funding
    from the BIA's Noxious Weed Program to control loosestrife on public
    lands and NRCS EQIP funding to control loosestrife on private lands
    with land owner consent. GLIFWC also incorporated an integrated pest
    control strategy utilizing both chemical controls and biological
    controls--beetles that feed exclusively on purple loosestrife. The
    beetles were grown and released on a number of sites as a long term
    control measure. Field assessments indicate that the beetles have
    established themselves at the release sites. The use of GPS and GIS
    technology enabled GLIFWC to document the effectiveness of this
    invasive species control strategy.
        GLIFWC has also completed two EQIP education grants in support of
    its purple loosestrife and leafy spurge control efforts. Under these
    grants, the GLIFWC: (1) prepared and published educational materials to
    prevent the spread of purple loosestrife, leafy spurge, and other
    invasive plants; (2) established an Internet GIS web site (see http://
    www.glifwc-maps.org/) to assist landowners, State and Federal agencies,
    non-profit conservation organizations, and tribes in developing and
    implementing invasive plant control strategies within watersheds; and
    (3) promoted cooperative control projects through technical assistance
    and educational materials/presentations.
        These EQIP education grants provided an informational foundation
    for the Northwood's Weed Initiative (NWI). The Northwood's Weed
    Initiative (NWI), a partnership including: NRCS, GLIFWC, The Nature
    Conservancy, USFWS, USFS, WDNR, UWEX and private citizens, is working
    to slow the spread of leafy spurge and other invasive plants that have
    been identified in the area. This invasive plant poses a threat to
    tribal gathering rights as it will disrupt plant communities, out-
    competing native plants used by tribal members. The first efforts to
    control and contain leafy spurge were begun on private lands within the
    ceded territory. An educational poster on leafy spurge is in the
    development phase and will be distributed State-wide.
        Wisconsin Tribal Conservation Advisory Council.--The Wisconsin
    Tribal Conservation Advisory Council (WTCAC) was established for the
    purposes of: (1) identifying tribal conservation issues, (2) advising
    the USDA Natural Resources Conservation Service on more effective ways
    to deliver USDA programs, and (3) assisting the Indian Nations of
    Wisconsin in accessing USDA resources. This Tribal Conservation
    Advisory Council was organized in March 2001 and is the first such
    council formed in the country as authorized under the 1995 Farm Bill.
    GLIFWC requests Congress restore funding for WTCAC at $275,000 in
    fiscal year 2006 thereby ensuring tribal communities in Wisconsin have
    the technical resources needed to address their conservation needs.
        WTCAC and EQIP Funding set-asides Increase Program Participation by
    Indian Nations in Wisconsin.--One of the responsibilities of the WTCAC,
    at the request of the NRCS State Conservationist, is to review and
    recommend funding for conservation proposals from the 11 federally
    recognized tribes in Wisconsin. The WTCAC was allocated $88,000 in WHIP
    funding and $1,100,000 in EQIP funding over fiscal year 2003 and fiscal
    year 2004. These resources enabled tribes to conserve and protect
    natural resources through a number of innovative projects including:
      --Supporting Aquaculture Development.--Tribes have taken a leadership
            role in integrating aquaculture projects into USDA's EQIP
            program including: (1) Red Cliff's construction of a wetland
            filtration system as part of Red Cliff's Coaster Brook Trout
            Restoration Project at $75,000--which was critical in
            supporting the selection of Red Cliff for the State's new $3
            million aquaculture training facility; (2) St Croix's
            installing an aquaculture effluent treatment system at its St.
            Croix Waters Aquaculture facility at $43,162 and establishment
            of nutrient management of fish waste at $3,780; and (3) St.
            Croix's contracting of $19,918 to improve water volume and
            quality for the rearing of food fish and walleye and perch
            fingerlings for restocking efforts on local lakes. NRCS is now
            working with Lac Courte Oreilles (LCO) on plans to expand the
            fish rearing ponds currently operated by the tribal hatchery.
      --Decommissioning Abandoned Wells.--Tribes have used EQIP funding to
            decommission abandoned wells that are a potential source of
            groundwater contamination including: (1) $5,500 contracted at
            Bad River; (2) $10,026 contracted at Lac du Flambeau; and (3)
            $45,800 at the Sokaogan Chippewa community.
      --Controlling Shoreline Erosion on Wisconsin Lakes.--EQIP funding has
            been used to provide shoreline stabilization to prevent
            sedimentation, adverse effects on water quality, and aquatic
            habitat damage including projects on: (1) the Chippewa Flowage
            and Skull Island and Middle Three Sisters Islands by LCO at
            $225,000; (2) Flambeau and Pokegama Lakes by Lac du Flambeau at
            $40,000; and (3) Big Sand Lake in Burnett County by St. Croix.
      --Wetland and Wild Rice Restoration Project.--The Sokaogon Chippewa
            Community contracted $47,780 (EQIP) to restore the natural flow
            that was altered in Swamp Creek, remove nuisance plant species,
            reseed wild rice, remove debris from stream banks and beds, and
            control erosion on a tribal access road. St. Croix contracted
            $18,750 (EQIP) to install a grade stabilization structure to
            control soil erosion upstream of the confluence of the Yellow
            River and the St. Croix River impaired wild rice beds
            downstream on the St. Croix River. LCO used $7,050 (WHIP) to
            re-establish wild rice and install 100 wood duck houses and 12
            loon nesting platforms. These efforts build upon the tribe's
            earlier success in establishing wild rice beds on Billy Boy
            Flowage.
      --Stream Corridor Restoration Projects.--Tribes used WHIP funding for
            habitat projects to support efforts to establish spawning
            migrations of coaster brook trout from Lake Superior through
            stream habitat work in Graveyard Creek (i.e. by Bad River at
            $15,732) and in Red Cliff Red Cliff Creek (i.e. by Red Cliff at
            $10,000).
      --Forest Restoration and Protection Project.--The Bad River
            contracted $74,988 to plant white pine, red pine, balsam fir,
            and white spruce on tribal lands that, left untreated, would
            regenerate to aspen and increase erosion problems. Lac du
            Flambeau contracted $54,160 in EQIP funding for Forest site
            preparation on 200 Acres, Forest stand improvement on 250
            acres, a prescribed burn on 223 acres, and three water control
            structures.
        Michigan Tribes Begin to Access NRCS EQIP and WHIP Funding.--The
    success of Wisconsin tribes experienced in contracting EQIP and WHIP
    funding from NRCS is now starting in Michigan. In 2004, the Lac View
    Desert Band contracted EQIP funding to construct two walleye rearing
    ponds at $100,000. The tribe also received an additional $11,000 in
    WHIP funding to drill wells for the ponds.
        The Keweenaw Bay Indian Community contracted $50,000 in WHIP
    funding to construct a walleye rearing pond. Keweenaw Bay also
    contracted $20,000 to establish buffer zones to protect coastal
    wetlands from sedimentation from stamp sands in Keweenaw Bay.
    Unfortunately, the Bay Mills Indian Community has yet to receive
    funding through USDA's EQIP or WHIP programs and is looking to rectify
    this problem in the future.
        Once projects move into the implementation phase at Keweenaw Bay
    and Lac View Desert, GLIFWC will also begin assessing and documenting
    program delivery to its member tribes in Minnesota.
        Tribal Contributions to NRCS.--It is import for Congress to
    acknowledge that while NRCS has provided tribes with fiscal resources,
    tribes have also provided assistance to NRCS in meeting their
    conservation mission. GLIFWC, and its professional biologists, have
    taken a leadership role in assisting NRCS in preparing: (1) Wisconsin
    Biology Technical Note 4 Wild Rice Seeding Guidelines; (2) Wisconsin
    Biology Technical Note 5 Invasive Plant Species Control; and (3)
    Wisconsin Practice Standard 595 Pest Management -Aquatic Invasive
    species.
        GLIFWC takes the following lessons from these circumstances:
      --Funding for tribal projects in Wisconsin is directly attributable
            to active outreach toward and integration of tribes into the
            budgeting process of NRCS State offices.
      --A tribal advisory council consisting of the tribal representatives
            and funded by NRCS can effectively link tribes with the NRCS
            and result in more funding directed toward tribal projects.
      --Set asides for tribal projects from NRCS State office funding
            allocations is critical to ensure that tribes are able to
            access their fair share of those allocations.
      --The lessons learned in Wisconsin are useful in supporting efforts
            to bring NRCS programs to Michigan tribes given those tribes
            are provided an adequate commitment of staff time and fiscal
            resources.
        A partnership integrating WTCAC, the State NRCS offices, and
    financial resources from USDA's EQIP and WHIP programs enables Tribal
    Nations to directly address conservation needs that are prioritized
    within their respective communities. We ask Congress to support
    increased funding for these programs and re-affirm support for local
    decision making processes.
                                     ______

         Prepared Statement of The Humane Society of the United States

        As the largest animal protection organization in the country, we
    appreciate the opportunity to provide testimony to the Agriculture,
    Rural Development, and Related Agencies Subcommittee on fiscal year
    2006 funding items of great importance to The Humane Society of the
    United States (HSUS) and its more than 8.9 million supporters
    nationwide.

                       ENFORCEMENT OF ANIMAL WELFARE LAWS

        We are writing to thank you for your outstanding support during the
    past few years for improved enforcement by the U.S. Department of
    Agriculture of key animal welfare laws, and to urge you to sustain this
    effort in fiscal year 2006. Your leadership is making a great
    difference in helping to protect the welfare of millions of animals
    across the country, including those at commercial breeding facilities,
    laboratories, zoos, circuses, airlines, and slaughterhouses. As you
    know, better enforcement will also benefit people by helping to
    prevent: (1) orchestrated dogfights and cockfights that often involve
    illegal gambling, drug trafficking, and human violence, and can
    contribute to the spread of costly illnesses such as Exotic Newcastle
    Disease and bird flu; (2) injuries to slaughterhouse workers from
    animals that are still conscious; (3) the sale of unhealthy pets by
    commercial breeders, commonly referred to as ``puppy mills''; (4)
    laboratory conditions that may impair the scientific integrity of
    animal based research; (5) risks of disease transmission from, and
    dangerous encounters with, wild animals in or during public exhibition;
    and (6) injuries and deaths of pets on commercial airline flights due
    to mishandling and exposure to adverse environmental conditions. For
    fiscal year 2006, we want to ensure that the important work made
    possible by the fiscal year 2005 budget is continued and that resources
    will be used in the most effective ways possible to carry out these key
    laws. Specific areas of concern are as follows:

    APHIS/Animal Welfare Act (AWA) Enforcement
        We commend the Committee for responding in recent years to the
    urgent need for increased funding for the Animal Care division to
    improve its inspections of approximately 10,000 sites, including
    commercial breeding facilities, laboratories, zoos, circuses, and
    airlines, to ensure compliance with AWA standards. Thanks to the
    Committee's strong support, Animal Care now has 106 inspectors,
    compared to 66 at the end of the 1990s. We are pleased that the
    President's budget recommends an increase of $770,000 (plus allowance
    for pay costs) and 8 staff years to further improve AWA enforcement in
    fiscal year 2006. This responds to Animal Care's significantly
    increased workload as a result of rapid growth in the number of new
    licensees and registrants, particularly in the Western Region
    (including the Midwest), which has had an average increase of 109
    facilities per month so far in fiscal year 2005. Since fiscal year
    2001, the number of licensed/registered facilities in the Western
    Region has nearly doubled. The Eastern Region is also experiencing
    growth of an average 57 new facilities per month. We commend Animal
    Care for reaching out to those that had previously failed to become
    licensed or registered as the law requires, and bringing them under the
    agency's oversight for AWA compliance. To ensure that the program's
    effectiveness is not compromised, we urge you to provide $17,478,056,
    as recommended by the President, for Animal Welfare.

               APHIS/INVESTIGATIVE AND ENFORCEMENT SERVICES (IES)

        The President's budget recommends an increase of $928,000 and 8
    staff years for IES in fiscal year 2006, and 3 of the 8 new field
    investigator positions are to focus primarily on enforcement of Federal
    animal welfare laws. This reflects the fact that the volume of animal
    welfare cases is rising significantly as new facilities become licensed
    and registered. IES has already initiated more cases in the first half
    of fiscal year 2005 than it had pursued in each of the previous two
    years. In fiscal year 2004, IES conducted 288 formal investigations of
    alleged AWA violations, with 97 cases resolved through either civil
    penalty stipulations or Administrative Law Judge decisions and a total
    of $548,614 assessed in fines. To ensure the vital support for Animal
    Care's front-line work, we urge you to provide the $10,398,944
    requested by the President for IES.

    Office of Inspector General/Animal Fighting Enforcement
        We very much appreciate the inclusion of $800,000 in fiscal year
    2005 for USDA's Office of Inspector General to focus on animal fighting
    cases. Congress enacted provisions in 2002 (as part of the Farm Bill)
    that were overwhelmingly supported in both chambers to close loopholes
    in the AWA regarding cockfighting and dogfighting. Since 1976, when
    Congress first prohibited most interstate and foreign commerce of
    animals for fighting, USDA has pursued only a handful of dogfighting
    and cockfighting cases, despite rampant activity across the country.
    USDA continues to receive frequent tips from informants and requests to
    assist with State and local prosecutions, and is beginning to take
    seriously its responsibility to enforce the portion of the AWA dealing
    with animal fighting ventures. Dogfighting and cockfighting are
    barbaric practices in which animals are drugged to heighten their
    aggression and forced to keep fighting even after they've suffered
    grievous injuries. Animal fighting is almost always associated with
    illegal gambling, and also often involves illegal drug trafficking and
    violence toward people. Dogs bred and trained to fight endanger public
    safety, and some dogfighters steal pets to use as bait for training
    their dogs. Cockfighting has been linked with the outbreak of Exotic
    Newcastle Disease in 2002-2003 that cost taxpayers more than $200
    million for containment and compensation, and with the death of at
    least four children in Asia in 2004 who were exposed through
    cockfighting activity to avian influenza. Given the potential for
    further costly disease transmission, as well as the animal cruelty
    involved, we believe it would be a sound investment for the Federal
    Government to increase its efforts to combat illegal cockfighting and
    dogfighting activity, working closely with State and local law
    enforcement personnel to complement their efforts. We therefore
    respectfully request that $1.2 million be designated for the OIG to
    focus on animal fighting cases in fiscal year 2006.

    Food Safety and Inspection Service/Humane Methods of Slaughter Act
            (HMSA) Enforcement
        We are grateful that Congress provided $5 million in fiscal year
    2005 to sustain no fewer than 63 full time equivalent (FTE) positions
    dedicated solely to inspections and enforcement related to the Humane
    Methods of Slaughter Act, plus $3 million to incorporate a new tracking
    system to ensure compliance with this law. The HMSA is designed to
    ensure that livestock are treated humanely and rendered unconscious
    before they are killed. The effort to target funds for this purpose was
    undertaken following reports of lax enforcement of the HMSA and animals
    being skinned, dismembered, and scalded while still alive and
    conscious. We urge that $5 million be provided again in fiscal year
    2006 exclusively for HMSA enforcement, and that language again be
    included to ensure effective implementation. Specifically, we hope such
    language will encourage USDA to: (1) use a portion of these funds to
    designate additional FSIS personnel to work with the existing District
    Veterinary Medical Specialists solely on HMSA enforcement; (2) employ
    objective scoring techniques (such as ratings on physical plant layout)
    to determine when regulatory actions are needed and to document
    improvements or failures in animal handling and slaughter operations;
    and (3) use location and technologies to enhance enforcement through
    unannounced observations.

    APHIS/Horse Protection Act Enforcement
        Congress enacted the Horse Protection Act in 1970 to end the
    obvious cruelty of physically soring the feet and legs of show horses.
    In an effort to exaggerate the high-stepping gate of Tennessee Walking
    Horses, unscrupulous trainers use a variety of methods to inflict pain
    on sensitive areas of the feet and legs for the effect of the leg-jerk
    reaction that is popular among many in the show-horse industry. This
    cruel practice continues unabated by the well-intentioned but seriously
    understaffed APHIS inspection program. We appreciate the Committee's
    help providing modest increases to bring this program close to its
    authorized annual funding ceiling of $500,000. We hope you will provide
    the $497,024 requested by the President for fiscal year 2006. We also
    urge the Committee to oppose any effort to restrict USDA from enforcing
    this law to the maximum extent possible.

                             DOWNED ANIMALS AND BSE

        We are pleased that the Bush Administration proposed an interim
    final rule in January 2004 to ban the use of downed cattle for human
    food, in the wake of the discovery of a cow in Washington State that
    was infected with Bovine Spongiform Encephalopathy (BSE). We hope the
    Committee will codify this ban--and extend it to other livestock
    besides cattle--with language barring the Food Safety and Inspection
    Service from spending funds to certify meat from downed livestock for
    human consumption. While the science to date has only indicated BSE
    transmission from infected cows to people, downer pigs and other downer
    livestock are at a significantly higher risk of transmitting other
    serious and sometimes fatal illnesses through their meat, such as
        E. coli and Salmonella, and these animals, too, suffer when they
    are moved en route to slaughter.
        As the Committee is aware, some segments of industry and members of
    Congress have recommended weakening the USDA downed cattle ban. They
    claim that animals unable to walk because of injury pose no health
    risk. But injury and illness are often interrelated--an animal may
    stumble and break a leg because of disease that causes weakness and
    disorientation. And USDA inspectors would have a difficult--if not
    impossible--task trying to sort out the reason an animal became non-
    ambulatory. Major consumer groups including Consumers Union and
    Consumer Federation of America, support groups for victims of food-
    borne illness, such as Safe Tables Our Priority (S.T.O.P.),
    Creutzfeldt-Jakob Disease Foundation, and CJD Voice, food safety
    organizations, companies such as McDonald's and Wendy's, and many
    others have all pointed out how reckless such a system would be. Of the
    BSE cases identified in Canada and the United States to date, 3 out of
    the 5 were identified as downed due to injuries, including the
    Washington State case (``calving injuries'') and the most recent case
    in Canada (``slipped on ice/broken leg'').
        From an animal welfare perspective, a comprehensive ban is needed
    because a downer cow with a broken leg would suffer just as much as a
    sick one if it's dragged through a slaughterplant--maybe even more. A
    ban on use of all downers for human food also provides an incentive for
    producers to treat animals humanely and prevent livestock from going
    down. Even before the administrative ban, USDA estimated that only 0.4
    percent to 0.8 percent of all cows processed annually were non-
    ambulatory. The downer ban encourages producers and transporters to
    engage in responsible husbandry and handling practices, so that this
    percentage may be reduced to levels approaching zero. As Temple
    Grandin--advisor to the American Meat Institute and others in the meat
    industry--long ago explained in Meat & Poultry Magazine, ``Ninety
    percent of all downers are preventable.'' Cases that involve broken
    bones and other injuries are perhaps the most preventable with improved
    husbandry.
        Most Americans had no idea that animals too sick or injured to walk
    were being dragged with chains or hauled by bulldozer en route to the
    food supply. When that fact came to light in December 2003, USDA's
    prompt decision to ban all downer cattle from human food calmed
    consumers. Unraveling the ban would undermine consumer confidence. More
    than 99 percent of the 22,000+ public comments USDA received on its
    downer ban called on the agency to maintain and strengthen its downer
    ban, with most asking that other species be included. For a report on
    the comments received by the agency, please go to: http://
    files.hsus.org/web-files/PDF/2004_06_16_rept_USDA_comments.pdf.
        USDA testimony before various congressional committees has made
    clear that the agency need not rely on slaughterplant testing for BSE
    surveillance purposes. The USDA can conduct a viable surveillance
    program at rendering plants and farms to track the potential
    progression of BSE in this country.
        In addition to the downer issue, we urge the Committee to provide
    adequate funding to ensure meaningful enforcement by the Food and Drug
    Administration of its ``feed ban,'' designed to prevent BSE-
    contaminated animal products from being fed to other animals. We are
    concerned that inspectors visit facilities infrequently and rely on
    self-reporting by those facilities and paperwork checking rather than
    first-hand evaluation of feed content and dedicated production lines.
    We are also concerned that FDA relies a great deal on State agencies to
    conduct this oversight, when most states face severe budget constraints
    that may compromise their ability to handle this job. Preventing the
    spread of BSE is vital to the Nation as a whole, for public health, the
    agricultural industry, and animal welfare. Vigorous enforcement of the
    feed ban is an essential component of this effort. We hope adequate
    Federal funds will be provided in fiscal year 2006 to meet this
    challenge.
        Again, we appreciate the opportunity to share our views and
    priorities for the Agriculture, Rural Development, and Related Agencies
    Appropriation Act of fiscal year 2006. We appreciate the Committee's
    past support, and hope you will be able to accommodate these modest
    requests to address some very pressing problems affecting millions of
    animals in the United States. Thank you for your consideration.
                                     ______

            Prepared Statement of the InterTribal Bison Cooperative

                          INTRODUCTION AND BACKGROUND

        My name is Ervin Carlson, a member of the Blackfeet Tribe of
    Montana and President of the InterTribal Bison Cooperative. Please
    accept my sincere appreciation for this opportunity to submit testimony
    to the honorable members of the Department of Agriculture
    Appropriations Sub-Committee. The InterTribal Bison Cooperative (ITBC)
    is a Native American non-profit organization, headquartered in Rapid
    City, South Dakota, comprised of 54 federally recognized Indian Tribes
    located across 18 States across the United States.
        Buffalo thrived in abundance on the plains of the United States for
    many centuries before they were hunted to near extinction in the 1800s.
    During this period of history, buffalo were critical to survival of the
    American Indian. Buffalo provided food, shelter, clothing and essential
    tools for Indian people and insured continuance of their subsistence
    way of life. Naturally, Indian people developed a strong spiritual and
    cultural respect for buffalo that has not diminished with the passage
    of time.
        Numerous tribes that were committed to preserving the sacred
    relationship between Indian people and buffalo established the ITBC as
    an effort to restore buffalo to Indian lands. ITBC focused upon raising
    buffalo on Indian Reservation lands that did not sustain other economic
    or agricultural projects. Significant portions of Indian Reservations
    consist of poor quality lands for farming or raising livestock.
    However, these wholly unproductive Reservation lands were and still are
    suitable for buffalo. ITBC began actively restoring buffalo to Indian
    lands after receiving funding in 1992 as an initiative of the first
    Bush Administration.
        Upon the successful restoration of buffalo to Indian lands,
    opportunities arose for Tribes to utilize buffalo for tribal economic
    development efforts. ITBC is now focused on efforts to assure that
    tribal buffalo projects are economically sustainable. Federal
    appropriations have allowed ITBC to successfully restore buffalo to
    tribal lands, thereby preserving the sacred relationship between Indian
    people and buffalo. The respect that Indian tribes have maintained for
    buffalo has fostered a serious commitment by ITBC member Tribes for
    successful buffalo herd development. The successful promotion of
    buffalo as a healthy food source will allow Tribes to utilize a
    culturally relevant resource as a means to achieve self-sufficiency.

                   AMENDED LANGUAGE REQUEST TO FOOD STAMP ACT

        The InterTribal Bison Cooperative respectfully requests an
    amendment to the Department of Agriculture's Food Stamp Act to amend
    the earmark language for purchase of buffalo from ``Native American
    producers or producer owned cooperatives'' to ``exclusively from Native
    American producers'' in the current fiscal year 2005 amount of
    $4,000,000. Specifically, ITBC requests the following amended language
    to the Food Stamp Act:
        For necessary expenses to carry out the Food Stamp Act (7 U.S.C.
    2011 et seq.), $26,289,692,000, of which $2,000,000,000 shall be placed
    in reserve for use only in such amounts and at such times as may become
    necessary to carry out program operations: Provided, That of the funds
    made available under this heading and not already appropriated to the
    Food Distribution Program on Indian Reservations (FDPIR) established
    under section 4(b) of the Food Stamp Act of 1977 (7 U.S.C. 2013 (b)),
    $4,000,000 shall be used to purchase bison and/or bison meat for the
    FDPIR and other food programs on the reservations, exclusively from
    Native American bison producers. Provided further, That all bison
    purchased shall be labeled according to origin and the quality of cuts
    in each package: Provided further, That the Secretary of Agriculture
    shall make every effort to enter into a service contract, with an
    American Indian Tribe, Tribal company, or an Inter Tribal organization,
    for the processing of the buffalo meat to be acquired from Native
    American producers: Provided further, That funds provided herein shall
    be expended in accordance with section 16 of the Food Stamp Act:
    Provided further, That this appropriation shall be subject to any work
    registration or workfare requirements as may be required by law:
    Provided further, That funds made available for Employment and Training
    under this heading shall remain available until expended, as authorized
    by section 16(h)(1) of the Food Stamp Act.

                      PREVENTATIVE HEALTH CARE INITIATIVE

        The Native American Indian population currently suffers from the
    highest rates of Type 2 diabetes. The Indian population further suffers
    from high rates of cardio vascular disease and various other diet
    related diseases. Studies indicate that Type 2 diabetes commonly
    emerges when a population undergoes radical diet changes. Native
    Americans have been forced to abandon traditional diets rich in wild
    game, buffalo and plants and now have diets similar in composition to
    average American diets. More studies are needed on the traditional
    diets of Native Americans versus their modern day diets in relation to
    diabetes rates. However, based upon the current data available, it is
    safe to assume that disease rates of Native Americans are directly
    impacted by a genetic inability to effectively metabolize modern foods.
        More specifically, it is well accepted that the changing diet of
    Indians is a major factor in the diabetes epidemic in Indian Country.
        Approximately 65-70 percent of Indians living on Indian
    Reservations receive foods provided by the USDA Food Distribution
    Program on Indian Reservations (FDPIR) or from the USDA Food Stamp
    Program. The FDPIR food package is composed of approximately 58 percent
    carbohydrates, 14 percent proteins and 28 percent fats. Indians
    utilizing Food Stamps generally select a grain-based diet and poorer
    quality protein sources such as high fat meats based upon economic
    reasons and the unavailability of higher quality protein sources.
        Buffalo meat is low in fat and cholesterol and is compatible to the
    genetics of Indian people. ITBC has implemented a health care
    initiative to provide easy access to buffalo meat on Indian
    reservations and to educate more Indian familes on the health benefits
    of range fed buffalo meat in their daily diets. ITBC believes that
    incorporating buffalo meat into the FDPIR program will provide a
    significant positive impact on the diets of Indian people living on
    Indian Reservations. Further, ITBC is exploring methods to make small
    quantities of buffalo meat available for purchase in Reservation
    grocery stores. A healthy diet for Indian people that results in a
    lower incidence of diabetes will reduce Indian Reservation health care
    costs and result in a savings for taxpayers.

                           ITBC GOALS AND INITIATIVES

        In addition to developing a preventative health care initiative,
    ITBC intends to continue with its buffalo restoration efforts and its
    Tribal buffalo marketing initiative.
        In 1991, seven Indian Tribes had small buffalo herds, with a
    combined total of 1,500 animals. The herds were not utilized for
    economic development but were often maintained as wildlife only. During
    ITBC's relatively short 10-year tenure, it has been highly successful
    at developing existing buffalo herds and restoring buffalo to Indian
    lands that had no buffalo prior to 1991. Today, through the efforts of
    ITBC, over 35 Indian Tribes are engaged in raising over 15,000 buffalo.
    All buffalo operations are owned and managed by Tribes and many
    programs are close to achieving self-sufficiency. ITBC's technical
    assistance is critical to ensure that the current Tribal buffalo
    projects are sustainable within their Tribal communities. Further,
    ITBC's assistance is critical to those Tribes seeking to start a
    buffalo restoration effort.
        Through the efforts of ITBC, a new industry has developed on Indian
    reservations utilizing a culturally relevant resource. Hundreds of new
    jobs directly and indirectly revolving around the buffalo industry have
    been created. Tribal economies have benefited from the thousands of
    dollars generated and circulated on Indian Reservations.
        ITBC has also been strategizing to overcome marketing obstacles for
    Tribally raised buffalo. ITBC is presently assisting the Assiniboine
    and Gros Ventre Tribes of the Fort Belknap Reservation, who recently
    purchased a U.S.D.A. approved meat-processing plant, with a
    coordination scheme to accommodate the processing of range-fed Tribally
    raised buffalo.

                                   CONCLUSION

        ITBC has proven highly successful since its establishment to
    restore buffalo to Indian Reservation lands to revive and protect the
    sacred relationship between buffalo and Indian Tribes. Further, ITBC
    has successfully promoted the utilization of a culturally significant
    resource for viable economic development.
        ITBC has assisted Tribes with the creation of new jobs, on-the-job
    training and job growth in the buffalo industry resulting in the
    generation of new money for Tribal economies. ITBC is actively
    developing strategies for sustainable Tribal buffalo operations.
    Finally, and most critically for Tribal populations, ITBC is developing
    a preventive health care initiative to utilize buffalo meat as a
    healthy addition to Tribal family diets.
        ITBC strongly urges you to support its request for the amended
    language as specifically provided above to the Food Stamp Act to allow
    $4,000,000 for the purchase of Native American produced buffalo and
    buffalo meat, to improve the diet of Tribal members.
                                     ______

       Prepared Statement of the Metropolitan Water District of Southern
                                   California

        Dear Chairman Bennett: The Metropolitan Water District of Southern
    California is writing in support of the following Federal program under
    the Department of Agriculture's (USDA) budget that we believe is
    deserving of your Subcommittee's support during the fiscal year 2006
    budget process:
        Farm Security and Rural Investment Programs, Environmental Quality
    Incentives Program Activity.
        $25 million earmark for the Colorado River Basin Salinity Control
    Forum.
        The Metropolitan Water District of Southern California is a public
    agency that was created in 1928 to meet the supplemental water demands
    of people living in what is now portions of a six-county region of
    southern California. Today, the region served by Metropolitan includes
    approximately 18 million people living on the coastal plain between
    Ventura and the international boundary with Mexico. It is an area
    larger than the State of Connecticut and, if it were a separate Nation,
    would rank in the top ten economies of the world.
        Included in our region are more than 300 cities and unincorporated
    areas in the counties of Los Angeles, Orange, San Diego, Riverside, San
    Bernardino, and Ventura. We provide over half of the water used in our
    5,200-square-mile service area. Metropolitan's water supplies come from
    the Colorado River via our Colorado River Aqueduct and from northern
    California via the State Water Project's California Aqueduct.
        MWD continues to support USDA implementation of conservation
    programs. MWD firmly believes that interagency coordination, along with
    incentive-based cooperative conservation programs that facilitate the
    development of partnerships, are critical to addressing natural
    resources concerns, such as water quality degradation, wetlands loss
    and wildlife habitat destruction. It is vital that the Congress
    provides USDA with the funding necessary to successfully carry out its
    commitment to natural resources conservation.

                ENVIRONMENTAL QUALITY INCENTIVES PROGRAM (EQIP)

        An important program for MWD has been the Colorado River Basin
    Salinity Control Program, which is funded by USDA at the Federal level
    through the Environmental Quality Incentives Program Activity of the
    Farm Security and Rural Investment Programs. MWD recommends that EQIP
    be funded at $1 billion in fiscal year 2006, as proposed in the
    President' Budget, with the Colorado River Basin Salinity Control
    Program funded at $25 million, 2.5 percent of the EQIP Activity, as
    requested by the seven Colorado River Basin States through the Colorado
    River Basin Salinity Control Forum.
        EQIP provides assistance to farmers and ranchers who face threats
    to soil, water, air and related natural resources on their land. EQIP
    provides assistance in a manner that will promote agricultural
    production and environmental quality as compatible goals. The Natural
    Resources Conservation Service (NRCS) offers the program throughout the
    Nation.
        In Public Law 104-127, Congress amended the Colorado River Basin
    Salinity Control Act to direct the Secretary of Agriculture to carry
    out salinity control measures in the Colorado River Basin as part of
    EQIP. Beginning with the first full year of EQIP funding in 1997
    through 2001, USDA's participation in the Colorado River Basin Salinity
    Control Program (Salinity Control Program) had significantly diminished
    as compared to the 1996 level of funding for salinity control. After
    requests had been made by the Colorado River Basin Salinity Control
    Forum (Forum), the interstate organization responsible for coordinating
    the seven Basin States' salinity control efforts, and others, as well
    as directives from the Congress, USDA concluded that the Salinity
    Control Program warranted a multi-state river basin approach. The Forum
    is composed of Gubernatorial appointees from Arizona, California,
    Colorado, Nevada, New Mexico, Utah, and Wyoming. Clearly, Colorado
    River Basin salinity control has benefits that are not merely local or
    intrastate in nature, but continue downstream. EQIP is also important
    because it provides funding for agricultural source water protection
    measures that protect and improve the quality of Metropolitan's
    imported supplies from Northern California.
        The Colorado River is a large component of Southern California's
    regional water supply and its relatively high salinity causes
    significant economic impacts on water customers in MWD's service area,
    as well as throughout the Lower Colorado River Basin (Lower Basin). MWD
    and the Bureau of Reclamation (Reclamation) completed a Salinity
    Management Study for Southern California in June 1999. The study
    concluded that the high salinity from the Colorado River continues to
    cause significant impacts to residential, industrial and agricultural
    water users. Furthermore, high salinity adversely affects the region's
    progressive water recycling programs, diminishes the effectiveness of
    water conservation efforts, and is contributing to an adverse salt
    buildup through infiltration into Southern California's irreplaceable
    groundwater basins.
        In April 1999, MWD's Board of Directors authorized implementation
    of a comprehensive Action Plan to carry out MWD's policy for management
    of salinity. The Action Plan focuses on reducing salinity
    concentrations in Southern California's water supplies through
    collaborative actions with pertinent agencies, recognizing that an
    effective solution requires a regional commitment. MWD, the Association
    of Groundwater Agencies, the Southern California Association of
    Publicly Owned Treatment Works, and the WateReuse Association of
    California have formed a Salinity Management Coalition.
        During 2003, the Coalition was expanded to include major water and
    wastewater agencies throughout Southern California. Presently, the
    eleven members of the coalition are working to implement a Strategic
    Action Plan that focuses primarily on local contributions to southern
    California's high-salinity problem. In addition, Southern California
    leaders are working with urban areas in Arizona, Nevada, New Mexico,
    and Texas to find solutions to mutual problems with salinity in
    imported supplies, such as from the Colorado River, and other sources.
    In December 2004, these agencies participated in the National Salinity
    Summit to examine and coordinate salinity management activities.
        Concentrations of salts in the Colorado River cause hundreds of
    millions of dollars in damage in the United States according to the
    U.S. Department of the Interior. Implementation of salinity control
    measures:
      --increases the yield of salt sensitive crops and decreases water use
            for leaching in the agricultural sector,
      --increases the useful life of galvanized water pipe systems, water
            heaters, faucets, garbage disposals, clothes washers, and
            dishwashers, and decreases the use of bottled water and water
            softeners in the household sector,
      --decreases the use of water for cooling, and the cost of water
            softening, and increases equipment service life in the
            commercial sector,
      --decreases the use of water and the cost of water treatment, and
            decreases sewer fees in the industrial sector,
      --increases the life of treatment facilities and pipelines in the
            utility sector,
      --eases the meeting of wastewater discharge requirements to comply
            with National Pollutant Discharge Elimination System permit
            terms and conditions, and decreases desalination and brine
            disposal costs due to less accumulation of salts in groundwater
            basins, and
      --decreases use of imported water for leaching and the cost of
            desalination and brine disposal for recycled water.
        Absent the Salinity Control Program, impacts would progressively
    increase with continued agricultural and urban development upstream of
    California's points of Colorado River diversion. Droughts will cause
    spikes in salinity levels in the future that will be highly disruptive
    to Southern California water management and commerce. The Salinity
    Control Program has proven to be a very cost-effective approach to help
    mitigate the impacts of higher salinity. Adequate Federal funding of
    the Salinity Control Program is essential.
        The Forum issued its 2002 Review, Water Quality Standards for
    Salinity, Colorado River System (2002 Review) in October 2002. The 2002
    Review found that 1 million tons of salinity needs to be controlled
    annually to maintain 2001 salinity levels through 2020. From 1994
    through 2003, funding for USDA's salinity control program did not equal
    the Forum-identified funding need for the portion of the program the
    Federal Government is responsible to implement. While NRCS has
    designated Colorado River Basin salinity control as an area of special
    interest, appointed a multi-state coordinator, and allocated about
    $19.8 million in fiscal year 2004 and $19.5 million in 2005, it is
    essential that implementation of salinity control efforts through EQIP
    continue to be accelerated to reduce economic impacts. The Basin States
    and farmers continue to stand ready to pay their share of the
    implementation costs of EQIP.
        The Forum has determined that allocation of 2.5 percent of the EQIP
    funds, that is $25 million, is needed in fiscal year 2006 for on-farm
    measures to control Colorado River Basin salinity. Funding at this
    level will permit the state adopted and U.S. Environmental Protection
    Agency approved water quality standards to be met. With 2.5 percent of
    the EQIP cost share financial assistance, monitoring, and technical
    assistance funding requested by the President allocated to the Salinity
    Control Program, an additional $21 million in States and local cost
    sharing could be committed.
        MWD urges the Subcommittee to support funding of $1 billion for
    EQIP, the amount requested in the President's Budget, and advise USDA
    that $25 million, or 2.5 percent of the EQIP funds, be designated for
    the Salinity Control Program. Thank you for your consideration of our
    testimony. USDA's conservation programs are critical for achieving
    Colorado River Basin salinity control objectives, as well as broader
    source water quality protection objectives in the Colorado River Basin
    and California.
        We look forward to working with you and your Subcommittee. Please
    contact Brad Hiltscher, MWD's Executive Legislative Representative in
    Washington, D.C. at (202) 296-3551, if we can answer any questions or
    provide additional information.
                                     ______

        Prepared Statement of the National Association of State Energy
                               Officials (NASEO)

        Mr. Chairman and members of the Subcommittee, I am Sara Ward of
    Ohio and Chair of the National Association of State Energy Officials
    (NASEO). NASEO is submitting this testimony in strong support of
    funding at a $23 million level in fiscal year 2006 for Section 9006 of
    the Farm Bill, dealing with energy efficiency and renewable energy for
    farms and rural small businesses. NASEO also supports a $14 million
    funding level for the critical biomass R&D program contained in Section
    9010 of the Farm Bill.
        The state energy offices implement energy programs in the states in
    all sectors of the economy and develop energy policies for the States.
    The energy offices work closely with agricultural extension offices
    throughout the United States to support a vibrant rural economy, while
    increasing productivity and the use of energy efficiency and renewable
    energy. NASEO has long-supported expanded use of ethanol, as part of a
    balanced national energy policy.
        The ``Renewable Energy System and Energy Efficiency Improvements
    Program'' (Section 9006 of the Farm Security and Rural Investment Act
    of 2002 ) (Public Law 107-171) received $23 million in fiscal year
    2005. Despite the budget request of $10 million, we strongly support
    level funding of $23 million in fiscal year 2006. This program has
    already proven to be effective in promoting the use of renewable energy
    and energy efficiency in the agriculture sector. The State energy
    offices are working to promote this program. A number of States have
    matching efforts to expand the reach of this critical activity. The
    first 2 years of the program distributed $44 million in Federal grants
    across 29 States, for $300 million in energy projects. These projects
    have included wind power, energy efficiency, anaerobic digesters,
    biofuels processing and many other projects.
        The State energy offices stand ready to respond to any questions or
    concerns from the Subcommittee regarding these two important programs.
                                     ______

       Prepared Statement of the National Association of State Foresters

                                  INTRODUCTION

        The National Association of State Foresters (NASF) is pleased to
    provide testimony on the U.S. Department of Agriculture (USDA) budget
    request for fiscal year 2006. Representing the directors of State
    forestry agencies from the States, eight U.S. territories, and the
    District of Columbia, our testimony centers around those Deputy Areas
    most relevant to the long-term forestry operations of our constituents:
    Research, Education, and Economics, as well as Natural Resources and
    Environment. We believe the USDA budget for fiscal year 2006, which
    offers opportunities for advancing the sustainable management of
    private forestland nationwide, can be strengthened through our
    recommendations.

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

    Cooperative Forestry Research (McIntire--Stennis) Program
        The Cooperative Forestry Research (McIntire-Stennis) Program (CFRP)
    is a crucial part of the foundation that underlies academic and
    scientific understanding of the Nation's forest resources. McIntire-
    Stennis CFRP was originally enacted in order to provide universities
    with formula funds for the explicit purpose of research in the field of
    forestry, which was not provided for in similar research funding
    programs. For more than forty years, CFRP has equipped both private and
    land-grant universities with the ability to produce invaluable research
    concerning forest productivity, environmental quality, and technologies
    for monitoring and extending the natural resource base. The program
    also provides rigorous scientific education and training for university
    students--the future managers of the Nation's forest resources.
        Universities, supported by base funds from the Federal Government,
    have consistently supplied science-based forestry research not
    affiliated with any particular resource use or interest group. Without
    sufficient base funds from the Federal Government, society will lose
    the benefits wrought by this productive partnership.
        The Administration's proposed fiscal year 2006 budget reduces
    funding for the McIntire-Stennis CFRP to half the amount enacted in
    fiscal year 2005 and aims to eliminate the program formula funds in
    fiscal year 2007. The Administration plans to redirect the funds toward
    both the National Research Initiative competitive grants program (NRI),
    and the new State Agriculture Experiment Station competitive grants
    program (SAES), which would provide competitive grants exclusively to
    land-grant universities. Although the amount of funding would
    theoretically be maintained, the proposed change in the funding
    mechanism would drastically alter the way that the funds would
    ultimately be used. Neither NRI nor SAES support specific forestry
    research efforts. The combination of the proposed elimination of
    McIntire-Stennis formula funds and the shift in the program funding
    mechanism would significantly reduce universities' ability to conduct
    necessary and credible forest resource research.
        NASF recommends full restoration of program funding for the
    Cooperative Forestry Research (McIntire-Stennis) Program to $22
    million. The proposed increase in CFRP will help the program continue
    to serve as the cornerstone of forest research in universities,
    providing knowledge central to sound management from environmental,
    economic, and social perspectives.

    The National Research Initiative Competitive Grants Program (NRI)
        The National Research Initiative Competitive Grants Program (NRI)
    advances fundamental scientific agriculture and forestry research. Two
    of the notable NRI forestry funding opportunities available in 2005 are
    Bio-based Products research grants and Bioenergy Production research
    grants. While grants such as these have great potential to contribute
    to forest resource research efforts, only 6 percent of NRI funds were
    allocated to forestry research proposals in fiscal year 2005.
        NASF supports continued funding for NRI, and encourages the
    President to increasing the proportion of spending dedicated to forest
    research to a minimum of 10 percent. However, NASF strongly disapproves
    of the proposed shift of McIntire-Stennis funds to NRI, thereby ending
    the forestry focus of the McIntire-Stennis program.

    The Renewable Resources Extension Act (RREA)
        The Renewable Resources Extension Act (RREA) facilitates the
    transfer of needed forestry information and technology to non-
    industrial private forest landowners, as well as loggers and small
    businesses involved with forest resource management.
        Extension's education programs aid private landowners in
    understanding their management options and responsibilities, and
    encourage them to take advantage of other technical and financial
    assistance programs.
        NASF recommends funding RREA at $4.1 million for fiscal year 2006,
    in order to sustain the program's ability to address critical extension
    and stewardship needs.

                        FARM BILL CONSERVATION PROGRAMS

        NASF believes that the conservation programs enacted in the 2002
    Farm Bill are integral for protecting water quality, erodible soils,
    wildlife habitat, and wetlands associated with forestry and
    agricultural operations. Trees and forestry practices are often the
    best solution to many of the conservation challenges arising from these
    operations.
        NASF recommends funding for the Environmental Quality Incentives
    Program (EQIP) at the fiscal year 2005 level of $1.2 billion, full
    funding for the Conservation Reserve Program (CRP), $85 million for the
    Wildlife Habitat Improvement Program (WHIP), targeting of 321,000 acres
    under the Wetlands Reserve Program (WRP), and $150 million for the
    Emergency Watershed Program (EWP). NASF supports the President's fiscal
    year 2006 funding proposal of $274 million for the Conservation
    Security Program (CSP). NASF recommends that the Subcommittee strongly
    encourage the Secretary of Agriculture and the NRCS to expand the
    emphasis on forestry practices in EQIP and the other Farm Bill
    Conservation Programs.
        These programs are important for landowners with both forest and
    agricultural land, as well as farmers who wish to plant trees for
    conservation purposes on their agricultural lands. Nearly two-thirds of
    the land in the United States is forested, the majority of which is
    privately owned. Investing Federal funds in conservation practices on
    private forest lands produces benefits for all, not simply landowners.
    These benefits include abundant clean water for drinking and
    recreation, improved wildlife habitat, open space, viable rural
    economies, and many other tangible and intangible public benefits.

                                   CONCLUSION

        The National Association of State Foresters seeks the
    Subcommittee's support for a USDA fiscal year 2006 budget that will
    make sure the public's conservation needs--provided by private
    landowners--are met. Thank you for the opportunity to provide our
    testimony.
                                     ______

    Prepared Statement of the National Association of University Fisheries
                             and Wildlife Programs

        The National Association of University Fisheries and Wildlife
    Programs (NAUFWP) appreciates the opportunity to submit testimony
    concerning the fiscal year 2006 budget for the U.S. Department of
    Agriculture. NAUFWP represents approximately 55 university programs and
    their 440 faculty members, scientists, and extension specialists and
    over 9,200 undergraduates and graduate students working to enhance the
    science and management of fisheries and wildlife resources. NAUFWP is
    interested in strengthening fisheries and wildlife education, research,
    extension, and international programs to benefit wildlife and their
    habitats on agricultural and other private land.
        The following table summarizes NAUFWP's recommendations for the
    Cooperative State Research, Education and Extension Service, and the
    Natural Resources Conservation Service:

                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Fiscal Year
                                                                     -----------------------------------------------
                           USDA Agency/Program                                             2006
                                                                       2005 Enacted     President's     2006 NAUFWP
                                                                                          Budget        Recommended
    ----------------------------------------------------------------------------------------------------------------
    Coop. St. Research, Education, and Extension Serv:
        Hatch Act...................................................         178,707          89,354         178,707
        McIntire-Stennis Cooperative Forestry.......................          22,205          11,103          22,205
        Renewable Resources Extension Act...........................           4,060           4,093           4,093
        Natural Resources Inventory.................................         179,552         250,000         250,000
    Natural Resources Conservation Service:
        Forest Land Enhancement Program.............................  ..............  ..............          80,000
        Conservation Program Monitoring and Evaluation..............  ..............  ..............           1,000
    ----------------------------------------------------------------------------------------------------------------

          COOPERATIVE STATE RESEARCH, EDUCATION AND EXTENSION SERVICE

        Hatch Act.--The President's fiscal year 2006 request for the Hatch
    Act proposes a 50 percent cut in these formula funds, moving toward
    elimination of the program in fiscal year 2007. The Hatch Act supports
    agricultural research in the States at college and university
    agriculture experiment stations. Experiment stations conduct research
    that relates directly to maintaining an effective agricultural industry
    and promoting a sound and prosperous agricultural and rural life. These
    stations are essential for their work on food and fiber systems,
    environmental impacts of these systems, and resource issues relating to
    the future of agriculture in each State and the Nation. Eliminating the
    base funding for critical agricultural research at land grant
    universities would be detrimental to rural economies and our natural
    resources. NAUFWP strongly encourages Congress to continue Hatch Act
    formula funding into the future, starting with restoring the program to
    $178.707 million in fiscal year 2006.
        McIntire-Stennis.--The proposed budget for McIntire-Stennis
    Cooperative Forestry in fiscal year 2006 reflects a 50 percent cut, and
    reports elimination of the program in fiscal year 2007. These funds are
    essential to the future of resource management on non-industrial
    private forestlands, where forest products are produced while natural
    resources, including fish and wildlife, are conserved. As societal
    pressures for forest products grow, private forestlands will
    increasingly be needed to supplement wood products and supplies. In the
    absence of long-term, on-going research on forest health, productivity
    and environmental quality provided through McIntire-Stennis, the Nation
    could easily become unable to meet future forest product needs.
    Replacing formula funds with competitive grants will erode essential
    base funding for land grant universities, and leave long-term, stable
    forest research to chance. NAUFWP strongly encourages you to continue
    the McIntire-Stennis Cooperative Forestry program into the future by
    restoring the program to $22.505 million in fiscal year 2006.
        Renewable Resources Extension Act.--We strongly recommend that the
    Renewable Resources Extension Act be funded at the President's
    requested level, $4.093 million, in fiscal year 2006. RREA funds are
    apportioned to State Extension Services at land grant universities for
    educational programs aimed at private forests and rangelands. The
    programs help landowners improve management, marketing, and utilization
    of their renewable natural resources. RREA funds are leveraged up to
    15-fold (average of 7:1) by State, local, and private funds to develop
    and disseminate information. Given that 58 percent of the Nation's
    forestland is privately owned, it is imperative that we provide these
    landowners with the knowledge to sustainably manage their forests for
    timber, watershed protection, recreation, biodiversity, and carbon
    sequestration. Extension programs supported by RREA also offer
    information about technical assistance, tax incentives, and cost-
    sharing opportunities.
        Recently, CSREES and the Land Grant universities developed a 5-year
    strategic plan to guide RREA implementation from 2005-2009. The
    resulting goals and actions, if appropriately funded, will allow State
    Extension Services to help private forest landowners develop more
    profitable resource-based enterprises while improving environmental
    quality, controlling invasive species, decreasing land conversion and
    fragmentation, and increasing economic and quality of life benefits to
    landowners and communities.
        RREA is a ``win-win'' program with measurable results. For example,
    the University of Florida used RREA funds to develop a Wildland Fire
    Education program, leveraging $200,000 and reaching 2,000 workshop
    participants. Cornell University used RREA funds to work with the New
    York Department of Environmental Conservation's Division of Lands and
    Forests to implement the State's Stewardship Plan for the 2002 Farm
    Bill. As a result of Cornell's RREA-supported involvement,
    approximately $323,000 has been leveraged to provide educational
    assistance to over 57,000 forest owners who control more than 3 million
    acres of forestland in the State. Texas A&M used RREA funds to initiate
    creation of an electronic version of the Texas Friendly quality
    customer service training, to help Texas landowners expand
    opportunities for nature tourism income sources.
        National Research Initiative.--National Research Initiative
    Competitive Grants (NRI) are open to academic institutions, federal
    agencies, and private organizations to fund research on improving
    agricultural practices, particularly production systems that are
    sustainable both environmentally and economically, and to develop
    methods for protecting natural resources and wildlife. Innovative grant
    programs such as NRI help broaden approaches to land management, such
    as integrating timber and wildlife management on private lands. We
    support the President's $250 million request for National Research
    Initiative Competitive Grants in fiscal year 2006, provided the
    increase does not come at the expense of important formula fund
    programs such as Hatch Act and McIntire-Stennis.

                     NATURAL RESOURCES CONSERVATION SERVICE

        Forest Land Enhancement Program (FLEP).--The Forest Land
    Enhancement Program was created through the 2002 Farm Bill to provide
    financial, technical, educational, and related assistance to promote
    sustainable management of non-industrial private forestlands. The
    program is authorized at $100 million for 2002-2007, to be distributed
    through State forestry agencies. We request restoration of the full
    funding balance, $80 million, for this program in fiscal year 2006.
        Conservation Program Monitoring and Evaluation.--Monitoring Farm
    Bill conservation programs and evaluating their progress toward
    achieving Congressionally established objectives for soil, water, and
    wildlife will enable NRCS to ensure successful program implementation
    and effective use of appropriated funds. Thus far, limited monitoring
    efforts have been focused on soil and water achievements, and NRCS and
    the Agricultural Research Service have done all the evaluations. It is
    important for assessments to address wildlife and habitat impacts, and
    for external parties to be included to ensure credibility and
    objectivity. We recommend Congress direct $1 million toward a pilot
    watershed-based monitoring and evaluation project that can serve as a
    model for conservation program assessment nationwide.
        Thank you for considering the views of university fisheries and
    wildlife scientists. We look forward to working with you and your staff
    to ensure adequate funding for wildlife conservation.
                                     ______

    Prepared Statement of the National Coalition for Food and Agricultural
                                    Research

        Dear Mr. Chairman, Ranking Member Kohl and Members of the
    Subcommittee: On behalf of the National Coalition for Food and
    Agricultural Research (National C-FAR), we are pleased to submit
    comments in strong support of enhanced public investment in food and
    agricultural research, extension and education as a critical component
    of Federal appropriations for fiscal year 2006 and beyond.

                       SUMMARY POSITION--FISCAL YEAR 2006

        With the noteworthy exceptions indicated below, National C-FAR
    urges the Subcommittee and Committee to fund the Administration's
    request for food and agricultural research, extension and education for
    fiscal year 2006, including much-needed increases in the National
    Research Initiative. National C-FAR urges that funding for research,
    extension and education be augmented to the maximum extent practicable,
    as an important next step toward building the funding levels needed to
    meet identified food and agricultural research, extension and education
    needs. In particular--
      --National C-FAR urges the Subcommittee and Committee to maintain
            funding for the Hatch, McIntyre-Stennis and Animal Health and
            Disease formula fund programs at or above fiscal year 2005
            enacted levels. National C-FAR is concerned that the
            Administration's proposal to (1) cut Hatch and McIntyre-Stennis
            funds by 50 percent in fiscal year 2006 and 100 percent in
            fiscal year 2007; and (2) eliminate funding for Animal Health
            and Disease in fiscal year 2006 would destabilize the important
            research and extension activities currently funded by those
            programs, as well as the ability to maintain critical
            scientific expertise at the affected institutions.
      --National C-FAR appreciates the Administration's proposed increases
            for selected programs in the Agricultural Research Service. We
            also are concerned about the apparent arbitrary reduction in a
            number of programs without a careful review of their merits,
            including adequate stakeholder input.
        As a coalition representing stakeholders in both the research,
    extension and education community and the customers' who need and
    depend upon their outcomes, National C-FAR urges expanded public
    participation in the Administration's research priority setting and
    funding decision process and stands ready to work with the
    Administration and other interested stakeholders in such a process.

                           INTEREST OF NATIONAL C-FAR

        National C-FAR serves as a forum and a unified voice in support of
    sustaining and increasing public investment at the national level in
    food and agricultural research, extension and education. National C-FAR
    is a nonprofit, nonpartisan, consensus-based and customer-led coalition
    established in 2001 that brings food, agriculture, nutrition,
    conservation and natural resource organizations together with the food
    and agriculture research and extension community. More information
    about National C-FAR is available at http://www.ncfar.org.\1\
    ---------------------------------------------------------------------------
        \1\ National C-FAR seeks to increase awareness about the value of,
    and support for, food and agricultural research, extension and
    education. For example, National C-FAR is hosting an educational series
    of ``Break & a Briefing'' seminars on the hill, featuring leading-edge
    researchers on timely topics to help demonstrate the value of public
    investment in food and agricultural research, extension and education.
    National C-FAR also circulates a series of one-page Success Profiles
    highlighting some of the many benefits already provided by public
    investment in food and agricultural research, extension and education.
    Each provides a contact for more information. Profiles released to date
    are titled ``Anthrax,'' ``Mastitis,'' ``Penicillin,'' ``Witchweed,''
    ``Making Wine,'' ``Fighting Allergens,'' and ``Harnessing
    Phytochemicals.'' The Profiles can be accessed at http://www.ncfar.org/
    research.asp.
    ---------------------------------------------------------------------------
       DEMONSTRATED VALUE OF PUBLIC INVESTMENTS IN FOOD AND AGRICULTURAL
                       RESEARCH, EXTENSION AND EDUCATION

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

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

        National C-FAR appreciates the longstanding support this
    Subcommittee and the full Committee have demonstrated through funding
    food and agricultural research, extension and education programs over
    the years that have helped the U.S. food and agricultural sector be a
    world leader and provide unprecedented value to U.S. citizens, and
    indeed the world community.
        National C-FAR is deeply concerned that shortfalls in funding in
    recent years for food and agricultural research, extension and
    education jeopardize the food and agricultural community's continued
    ability to maintain its leadership role and more importantly respond to
    the multiple, demanding challenges that lie ahead. Federal funding for
    food and agricultural research, extension and education has been flat
    for over 20 years, while support for other Federal research has
    increased substantially. Public funding of agricultural research in the
    rest of the world during the same time period has reportedly increased
    at a nearly 30 percent faster pace.
        Reduced public investment in food and agricultural research,
    extension and education may well be a result of a view that the U.S.
    food and agricultural system is an unprecedented success story.
    However, societal demands and expectations placed upon the food and
    agricultural system are ever-changing and growing. Simply stated,
    Federal funding has not kept pace with identified priority needs.
        National C-FAR is deeply concerned that continuing shortfalls in
    funding for food and agricultural research, extension and education
    will jeopardize the food and agricultural community's ability to
    maintain its leadership role. National C-FAR believes it is imperative
    to lay the groundwork now to respond to the many challenges and
    promising opportunities ahead through Federal policies and programs
    needed to promote the long-term health and vitality of food and
    agriculture for the benefit of both consumers and producers. Stronger
    public investment in food and agricultural research, extension and
    education is essential in producing research outcomes needed to help
    bring about beneficial and timely solutions to multiple challenges.
    Multiple examples, such as those listed below, serve to illustrate
    current and future needs that arguably merit enhanced public investment
    in research, extension and education so that the food and agricultural
    system can respond to these challenges on a sustainable basis:
      --Strengthened bio-security is a pressing national priority. There is
            a compelling need for improved bio-security and bio-safety
            tools and policies to protect against bio-terrorism and dreaded
            problems such as foot-and-mouth and ``mad cow'' diseases and
            other exotic plant and animal pests, and protection of range
            lands from invasive species.
      --Food-linked health costs are high. Some $100 billion of annual U.S.
            health costs are linked to poor diets, obesity, food borne
            pathogens and allergens. Opportunities exist to create
            healthier diets through fortification and enrichment.
      --Research, extension and education are key to providing to solutions
            to environmental issues related to global warming, limited
            water resources, enhanced wildlife habitat, and competing
            demands for land and other agricultural resources.
      --There was considerable debate during the last farm bill
            reauthorization about how expanded food and agricultural
            research, extension and education could enhance farm income and
            rural revitalization by improving competitiveness and value-
            added opportunities.
      --Energy costs are escalating, dependence on petroleum imports is
            growing and concerns about greenhouse gases are rising.
            Research, extension and education can enhance agriculture's
            ability to provide renewable sources of energy and cleaner
            burning fuels, sequester carbon, and provide other
            environmental benefits to help address these challenges, and
            indeed generate value-added income for producers and stimulate
            rural economic development.
      --Population and income growth are expanding the world demand for
            food and natural fiber and improved diets. World food demand is
            projected to double in 25 years. Most of this growth will occur
            in the developing nations where yields are low, land is scarce,
            and diets are inadequate. Without a vigorous response, demand
            will only be met at a great global ecological cost.
      --Regardless of one's views about biotechnology and genetic
            resources, an effective publicly funded research role is needed
            for oversight and to ensure public benefits.
        Translational education (extension) is a vital link connecting the
    research community to those who need and use research outcomes. The
    extension and education system helps translate basic and applied
    research outcomes into practical applications and more timely
    implementation by the end user community, thus helping to realize
    positive economic, environmental, health, food security and a host of
    other benefits in the food and agricultural system, and for the
    consuming public. The USDA's National Research Initiative has made
    significant progress in recognizing this role, through funding of
    projects that undertake an integrated research and extension approach.
    National C-FAR strongly supports funding for extension and education.
        Finally, there is a continuing need to build the human capacity of
    expertise to do quality food and agricultural research, extension and
    education, and to implement research outcomes in the field and
    laboratory. The food and agricultural sciences face a daunting task of
    supplying the Nation with the next generation of scientists and
    educators. If these basic human resource needs are not met, then the
    Nation will face a shortage of trained and qualified individuals.
        Public investment in food and agricultural research, extension and
    education today and in the future must simultaneously satisfy needs for
    food quality and quantity, resource preservation, producer
    profitability and social acceptability. National C-FAR supports the
    public funding needed to help assure that these needs are met.
        A Sense of the Congress resolution endorsed by National C-FAR to
    double funding in food and agricultural research, extension and
    education within 5 years was incorporated into the 2002 Farm Bill that
    was enacted into law. However, the major commitment to expanded
    research has not yet materialized. At the 3-year mark, the larger
    reality is the threat of funding cuts.

             NATIONAL C-FAR FISCAL YEAR 2006 FUNDING RECOMMENDATION

        With the noteworthy exceptions indicated below, National C-FAR
    urges the Subcommittee and Committee to fund the Administration's
    request for food and agricultural research, extension and education for
    fiscal year 2006, including much-needed increases in the National
    Research Initiative. National C-FAR urges that funding for research,
    extension and education be augmented to the maximum extent practicable,
    as an important next step toward building the funding levels needed to
    meet identified food and agricultural research, extension and education
    needs. In particular--
      --National C-FAR urges the Subcommittee and Committee to maintain
            funding for the Hatch, McIntyre-Stennis and Animal Health and
            Disease formula fund programs at or above fiscal year 2005
            enacted levels. National C-FAR is concerned that the
            Administration's proposal to (1) cut Hatch and McIntyre-Stennis
            funds by 50 percent in fiscal year 2006 and 100 percent in
            fiscal year 2007; and (2) eliminate funding for Animal Health
            and Disease in fiscal year 2006 would destabilize the important
            research and extension activities currently funded by those
            programs, as well as the ability to maintain critical
            scientific expertise at the affected institutions.
      --National C-FAR appreciates the Administration's proposed increases
            for selected programs in the Agricultural Research Service
            (ARS). We also are concerned about the apparent arbitrary
            reduction in a number of programs without a careful review of
            their merits, including adequate stakeholder input.
        As a coalition representing stakeholders in both the research,
    extension and education community and the customers' who need and
    depend upon their outcomes, National C-FAR urges expanded public
    participation in the Administration's research, extension and education
    priority setting and funding decision process and stands ready to work
    with the Administration and other interested stakeholders in such a
    process.

                                   CONCLUSION

        In conclusion, National C-FAR respectfully submits that--
      --The food and agricultural sector merits Federal attention and
            support;
      --Food and agricultural research, extension and education have paid
            huge dividends in the past, not only to farmers, but to the
            entire Nation and the world;
      --There is an appropriate and recognized role for Federal support of
            research, extension and education;
      --Recent funding levels for food and agricultural research, extension
            and education have been inadequate to meet pressing needs;
      --Federal investments in food and agricultural research, extension
            and education should be enhanced in fiscal year 2006 and
            beyond;
      --Funding in fiscal year 2006 for USDA, CSREES formula fund programs
            (Hatch, McIntyre-Stennis and Animal Health and Disease) should
            be continued, at or above fiscal year 2005 enacted levels; and
      --The Administration should provide for expanded public
            participation, including during review of programs being
            considered for possible reforms or cuts.
        National C-FAR appreciates the opportunity to share its views and
    stands ready to work with the Chair and members of the Subcommittee and
    Committee in support of these important funding objectives.
                                     ______

    Prepared Statement of the National Commodity Supplemental Food Program
                                  Association

        Mr. Chairman and subcommittee members, I am Vicki Metheny,
    President of the National Commodity Supplemental Food Program (CSFP)
    Association. Our Association of State and local CSFP operators works
    diligently with the Department of Agriculture Food, Nutrition and
    Consumer Service to provide a quality nutritionally balanced commodity
    food package to low income persons aged sixty and older, low income
    mothers, infants, and children. The program first authorized in 1969,
    serves approximately 536,000 individuals every month in 32 States, 2
    Tribal Organizations and the District of Columbia.
      --The fiscal year 2006 President's Budget has proposed only $106.9
            million for the CSFP and projects total resources of $112.8
            million, with which the Department expects to support only
            491,056 caseload slots, an 8 percent cut. 45,140 low-income
            seniors will no longer receive much needed nutritious commodity
            foods.
      --The $110.8 million in total resources made available in fiscal year
            2005 will only maintain the fiscal year 2004 caseload of
            536,196.
      --Within the last 7 years, CSFP has added 15 new States to the
            Program serving 113,792 new program participants, the vast
            majority being low-income seniors.
      --The program is not yet in all 50 States due to budget constraints,
            not due to a lack of interest or need for the services. In
            fiscal year 2003 when additional resources were made available
            to the program, 84,160 additional participants were served,
            mostly seniors.
        The CSFP's 36 years of service stands as testimony to the power of
    partnerships between community and faith-based organizations, private
    industry and government agencies. The CSFP offers a unique combination
    of advantages unparalleled by any other food assistance program:
      --The CSFP specifically targets our nation's most nutritionally
            vulnerable populations: the young children and the low-income
            seniors.
      --The CSFP provides a monthly selection of food packages specifically
            tailored to the nutritional needs of the population we serve.
            Each eligible participant in the program is guaranteed [by law]
            a certain level of nutritional assistance every month in
            addition to life-changing nutrition education.
      --The CSFP purchases foods at wholesale prices, which directly
            supports the farming community. The average food package cost
            for fiscal year 2005 is $13.95 with an approximate retail cost
            of $50.00.
      --The CSFP involves the entire community in the problems of hunger
            and poverty. Thousands of volunteers as well as private
            companies donate money, equipment, and most importantly time to
            deliver food to homebound seniors. These volunteers not only
            bring food but companionship and other assistance to seniors
            who might have no other source of support. Forty-five percent
            of State and local operating resources are provided at the
            grassroots level along with an additional $7.7 million in items
            donated to participants.
        The Agriculture Appropriations Sub-Committee has consistently been
    supportive of CSFP, acknowledging it as a cost-effective way of
    providing nutritious supplemental food packages to low income eligible
    seniors, mothers and children.
        This year, your support is needed urgently to provide adequate
    resources in order to retain the existing services for the 536,196
    mothers, children and seniors currently receiving benefits. If the
    philosophy behind the President's budget is to do no harm to nutrition
    programs then $123.2 million must be provided to maintain fiscal year
    2005 level services.
        The sub-committee itself has provided funding increases over the
    years to allow States with approved plans to join the growing list of
    CSFP participants. Five States currently have approved State plans.
    $3.5 million would be needed to fund this vital program expansion into
    Arkansas, Delaware, New Jersey, Oklahoma and Utah.
        While it is true that budget times are difficult just now for the
    government, as they are for many individuals, States already operating
    CSFP have indicated that there is additional need for the program and
    have asked for 110,000 slots for expansion of the program. The total
    cost of this expansion would be $21.3 million, however, any expansion
    would be worthwhile and very much appreciated.

                     FISCAL YEAR 2006 PROGRAM SERVICE NEEDS
                              [Dollars in millions]
    ------------------------------------------------------------------------
                   Description                 Funding Need    Service Level
    ------------------------------------------------------------------------
    Maintain current service level..........          $123.2         536,196
    Maintain service level and expansion of            126.7         556,696
     service into five new States (20,500
     people)................................
    Maintain service level and expansion of            142.5         648,164
     service in current States (111,968
     people)................................
    Maintain current service level,                    148.0         674,664
     expansion of service and five new
     States.................................
    ------------------------------------------------------------------------

                              CURRENT SERVICE LEVEL
    ------------------------------------------------------------------------
                     Participant description                      Number
    ------------------------------------------------------------------------
    Senior Citizens 60 and over who are at or below 130              472,000
     percent of poverty.....................................
    Women, Infants, Children (exclusive of WIC recipients)..          64,000
                                                             ---------------
          TOTAL.............................................         536,000
    ------------------------------------------------------------------------

        Current Service Area:

                FISCAL YEAR 2006 PROPOSED FUNDING IS NOT ADEQUATE
    ------------------------------------------------------------------------
                                                 Proposed     Senior Service
                   Description                    Funding        Decrease
    ------------------------------------------------------------------------
    $106.9 million appropriation + $6.02      $112.8 million        (45,140)
     million USDA commodity drawdown........
    ------------------------------------------------------------------------

        The Commodity Supplemental Food Program (CSFP) provides Federal
    commodity food, nutrition education, and related services to senior
    citizens 60 and over (who are at or below 130 percent of Federal
    Poverty Income Guidelines). CSFP also serves pregnant and post-partum
    women, children under 6 (at or below 185 percent of Federal Poverty
    Income Guidelines), each month who are at nutritional risk due to low
    income. Eighty-eight percent of our monthly participants are seniors.
    The remaining 12 percent of those served by CSFP are moms and kids, of
    whom 9 out of 10 are no longer eligible for the WIC program. CSFP is
    currently distributed in 32 States, two (2) Indian Tribal
    Organizations, and the District of Columbia with the help of three (3)
    million volunteer hours, hundreds of non-profits and faith based
    organizations.

                                                                      CSFP ADMINISTRATIVE EXPENSE/VALUE SURVEY FOR FISCAL YEAR 2004
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Volunteer
                                Programs                                USDA Grants     Total Costs      Not USDA      In-Kind Cost        Value        Total Value    Percent USDA     Extra Goods
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    NH..............................................................        $423,110        $467,684         $44,574          $1,702        $151,812        $621,198              68          $2,750
    NY..............................................................       1,846,888       3,816,178       1,969,290           9,000          51,570       3,876,748              48          20,425
    VT, FB..........................................................         291,667         291,667               0               0          30,942         322,609              90         268,200
    DC..............................................................         447,667       2,030,320       1,582,653         507,873          12,256       2,550,449              18               0
    PA..............................................................         795,923       1,084,276         288,353         236,891         828,304       2,149,471              37         128,281
    KY..............................................................         943,750         963,000          19,250  ..............          55,008       1,018,008              93               0
    MS..............................................................         399,922         426,672          26,750          36,000         422,049         884,721              45               0
    NC..............................................................          82,803         122,803          40,000               0           3,438         126,241              66          20,000
    SC..............................................................         210,562         251,350          40,788         119,386         251,489         622,225              34          21,061
    TN..............................................................         840,733         840,733               0               0               0         840,733             100               0
    IL..............................................................         946,303         946,303               0               0         336,099       1,282,402              74               0
    IN..............................................................         263,202         298,202          35,000          17,520         358,095         673,817              39               0
    MI..............................................................       4,465,551       4,751,458         285,907         264,202       3,258,607       8,274,267              54      13,012,108
    MN..............................................................         811,741         150,848         339,107           7,508         691,494       1,849,850              44         240,000
    RL, MN..........................................................           7,422          14,844           7,422               0               0          14,844              50               0
    OH..............................................................         713,646         808,976          95,330          57,906         237,910       1,104,792              65         158,754
    WI..............................................................         261,820         306,025          44,205               0         240,110         546,135              48         528,550
    LA..............................................................       4,539,024       4,539,024               0         953,286       1,429,323       6,921,633              66             940
    NM..............................................................       1,113,015       1,428,969         315,954         368,815         237,144       2,034,928              55         646,964
    TX..............................................................         671,165         757,819          86,654          15,000         139,652         912,471              74          75,000
    CO..............................................................       1,158,839       1,289,224         130,385          87,860         597,192       1,974,276              59         577,049
    IA..............................................................         231,552         518,095         286,543               0          67,247         585,342              40         108,510
    KS..............................................................         325,397         394,416          69,019         329,960         255,881         980,257              33          81,424
    MS..............................................................         526,404         579,089          52,685          71,278         223,659         874,026              60               0
    MT..............................................................         357,744         406,496          48,752         116,529         199,301         722,326              50         295,666
    NE..............................................................         757,561       1,051,670         294,109          39,643         261,662       1,352,975              56          69,597
    ND..............................................................         157,368         192,942          35,574           1,135         226,220         420,297              37          23,940
    SD..............................................................         157,921         197,366          39,445          12,980          41,376         251,722              63          15,743
    OS, SD..........................................................          36,848          36,848               0               0               0          36,848             100               0
    AK..............................................................         157,921         176,196          18,275               0          36,271         212,467              74               0
    AZ..............................................................         992,153       1,632,789         640,636         442,950       1,030,066       3,105,805              32         655,000
    CA..............................................................       3,016,611       3,186,426         169,815         404,734         358,180       3,949,340              76         741,872
    NV..............................................................         473,764         490,051          16,287          33,000          30,474         553,525              86               0
    OR..............................................................          53,312          53,312               0               0               0          53,312             100               0
    WA..............................................................         134,194         145,743          11,549             300          62,366         208,409              64               0
                                                                     -------------------------------------------------------------------------------------------------------------------------------
          TOTAL.....................................................      28,613,503      34,647,814       7,034,311       4,135,458      12,125,197      51,908,469              55       7,691,834
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Prepared Statement of the National Council of Farmer Cooperatives

        Thank you, Mr. Chairman, and members of the Subcommittee for your
    leadership and support for U.S. agriculture. The National Council of
    Farmer Cooperatives (NCFC) appreciates this opportunity to submit its
    views regarding the fiscal year 2006 agriculture appropriations bill,
    and respectfully requests this statement be made part of the official
    hearing record.
        NCFC is the national trade association representing America's
    farmer cooperatives. There are nearly 3,000 farmer cooperatives across
    the United States whose members include a majority of our Nation's more
    than 2 million farmers. They exist for the mutual benefit of their
    farmer members and provide them with increased opportunity to improve
    their income from the marketplace and compete more effectively in the
    global marketplace.
        These farmer owned businesses handle, process and market virtually
    every type of agricultural commodity grown and produced, along with
    many related products; manufacture, distribute and sell a variety of
    farm inputs; and provide credit and related financial services,
    including export financing. Earnings derived from these activities are
    returned by farmer cooperatives to their farmer members on a patronage
    basis thereby enhancing their overall income.
        America's farmer cooperatives also provide jobs for nearly 300,000
    Americans with a combined payroll over $8 billion, further contributing
    to our Nation's economic wellbeing. Many of these jobs are in rural
    areas where employment opportunities are sometimes limited.
        We appreciate very much the challenges facing Congress in the
    current budget environment. At the same time, we want to emphasize the
    continued importance and high priority of policies and programs,
    together with needed funding, under the 2002 Farm Bill to help promote
    an economically healthy and competitive U.S. agricultural sector, meet
    the food and fiber needs of consumers at home and abroad, strengthen
    farm income, improve our balance of trade, promote rural development,
    and maintain and create needed jobs.
        To help achieve these important objectives, it is also vital to
    maintain and strengthen the ability of farmers to join together in
    cooperative self-help efforts. There is a long history of congressional
    support for public policy to enhance the ability of farmers to join
    together in farmer cooperatives to improve their overall income from
    the marketplace, manage their risk, capitalize on new market
    opportunities, and to compete more effectively in a global economy.
    Accordingly, in addition to supporting basic farm and commodity
    programs under the 2002 Farm Bill, we recommend the following:
      --USDA's Rural Business--Cooperative Service (RB-CS).--The rural
            development mission area includes responsibility for carrying
            out a variety of programs to help achieve these objectives,
            including research, education and technical assistance for
            farmers and their cooperatives. Since the elimination of a
            separate agency with responsibility for such programs, funding
            for such purposes has generally been provided through the
            salary and expense budget relating to rural development.
          For fiscal year 2006, the administration's budget proposal
            provides $683 million in both budget authority and program
            level for salaries and expenses for the rural development
            mission area, compared to $639 million for fiscal year 2005.
            Since there is no separate line item relating to programs in
            support of cooperative self-help efforts by farmers and their
            cooperatives, we recommend that specific language be included,
            as Congress previously has, to ensure that programs to
            encourage such cooperative self-help efforts be given a high
            priority.
      --Value-Added Producer Grants.--USDA's Value-Added Producer Grants
            program is aimed at encouraging and enhancing farmer
            participation in value-added businesses, including through
            farmer cooperatives, to help them capture a larger share of the
            value of their production and improve their overall income from
            the marketplace. It also helps promote economic development and
            create needed jobs in rural areas.
          In fiscal year 2005, the program was funded at $15.5 million. For
            fiscal year 2006, the administration has recommended
            approximately $16 million. Given the importance and success of
            the program in promoting cooperative self-help efforts by
            farmers, we would like to see the program fully funded at $40
            million as provided under the 2002 Farm Bill and hope the
            Subcommittee will be able to move toward that goal. It is also
            important to note that the program is administered on a
            matching basis, thereby doubling the impact of such grants and
            helping encourage needed investment in rural America. As a
            cost-share program, it has served as an excellent example of an
            effective public-private partnership that has been extremely
            successful by any measure.
      --Commodity Purchase Programs.--USDA annually purchases a variety of
            commodities for use in domestic and international feeding
            programs, including the school lunch program. NCFC strongly
            supports such programs to: (1) meet the food and nutrition
            needs of eligible consumers and (2) help strengthen farm income
            by encouraging orderly marketing and providing farmers with an
            important market outlet, especially during periods of surplus
            production.
          In addition to providing needed funding for such programs, it is
            important to ensure that farmers who choose to cooperatively
            market their production and related products, as well as their
            cooperatives, are not limited or excluded, but remain fully
            eligible under such programs. This is consistent with USDA's
            historic mission in support of such cooperative efforts and
            essential to ensure the continued availability of high quality
            products on a competitive basis.
      --B&I Loan Guarantee Program and Farmer Cooperatives.--One of the
            major challenges facing farmer cooperatives in helping farmers
            capture more of the value of what they produce beyond the farm
            gate is access to equity capital. In approving the 2002 Farm
            Bill, Congress made a number of changes to USDA's Business and
            Industry (B&I) guaranteed loan program to better meet the needs
            of farmer cooperatives and their farmer members. These included
            changes to allow farmers to qualify for guaranteed loans for
            the purchase of stock in both new and existing cooperatives to
            provide the equity capital needed to encourage more involvement
            and participation in value-added activities. For fiscal year
            2006, the administration's budget proposal provides an overall
            program level of $899 million, which represents an increase
            over fiscal year 2005. Accordingly, we recommend that funding
            be not less than this level.
      --Rural Business Investment Program.--The Rural Business Investment
            Program was authorized under the 2002 Farm Bill to help foster
            rural economic development by encouraging and facilitating
            equity investments in rural business enterprises, including
            farmer cooperatives. We are concerned over proposals that would
            eliminate funding for this important program. Again, providing
            improved access to equity capital is essential if farmers are
            going to be able to capitalize on value-added business
            opportunities through cooperative self-help efforts. For these
            reasons, we urge that the program be fully funded as authorized
            and implemented as Congress intended.
        We would also like to take this opportunity to express our strong
    support for USDA's export programs. Such programs are vital to helping
    maintain and expand U.S. agricultural exports, counter subsidized
    foreign competition, meet humanitarian needs, protect American jobs,
    and strengthen farm income. As a member of the Coalition to Promote
    U.S. Agricultural Exports, we urge that funding be provided at $200
    million, together with $34.5 million for the Foreign Market Development
    program, as provided under the 2002 Farm Bill. In addition, we urge
    full funding for the Export Credit Guarantee Programs, the Export
    Enhancement Program, Dairy Export Incentive Program, Technical
    Assistance for Specialty Crops, Food for Progress, as well as Public
    Law 480 and other food assistance programs, including McGovern-Dole.
        We also would like to urge support for needed funding and resources
    for USDA's Foreign Agricultural Service to continue to effectively
    carry-out such programs and to provide the technical assistance and
    support needed to help maintain and expand U.S. agricultural exports.
        Another important area of emphasis when it comes to enhancing the
    global competitiveness of farmer cooperatives and American agriculture
    is research. NCFC supports the National Coalition for Food and
    Agriculture Research goal of doubling Federal funding over the next 5
    years.
        Finally, we also want to express our strong support for important
    conservation and related programs administered by USDA's Natural
    Resources Conservation Service (NRCS). Many of these programs were
    significantly expanded under the 2002 Farm Bill and provide financial
    and technical assistance to help farmers and others who are eligible to
    develop and carry out conservation and related activities to achieve
    important environmental goals.
        NRCS is also the lead technical agency within USDA offering ``on-
    farm'' technical and financial assistance. We strongly support such
    programs, including technical assistance activities that may be carried
    out in partnership with the private sector involving farmer
    cooperatives. Farmer cooperatives have invested heavily in developing
    the technical skills of their employees to help their farmer members
    address environmental concerns. It is estimated that 90 percent of all
    members of the Certified Crop Advisor (CCA) program, for example, are
    employed by the private sector and majority of those are employed by
    farmer cooperatives.
    Conclusion
        Thank you again, Mr. Chairman and members of the Subcommittee, for
    the opportunity to share our views. We appreciate this statement being
    included in the official hearing record.
                                     ______

        Prepared Statement of the National Fish and Wildlife Foundation

        Mr. Chairman and Members of the Subcommittee: I appreciate the
    opportunity to submit testimony for the record regarding the fiscal
    year 2006 funding request for the National Fish and Wildlife Foundation
    (Foundation). The Foundation respectfully requests that this
    Subcommittee fund the Foundation at $4 million through the U.S. Natural
    Resources Conservation Service (NRCS) appropriation. This request would
    allow the Foundation to expand its highly successful grant program to
    better assist the NRCS in maximizing the benefits of the Conservation
    Title of the 2002 Farm Bill.
        Federal dollars appropriated by this Subcommittee allow us to
    leverage State, local, and private dollars for on-the-ground
    conservation. The Foundation's relationship with NRCS began in 1996
    when we signed a cooperative agreement to protect and restore
    previously converted agricultural wetlands through the Wetland Reserve
    Program (WRP). Through that partnership the Foundation received $5
    million in NRCS funds, matched it with $5.4 million in non-Federal
    funds and awarded a total of 31 WRP grants. More than 10,000 acres were
    restored and enrolled in the WRP through this effort. Since that time,
    the Foundation has received $15 million in NRCS Federal funds ($3
    million per fiscal year since fiscal year 2000) which it has dedicated
    to a matching grant program focused on private land conservation. The
    Foundation has been able to support 330 projects in 49 States by
    matching the $15 million with $47 million in non-Federal funds for a
    total of more than $62 million in on-the-ground conservation. These
    projects have led to the direct restoration of more than 200,000 acres
    of farmland and rangeland and to 775 miles of restored streams and
    rivers.
        Our general conservation grant program allowed us then and
    continues to allow the Foundation to be highly successful in assisting
    the NRCS in accomplishing its mission to help people conserve, maintain
    and improve our natural resources and environment. Whether it involves
    farm, range or grassland conservation, species management, or
    conservation education, the Foundation strategically invests the
    Federal funds entrusted to us in sound projects. In fiscal year 2004,
    the Foundation received $3 million in Federal funds, which it leveraged
    with over $9 million in non-Federal funds for a total of more than $12
    million in on-the-ground conservation. This marks the fourth year in a
    row that the Foundation has been able to average a 3:1 non-Federal to
    Federal funding ratio. With the funds provided by the Committee in
    fiscal year 2005, we expect to successfully continue our leveraging of
    Federal funds to increase on-the-ground conservation benefits.
        The Foundation's achievements are based on a competitive grant
    process where Federal funds are matched by the grantee with non-Federal
    funds and in-kind services. Those grantees include Resource
    Conservation and Development Areas, conservation districts,
    universities, and non-profit organizations who work in partnership with
    farmers and ranchers to support conservation efforts on private land.
    The Foundation also works to further maximize Federal funds by
    providing private funds through the generosity of one of our growing
    number of corporate and foundation partners. These funds are in
    addition to the non-Federal funds that are provided by the Foundation's
    grantees. In the Foundation's partnership with NRCS, Federal funds have
    been supplemented with funding from the Shell Oil Company, the FMC
    Corporation, the Anheuser-Busch Companies, Inc., the Summer T. McKnight
    Foundation, the Charles Stewart Mott Foundation, the William Penn
    Foundation, and the David and Lucile Packard Foundation. In total,
    these organizations provided approximately $700,000 to enhance our NRCS
    partnership grants.
        Working Landscapes.--Through our partnership, we work with NRCS to
    identify and fund projects that have strong support in affected
    agricultural and rural communities. We place our highest priority on
    projects integrating conservation practices on ongoing agricultural,
    ranching, and forestry operations. We fund partners and provide
    expertise by engaging watershed experts, ranchers, foresters, farmers,
    local governments, and non-profits to undertake on-the-ground private
    land activities with willing landowners.
        The Foundation has provided critical support to organizations that
    are assisting farmers and ranchers in implementing private land
    conservation activities. Through these efforts the Foundation has
    helped to restore and protect thousands of acres of buffer, wetland,
    and grassland habitats. One way Foundation grants promote the
    integration of conservation practices on farmland and rangeland is by
    demonstrating the economic benefits that can be obtained through these
    practices. Our Encouraging Wildlife on Direct-Market Farms project will
    attempt to demonstrate that preserving and restoring native plant and
    animal communities can be economically beneficial to direct-market
    farming operations. The University of Northern Iowa (UNI) will utilize
    $31,158 in Foundation NRCS funds that it will match with $91,308 in
    non-Federal funds to document the conservation activities on 200
    direct-market farms. UNI will then work with five farms to coordinate
    wildlife habitat restoration plans based on the most successful
    documented conservation activities found on surrounding farms. Three
    well-publicized field days will be conducted on participating farms and
    a variety of media will be used to inform consumers of the links
    between these farms and wildlife habitat improvements. It is
    anticipated that this demonstration project will encourage other area
    farmers to incorporate wildlife management into their operations.
        The Foundation has also invested heavily in efforts to improve the
    ecological health of working agricultural lands. Grantees supported by
    the Foundation have worked with farmers and ranchers to reduce
    agricultural runoff, remove invasive species, and restore native
    ecosystems. One of our stellar projects is the Conservation Agriculture
    Model Farms (ND)-IV project which is a cooperative effort between
    government, non-profit organizations, and private landowners to
    demonstrate the economic efficiency and profitability of designing
    whole farm plans. These plans identify the best soils to farm and
    design appropriate alternatives on the rest. The project is funded with
    $50,000 in Federal funds and is being match with $100,000 in non-
    Federal funds. The project will lower the costs of farming by making
    farming more efficient and by reducing the use of herbicides and
    fertilizers, while providing conservation benefits such as improved
    wildlife habitat, improved water storage, and reduced soil loss due to
    erosion. The template farm plans developed through this project will be
    able to be used by other farmers throughout the region.
        Conserving Fish, Wildlife and Plants.--With our NRCS dollars, the
    Foundation funds projects that directly benefit diverse fish and
    wildlife species including, salmon in the west, migratory birds in the
    midwest and grassland birds in the south. Habitat for native fish has
    been restored on private lands throughout the United States through
    vegetative planting, streambank stabilization, livestock fencing and
    nutrient reduction efforts. In addition to improving water quality,
    efforts have been undertaken by our grantees to reduce water loss
    caused by invasive species or from outdated irrigation systems. By
    reducing the water taken from rivers, there is less chance that drought
    will negatively impact aquatic life.
        A project that highlights one of these efforts is our Wildlife
    Habitat Enhancement (TX) project. The West Nueces-Las Moras Soil and
    Water Conservation District, funded with $31,200 in Foundation NRCS
    funds that is being matched with $62,400 in non-Federal funds, will
    conduct prescribed burns on over 3,000 acres of private lands to reduce
    densities of ashe juniper. Ashe juniper is an invasive plant species
    that uses a disproportionate amount of water resources. The removal of
    ashe juniper in the Edwards Aquifer will result in increases in water
    quality and quantity and improved wildlife habitat. In addition to the
    prescribed burns, the grantee will conduct field days and distribute
    brochures to local landowners on prescribed burning and grazing
    techniques that can be conducted to decrease ashe juniper infestations.
        We also measure our success in part by preventing the listing of
    species under the Endangered Species Act and by stabilizing and
    hopefully moving others off the list. Some species that have received
    support through our NRCS grant program include salmonids, golden-
    cheeked warblers, southwestern willow flycatchers, whooping cranes,
    sage grouse, lesser prairie chickens, aplomado falcons, black-tailed
    prairie dogs, Louisiana black bears, bog turtles, and Karner blue
    butterflies. We invest in common sense and innovative cooperative
    approaches to endangered species, building bridges between the
    government and the private sector.
        Expanding Conservation Education Opportunities.--Our grants also
    use our NRCS dollars to expand conservation education opportunities. Of
    our fiscal year 2004 NRCS partnership grants, approximately one fourth
    contained an environmental education or outreach component. Some of the
    conservation education projects supported through our NRCS grant
    program seek to educate farmers and ranchers on conservation practices
    while demonstrating how best management practices and wildlife
    incentives provide both environmental and economic benefits. Other
    projects have provided training to secondary school teachers on the
    ecological, economic and cultural benefits of rangeland and farmland
    conservation. The Sustainable Vineyard Ecosystem Management grant
    highlights some of the Foundation's environmental education work. In
    this project the grantee, California Sustainable Winegrowing Alliance,
    was awarded $60,000 in Federal funds that is being matched with
    $150,000 in non-Federal funds to encourage sustainable on-the-ground
    conservation practices that will benefit diverse species and habitats
    in California's winegrowing region. This sizable educational effort
    will target more than 4,000 winegrape growers who farm over 500,000
    acres through local workshops and outreach events.
        Continued Need.--The Foundation is uniquely positioned to continue
    assisting NRCS in meeting its need to implement beneficial conservation
    practices on our Nation's farms and ranches by leveraging NRCS's scarce
    Federal resources to maximize the on-the-ground conservation benefits.
    The Foundation's matching grant program has the flexibility to address
    many agricultural conservation needs. These include, but are not
    limited to, increasing instream flow for rivers while continuing to
    support agricultural irrigation, promoting the recovery of specific
    threatened or endangered animals on private land, implementing critical
    conservation practices on private land that does not qualify for
    funding under a Farm Bill program, and by forging broad community-based
    partnerships. The need for these projects is evident by the number of
    grant applications the Foundation receives. On average we receive two
    times the number of applications we are able to fund. In addition, we
    regularly fund projects at a reduced level that still permits the
    project to be successfully completed while allowing the Foundation to
    fund additional worthwhile agricultural conservation projects.
        Accountability and Grantsmanship.--All potential grants are subject
    to a peer review process involving local NRCS staff, State agency
    staff, academics, commodity and environmental interests, corporations,
    and others. The review process examines the project's conservation
    need, technical merit, the support of the local community, the variety
    of partners, and the amount of proposed non-Federal matching funds. We
    also provide a 30 day notification to the Members of Congress for the
    congressional district and State in which a grant will be funded prior
    to making the grant. In addition, the Foundation requires strict
    financial reporting by grantees and is subject to an annual audit.
        Basic Facts About the Foundation.--The Foundation promotes
    conservation solutions by awarding matching grants using its federally
    appropriated funds to match private sector funds. We have a statutory
    requirement to match Federal funds with at least an equal amount of
    non-Federal funds, which we consistently exceed. No Federal
    appropriations meet our administrative expenses.
        The Foundation is governed by a 25-member Board of Directors
    appointed by the Secretary of The Interior. At the direction of
    Congress, the Board operates on a nonpartisan basis. Directors do not
    receive any financial compensation for service on the Board; in fact,
    all of our directors make financial contributions to the Foundation. It
    is a diverse Board, representing the corporate, philanthropic, and
    conservation communities; all with a tenacious commitment to fish and
    wildlife conservation.
        The National Fish and Wildlife Foundation continues to be one of,
    if not the, most cost-effective conservation program funded in part by
    the Federal Government. By implementing real-world solutions with the
    private sector while avoiding regulatory or advocacy activity, our
    approach is more consistent with this Congress' philosophy than ever
    before. We serve as a model for bringing private sector leadership to
    Federal agencies and for developing cooperative solutions to
    environmental issues. We are confident that the money you appropriate
    to the Foundation will continue to make a difference.
                                     ______

              Prepared Statement of the National Organic Coalition

        Chairman Bennett, Senator Kohl, and Members of the Subcommittee: My
    name is Steven Etka. I am submitting this testimony on behalf of the
    National Organic Coalition (NOC) to detail our recommendations and
    requests for fiscal year 2006 funding for several USDA marketing,
    research, and conservation programs of importance to organic
    agriculture.
        The National Organic Coalition (NOC) is a national alliance of
    public interest organizations working to provide a voice for farmers,
    ranchers, environmentalists, consumers and others involved in organic
    agriculture. The goal of the Coalition is to assure that organic
    integrity is maintained, that consumer confidence is preserved and that
    policies are fair, equitable and encourage diversity of participation
    and access. The current members of NOC are the Center for Food Safety,
    Rural Advancement Foundation International--USA, National Cooperative
    Grocers Association, and the Northeast Organic Farming Association --
    Interstate Council.
        We urge the Subcommittee's strong consideration of the following
    funding requests for various USDA programs of importance to organic
    farmers, marketers and consumers:

    USDA/Agricultural Marketing Service (AMS)
        Organic Standards--Request: $2.5 million.
        Responding to a strong growth in consumer demand for organically
    produced foods, Congress enacted the Organic Foods Production Act of
    1990 (OFPA) to authorize the creation of national organic standards so
    that consumers across the Nation could be confident that one common set
    of rules applies to all foods that carry the label ``certified
    organic.''
        When the organic agriculture community agreed in the late 1980s to
    pursue legislation to create a Federal organic standards program, it
    was done in recognition of the benefits to producers and consumers of
    establishing one common standard in the Nation for organically produced
    agricultural products. Yet for many in the organic community, it was
    done with some apprehension, as well. Many saw the great risks
    associated with turning the keys to a grassroots effort over to the
    Federal Government.
        To capture both the promise and the apprehension associated with a
    federalized organic standards program, the Organic Foods Production Act
    (OFPA) of 1990 was enacted with an emphasis on maintaining a strong
    public/private partnership in the implementation and administration of
    Federal organic programs. There is concern, however, that some the
    provisions of OFPA that were included to assure strong participation by
    organic farmers and consumers in the national standard-setting and
    oversight process have not been fully implemented, in part due to lack
    of adequate funding.
        In fiscal year 2005, Congress specified funding of $1.98 million
    for the AMS category of ``Organic Standards,'' of which the National
    Organic Program (NOP) is a subset. This level represented funding of
    approximately $1.5 million for the National Organic Program,
    essentially level with the previous year. In the President's fiscal
    year 2006 budget submittal, a request was made for $2.026 million for
    AMS ``Organic Standards,'' representing a slight increase of $46,000
    over fiscal year 2005. However, we are requesting $2.5 million for AMS/
    organic standards, to provide USDA with the extra resources needed to
    establish certifier training programs and to respond more fully to the
    program deficiencies outlined in the outside audit conducted in 2004.
        The issue of how AMS spends the money appropriated for organic
    standards is of great importance and concern to the members of NOC.
    Congress included report language in fiscal year 2004 that urged AMS to
    use some of the funding increase received in fiscal year 2004 for the
    National Organic Program (NOP) to comply more fully with the statutory
    requirements of the Organic Foods Production Act (OFPA). Specifically,
    the Senate report language in fiscal year 2004 called on NOP to hire an
    Executive Director for the National Organic Standards Board (NOSB), to
    create an ongoing Peer Review Panel, and to improve scientific
    technical support for the NOSB. These points were reiterated in the
    fiscal year 2005 Senate Report. The members of NOC very much appreciate
    the Congressional efforts to provide NOP with the necessary funds and
    direction to bring about greater compliance with OFPA. This is an
    important step toward ensuring the public/private partnership
    intentions of that Act.
        However, the Department has not completed action on any of these
    Congressional recommendations. Therefore, NOC is urging that the
    Committee reiterate the importance of OFPA compliance on these matters,
    using the following suggested report language:
        ``In fiscal year 2004 and 2005 the committee urged AMS to use a
    portion of their appropriation to comply with unfulfilled statutory
    requirements of the Organic Foods Production Act (OFPA). While initial
    efforts are underway, the statutory requirements have not yet been
    fully complied with and the Committee urges the Department to fully
    comply with them in the 2006 fiscal year. Specifically, NOP and NOSB
    should work together to complete the hiring of a NOSB director. The
    Committee urges the Department to correct problems noted in the outside
    audit of the NOP conducted in 2004. This one-time audit should not be
    construed to meet the requirements under OFPA for the creation of an
    on-going Peer Review Panel to oversee the accreditation process for
    organic certifiers. Additionally, the committee urges AMS to promptly
    make available their list of certified organic entities.''

                                      USDA

    Organic Data Initiatives
        Authorized by Section 7407 of the 2002 Farm Bill, the Organic
    Production and Marketing Data Initiative states that the ``Secretary
    shall ensure that segregated data on the production and marketing of
    organic agricultural products is included in the ongoing baseline of
    data collection regarding agricultural production and marketing.'' As
    the organic industry matures and grows at a rate between 15 and 20
    percent annually, the lack of national data for the production,
    pricing, and marketing of organic products has been an impediment to
    further development of the industry and to the effective functioning of
    many organic programs within USDA. Reliable, current data is needed by
    all participants in the organic sector, and are also needed to support
    USDA organic programs through various USDA agencies.
        Because of the multi-agency nature of data collection within USDA,
    the effort to improve organic data collection and analysis within USDA
    must also be undertaken by several different agencies within the
    Department:

    Economic Research Service (ERS)
        Collection and Analysis of Organic Economic Data--Request:
    $500,000.
        In fiscal year 2005, Congress appropriated $495,850 to USDA's
    Economic Research Service to continue the collection of valuable
    acreage and production data, as required by Section 7407 of the 2002
    farm bill. This funding level was down slightly from the $500,000
    appropriated in fiscal year 2004.
        Because increased ability to conduct economic analysis for the
    organic farming sector is greatly needed, we request $500,000 million
    be appropriated to the USDA Economic Research Service to implement the
    ``Organic Production and Market Data Initiative'' included in Section
    7407 of the 2002 farm bill.

    Agricultural Marketing Service (AMS)
        Organic Price Collection--Request: $750,000.
        Accurate, public reporting of agricultural price ranges and trends
    helps to level the playing field for producers. Wholesale and retail
    price information on a regional basis is critical to farmers and
    ranchers, but organic producers have fewer sources of price information
    available to them than conventional producers. Additionally, the lack
    of appropriate actuarial data has made it difficult for organic farmers
    to apply for and receive equitable Federal crop insurance. AMS Market
    News is involved in tracking product prices for conventional
    agricultural products, and with funding, could broaden their efforts to
    include organic price data as well. We request $750,000 to be
    appropriated to the USDA Agricultural Marketing Service for collection
    of organic price information.

    National Agriculture Statistics Service (NASS)
        Census Follow-up/Organic Grower Survey--Request: $500,000.
        The mission of USDA's National Agricultural Statistics Service
    (NASS) is to provide timely, accurate, and useful statistics in service
    to U.S. agriculture. The Agency is currently in the process of
    developing the 2007 agricultural census. Although NASS is making an
    effort to expand the quantity of organic questions in the census, they
    will need to conduct a follow-up survey in order to collect more in-
    depth information on acreage, yield/production, inventory, production
    practices, sales and expenses, marketing channels, and demographics.
    Therefore, we are requesting $500,000 for USDA NASS.

    USDA/CSREES
        Organic Transitions Program--Request: $4 million.
        The Organic Transition Program, funded through the CSREES budget,
    is a research grant program that helps farmers surmount some of the
    challenges of organic production and marketing. As the organic industry
    grows, the demand for research on topics related to organic agriculture
    is experiencing significant growth as well. Extension agents and other
    information providers report an increase in number of farmers seeking
    reliable information on making the transition to organic production.
    The benefits of this research are far-reaching, with broad applications
    to all sectors of U.S. agriculture, even beyond the organic sector. Yet
    funding for organic research is minuscule in relation to the relative
    economic importance of organic agriculture and marketing in this
    Nation.
        The CSREES Organic Transition Program was funded at $2.1 million in
    fiscal year 2003, $1.9 million in fiscal year 2004, and $1.88 million
    in fiscal year 2005. Given the rapid increase in demand for organic
    foods and other products, and the growing importance of organic
    agriculture, the research needs of the organic community are expanding
    commensurately. Therefore, we are requesting that the program be funded
    at $4 million in fiscal year 2006.

    USDA/CSREES
        National Research Initiative--Request: Report Language on Plant and
    Animal Breeding.
        In recent decades, public resources for classical plant and animal
    breeding have dwindled, while expenditures by private firms on seed and
    breed development for a limited set of major crops and breeds have
    increased greatly. Unfortunately, this shift has significantly
    curtailed the public access to plant and animal germplasm, and limited
    the diversity of seed variety and animal breed development. This
    problem has been particularly acute for organic and sustainable
    farmers, who seek access to germplasm well suited to their unique
    cropping systems and their local environment.
        In the Senate Report that accompanied the fiscal year 2005
    Appropriations bill, language was included that encouraged ``the
    Department, especially in the establishment of priorities within the
    National Research Initiative, to give consideration to research needs
    related to classical plant and animal breeding.'' Despite this
    language, the need to foster classical plant and animal breeding has
    yet to be reflected in the NRI priority-setting process. Further, the
    relationship between public plant and animal breeding and meeting the
    needs of organic and sustainable farmers is still not clearly
    understood within CSREES. Therefore, we are requesting the inclusion of
    the following report language to continue to urge CSREES to make
    classical plant and animal breeding a greater priority in future NRI
    grant proposal request processes, and to underscore the importance of
    this effort for organic and sustainable agricultural systems:
        Through the fiscal year 2005 process, CSREES was urged to give
    consideration to research needs related to classical plant and animal
    breeding, especially in the establishment of priorities within the
    National Research Initiative. The Committee is concerned that classical
    plant and animal breeding is still not reflected in the NRI priority
    setting process, and that the importance of classical breeding to
    organic and sustainable agricultural systems is still not well
    understood within the Agency. The Committee would like to reiterate its
    concern about dwindling public funding for classical plant and animal
    breeding, and urges the Agency to use the NRI as a tool to revitalize
    public resources in this important area.

    USDA/Rural Business Cooperative Service
        Appropriate Technology Transfer for Rural Areas (ATTRA)--Request:
    $3.4 million.
        ATTRA is a national sustainable agriculture information service,
    which provides practical information and technical assistance to
    farmers, ranchers, Extension agents, educators and others interested in
    sustainable agriculture. ATTRA interacts with the public, not only
    through its call-in service and website, but also provides numerous
    publications written to help address some of the most frequently asked
    questions of farmers and educators. Much of the real-world assistance
    provided by ATTRA is extremely helpful to the organic community. As a
    result, the growth in demand for ATTRA services has increased
    significantly, both through the website-based information services and
    through the growing requests for workshops. Currently, given the lack
    of resources, ATTRA is only able to service 1 out of 5 requests for
    workshops. Therefore, we are requesting that ATTRA be funded at $3.4
    million for fiscal year 2006, representing a $920,000 increase over
    fiscal year 2005.

    USDA/ARS
        1.8 percent Set-Aside for Organic Research (No Net Increases)--
    Request: Report language.
        Development of organic production effectively serves USDA strategic
    objectives for environmental quality, human health and nutrition, and
    agricultural trade. ``Fair share'' funding of organic agricultural
    research, based on relative market size (between 1.5 percent and 2.5
    percent of total U.S. retail food sales), translates to at least a 5-
    fold increase in the proportion of USDA-ARS resources explicitly
    allocated to organic. In 2004, USDA-ARS spent about $3.5 million on
    organic-specific projects, or about 0.35 percent of the $1 billion
    fiscal year 2004 ARS expenditures. Under a 1.8 percent ``fair share''
    framework, the ARS would have generated about $18 million for organic
    research in its budget.
        The 2005 appropriations omnibus bill contained language encouraging
    ARS, when appropriate, to direct research resources in a manner that
    reflects the growing interest in organic production and the need to
    provide enhanced research for this growing organic sector. For fiscal
    year 2006 we are requesting more explicit report language encouraging
    the USDA ARS to set aside 1.8 percent of their budget to be used
    exclusively on organic research at appropriate ARS locations, under
    direction of the National Program Staff.

    USDA/NRCS
        Conservation Security Program--Request: No Funding Limitation.
    USDA/Rural Business Cooperative Service
        Value-Added Producer Grants--Request: No Funding Limitation.
        The Conservation Security Program (authorized by Section 2001 of
    the 2002 farm bill) and the Value-Added Producer Grant (authorized by
    Section 6401 of the 2002 farm bill) are new programs with great
    potential to benefit organic producers in their efforts to conserve
    natural resources and to explore new, value-added enterprises as part
    of their operations.
        Unfortunately, while these programs were authorized to operate with
    mandatory funding, their usefulness has been limited by funding
    restrictions imposed through the annual appropriations process. We are
    urging that the Conservation Security Program and the Value-Added
    Producer Grant Program be permitted to operate with unrestricted
    mandatory funding, as authorized.
        Thank you for this opportunity to testify and for your
    consideration on these critical funding requests.
                                     ______

               Prepared Statement of the National Potato Council

        My name is Jim Wysocki. I am a potato farmer from Wisconsin and
    current Vice President, Legislative/Government Affairs for the National
    Potato Council (NPC). On behalf of the NPC, we thank you for your
    attention to the needs of our potato growers.
        The NPC is the only trade association representing commercial
    growers in 50 States. Our growers produce both seed potatoes and
    potatoes for consumption in a variety of forms. Annual production is
    estimated at 437,888,000 cwt. with a farm value of $3.2 billion. Total
    value is substantially increased through processing. The potato crop
    clearly has a positive impact on the U.S. economy.
        The potato is the most popular of all vegetables grown and consumed
    in the United States and one of the most popular in the world. Annual
    per capita consumption was 136.5 pounds in 2003, up from 104 pounds in
    1962 and is increasing due to the advent of new products and heightened
    public awareness of the potato's excellent nutritional value. Potatoes
    are considered a nutritious consumer commodity and an integral,
    delicious component of the American diet.
        The NPC's fiscal year 2006 appropriations priorities are as
    follows:

                                POTATO RESEARCH

    Cooperative State Research Education and Extension Service (CSREES)
        The NPC urges the Congress not to support the President's fiscal
    year 2006 budget request to eliminate the CSREES Special Grant Programs
    and the formula funds under the Hatch Act. Both of these programs
    support important university research work that helps our growers
    remain competitive in today's domestic and world marketplace.
        The NPC supports an appropriation of $1.8 million for the Special
    Potato Grant program for fiscal year 2006. The Congress appropriated
    $1.417 million in fiscal year 2004, a decrease from the fiscal year
    2003 level of $1.584 million and $1.509 million in fiscal year 2005.
    This has been a highly successful program and the number of funding
    requests from various potato-producing regions is increasing.
        The NPC also urges that the Congress include Committee report
    language as follows:
        ``Potato Research.--The Committee expects the Department to ensure
    that funds provided to CSREES for potato research are utilized for
    varietal development testing. Further, these funds are to be awarded
    after review by the Potato Industry Working Group.''

                      AGRICULTURAL RESEARCH SERVICE (ARS)

        The NPC urges that the Congress not support the Administration's
    fiscal year 2006 budget request to rescind all fiscal year 2005
    Congressional increases for research projects.
        The Congress provided funds for a number of important ARS projects
    and due to previous direction by the Congress the ARS continues to work
    with the NPC on how overall research funds can best be utilized for
    grower priorities.

                           FOREIGN MARKET DEVELOPMENT

    Market Access Program (MAP)
        The NPC also urges that the Congress maintain the spending level
    for the Market Access Program (MAP) at its authorized level of $200
    million for fiscal year 2006 and not support the Administration's
    budget request to cap this valuable export program at the $125 million
    level.

    Foreign Agriculture Service (FAS)
        The NPC supports the Presidents fiscal year 2006 budget request of
    $152.4 million for the USDA Foreign Agriculture Service (FAS). This
    level is the minimum necessary for the agency given the multitude of
    trade negotiations and discussions currently underway.

                               FOOD AID PROGRAMS

    McGovern Dole
        The NPC supports the Administration's fiscal year 2006 budget
    request of $100 million for the McGovern-Dole International Food Aid
    Program. PVO's have been including potato products in their
    applications for this program.

    Public Law 480
        The President's fiscal year 2006 Budget requests $1.2 billion for
    USAID programs, including $964 million for USAID Public Law 480 Title
    II programs. The President's budget also transfers $300 million from
    USAID Title II activities funded under the Agriculture Budget to the
    Foreign Operations Budget. The NPC urges that the $300 million be
    reinstated in the regular USAID Public Law 480 Title II budget to avoid
    a significant loss of applications for dehydrated potatoes in Title II
    programs and procurement of U.S. food commodities for food aid.

                          PEST AND DISEASE MANAGEMENT

    Animal and Plant Health Inspection Service (APHIS)
        Golden Nematode Quarantine.--The NPC supports an appropriation of
    $1,266,000 for this quarantine which is what is believed to be
    necessary for USDA and the State of New York to assure official control
    of this pest. Failure to do so could adversely impact potato exports.
        Given the transfer of Agriculture Quarantine Inspection (AQI)
    personnel at U.S. ports to the Department of Homeland Security, it is
    important that certain USDA-APHIS programs be adequately funded to
    ensure progress on export petitions and protection of the U.S. potato
    growers from invasive and harmful pests and diseases.
        Pest Detection.--The NPC supports $45 million in fiscal year 2006,
    which is the Administration's budget request. Now that the Agriculture
    Quarantine Inspection (AQI) program is within the new Homeland Security
    Agency, this increase is essential for the Plant Protection and
    Quarantine Service's (PPQ) efforts against potato pests and diseases
    such as Ralstonia.
        Emerging Plant Pests.--$101 million was appropriated in fiscal year
    2005. The President requests $127 million in fiscal year 2006 which the
    NPC supports.
        The NPC supports having the Congress once again include language to
    prohibit the issuance of a final rule that shifts the costs of pest and
    disease eradication and control to the States and cooperators.
        Trade Issues Resolution Management.--$12,578,000 was appropriated
    in fiscal year 2005 and the President requests $18 million in fiscal
    year 2006. The NPC supports this increase ONLY if it is specifically
    earmarked for plant protection and quarantine activities. These
    activities are of increased importance yet none of these funds are used
    directly for plant protection activities. As new trade agreements are
    negotiated, the agency must have the necessary staff and technology to
    work on plant related import/export issues. The NPC also relies heavily
    on APHIS-PPQ resources to resolve phytosanitary trade barriers in a
    timely manner.

                            AGRICULTURAL STATISTICS

    National Agricultural Statistics Service (NASS)
        The NPC supports sufficient funds and guiding language to assure
    that the potato objective yield and grade and size surveys are
    continued.

                            RURAL DEVELOPMENT GRANTS

        Since potato growers do not receive direct payments, the 2002 Farm
    Bill provided for, among other things, grants to allow our growers to
    expand their business opportunities. One program that has been used by
    our growers is the value-added grant program. The NPC would urge that
    the Farm Bill funding level for this program be maintained. In
    addition, maintaining adequate farm labor is also important to our
    growers. The NPC urges that farm labor housing grants be maintained and
    not reduced as proposed by the Administration's budget request.
                                     ______

    Prepared Statement of the National Research Center for Coal and Energy
                                      \1\

        Chairman Bennett and Members of the Subcommittee: Thank you for the
    opportunity to offer testimony to the Subcommittee on Agriculture,
    Rural Development, and Related Agencies. Our testimony concerns three
    programs under USDA which support small communities. We request funding
    to continue the National Drinking Water Clearinghouse program ($1.5
    million) and the Special Services for Underserved Communities program
    ($1 million) as part of the overall Rural Community Advancement
    Program. We request new funding to initiate a Rural Brownfields
    Redevelopment Center ($1 million). These programs are described below.
    ---------------------------------------------------------------------------
        \1\ The National Research Center for Coal and Energy is located at
    West Virginia University. This statement has been prepared by Richard
    Bajura, Director, Pamela Schade, and Paul Ziemkiewicz. For additional
    information, contact our web site at http://www.nrcce.wvu.edu.
    ---------------------------------------------------------------------------
                DRINKING WATER AND WASTEWATER TREATMENT PROGRAMS

    Need for Federal Programs
        Clean, safe drinking water and wastewater treatment are critical to
    public and environmental health. For most of us, it's easy to take
    water for granted. But not that long ago, most people didn't have
    indoor plumbing. According to U.S. Census Bureau data, only half of
    American homes in 1940 had complete plumbing facilities--defined as hot
    and cold piped water, a bathtub or shower, and a flush toilet. By 2002,
    the Environmental Protection Agency (EPA) found that the number of
    homes having complete plumbing facilities increased to 91 percent. Much
    of this improvement can be attributed to Federal infrastructure
    investment.
        The U.S. Department of Agriculture's Rural Utilities Service (RUS)
    has provided more than $20 billion for water and wastewater projects
    since 1947. In spite of these improvements, however, 670,000 households
    (with nearly 2 million people) lack access to water, sanitation, or
    both. Safe, affordable water infrastructure is an investment in the
    economic viability and public health of rural America.
    Water and Wastewater Challenges
        Over 50,000 water treatment systems serve the U.S. population, with
    43,000 of these systems being classified as ``small'' systems (serving
    fewer than 3,300 people) and ``very small'' systems (serving fewer than
    500 customers). Because smaller systems have lower revenues and fewer
    resources, they are more likely to fail in meeting regulatory
    requirements. Very small systems are 50 percent more likely to incur
    violations than all other system sizes. When the Safe Drinking Water
    Act was passed in 1974, eighteen (18) contaminants were regulated. By
    2004, that number had grown to 86. Another eight will be added by 2008.
        While significant progress has been made, a number of challenges
    confront communities as they try to safeguard public health. In many
    communities, water distribution systems and wastewater collection
    systems are 40 to 50 years old, with many dating back more than a
    century. In the 2002 report titled Clean Water and Drinking Water
    Infrastructure Gap Analysis, EPA estimated that we need to invest $265
    billion for infrastructure for drinking water systems through 2022.
    Wastewater infrastructure systems will need an estimated $388 billion
    during the same time period. The report suggests that, without new
    investment, progress made over the last 30 years is threatened. As a
    partial solution to addressing the challenges of inadequate funding,
    the Technical Assistance and Training (TAT) grants under the Rural
    Community Advancement Program make it possible for small communities to
    maximize their investments in water infrastructure through deployment
    of appropriate technology.

                  NATIONAL DRINKING WATER CLEARINGHOUSE (NDWC)

        For nearly 15 years, the National Drinking Water Clearinghouse at
    West Virginia University has helped small and rural communities with
    their water infrastructure management and utility security issues. The
    NDWC is currently funded at approximately $1.2 million through the
    USDA's Rural Utilities Service (RUS) under the Rural Community
    Advancement Program (RCAP).
        The NDWC provides a range of assistance activities for small
    communities. Telephone callers can obtain toll-free technical
    assistance from our staff of certified operators, engineers, and
    scientists. Our quarterly publication ``On Tap,'' a magazine about
    drinking water treatment, financing, and management options helps
    communities and small water systems operate, manage and maintain their
    facilities, while keeping them financially viable. A comprehensive Web
    site and databases with thousands of entries provide around-the-clock
    access to contemporary information on small water systems. Training
    sessions customized for small and rural areas, teleconferences, and
    more than 400 free and low-cost educational products give people the
    instruction and tools they need to address their most pressing drinking
    water issues.
        These services are well received by small community officials and
    service providers and should be continued. We request funding of $1.5
    million to continue the NDWC programs through the Technical Assistance
    and Training Grants.

                  SPECIAL SERVICES TO UNDERSERVED COMMUNITIES

        In addition to the National Drinking Water Clearinghouse's
    knowledge base and technical support, the NDWC is expanding its
    assistance to underserved communities through technical field support.
    The NDWC's funding currently does not provide for direct services to
    underserved communities, so West Virginia University is piloting an
    effort to honor requests for site specific technical support. This
    support gives small and very small communities assistance through site
    assessments and feasibility studies that they might not otherwise be
    able to access for planning needed infrastructure improvements, their
    financing, and management. We request funding for technical services to
    underserved communities at the $1 million level.
        For fiscal year 2005, we anticipate receiving approximately $1.4
    million in total for the NDWC and the Special Services to Underserved
    Communities programs from appropriations provided by the Subcommittee.

                     RURAL BROWNFIELDS REDEVELOPMENT CENTER

        ``Brownfields'' is a catch-all term for the approximately 450,000
    former industrial and commercial sites across the United States that
    are contaminated, unused and often abandoned. The cleaning up, or
    ``remediation'' of these sites is essential to protect public health,
    strengthen local economies and encourage local growth. Communities with
    brownfields often face economic and social concerns, such as
    unemployment, substandard housing, outdated or faulty public
    infrastructure, and crime. Although Federal and state programs may be
    in place to address local issues, too often the programs operate in
    isolation.
        Additionally, Federal resources have been difficult to access by
    small and rural communities. Through the enactment of recent
    legislation, more funding with more flexibility in application is
    available for redeveloping brownfields in rural areas. Rural
    communities are now at the forefront for assessment and clean-up funds,
    particularly with the availability of direct grants. There is also
    widespread recognition that rural communities require different
    approaches and a variety of models to make brownfield redevelopment
    possible, and these communities require more technical assistance and
    other informational materials. The Appalachian Regional Commission
    (ARC) cites the following obstacles to brownfield redevelopment for
    rural Appalachian communities:
      --Unused open space is often more readily available and cheaper to
            develop than reclaiming a brownfield site.
      --Recruiting an experienced brownfield redevelopment manager is
            difficult.
      --Liability concerns are compounded by insufficient information to
            establish responsibility for contamination.
      --Cleaning up a brownfield site can be expensive.
      --There is no formal venue for exchanging information and providing
            guidance about brownfield redevelopment among rural
            communities.
        West Virginia University (WVU) proposes to initiate a Rural
    Brownfields Redevelopment Center. This center will merge our water
    research expertise with our technical assistance skills to enable us to
    provide support for brownfields redevelopment initiatives in small
    communities nationwide.
        Our work under the proposed Center will focus on developing data
    bases, information, and redevelopment models that can be deployed
    nationally to assist small communities in addressing needs for
    reclaiming brownfield sites and turning these sites into economic
    engines for developing regional economies. Topics to be addressed
    include:
      --information collection and dissemination,
      --map site libraries which include GIS data,
      --technical assistance by phone and in person, and field assistance
            (at the sites),
      --demonstration programs,
      --assistance to state agency personnel and communities,
      --assistance with planning and identifying funding options,
      --specialization in rural brownfields redevelopment,
      --state-based brownfields conferences,
      --manuals, models, and personal consultation and courses to assist
            other communities based on lessons we learn.
        WVU is well positioned to lead a national brownfields redevelopment
    effort. Our National Drinking Water Clearinghouse, National Small Flows
    Clearinghouse, and WV Water Research Institute and its Geotechnology
    Center have technical assistance, education and outreach, and research
    capabilities relevant to brownfields issues. All three programs have
    installed and managed successful demonstrations on the ground.
    Nationally, there is no current brownfields assistance program that has
    married the practice of brownfields redevelopment with expertise in
    water issues.
        We request funding in fiscal year 2006 at a level of $1 million to
    initiate this program. Stakeholders will include regional universities,
    state offices, development agencies, and industry.
        Thank you for the opportunity to offer testimony on the USDA
    programs.
                                     ______

           Prepared Statement of the National Rural Housing Coalition

        Mr. Chairman and members of the House Subcommittee on Agriculture,
    my name is Robert Rapoza, the executive secretary of the National Rural
    Housing Coalition.
        The National Rural Housing Coalition (the Coalition) has been a
    national voice for rural low-income housing and community development
    programs since 1969. Through direct advocacy and policy research, the
    Coalition has worked with Congress and the Department of Agriculture to
    design new programs and improve existing programs serving the rural
    poor. The Coalition also promotes a non-profit delivery system for
    these programs, encouraging support for rural community assistance
    programs, farm labor housing grants, self-help housing grants, and
    rural capacity building. The Coalition is comprised of approximately
    300 members nationwide. We have testified before the Subcommittee
    before and appreciate this opportunity to share the views of our
    members on Federal rural housing and community development policy.
        A disproportionate amount of the Nation's substandard housing is in
    rural areas. Rural households are poorer than urban households, pay
    more of their income for housing than their urban counterparts, and are
    less likely to receive government-assisted mortgages. They also have
    limited access to mortgage credit and the secondary mortgage market,
    making them prime targets for predatory lending. Rural America needs
    programs targeted directly at the issues facing its population. The
    Rural Housing Service (RHS) of Rural Development (RD) meets many of
    these needs, serving low and very-low income families with safe
    affordable housing.
        According to the 2000 Census, there are 106 million housing units
    in the United States. Of that, 23 million, or 22 percent, are located
    in non-metro areas. 1.6 million of these units are either moderately or
    severely substandard. At the same time, many non-metro households are
    unable to afford adequate housing due to high poverty rates. According
    to a 1999 Economic Research Service report, the poverty rate in Rural
    America was 15.9 percent--over 8 million people--compared to 13.2
    percent in urban areas. A full 5.5 million people, or one-quarter of
    the non-metro population, are overburdened by housing costs.
        Renters in rural areas are, in fact, the worst housed individuals
    and families in the country. Thirty-five percent of all rural renters
    are cost-burdened, paying more than 30 percent of their income for
    housing. Almost one million rural renters suffer from multiple housing
    problems, 60 percent of whom pay more than 70 percent of their income
    for housing.
        Prospective homeowners suffer the same problems of high rates of
    poverty and poor quality of housing as rural renters. Additionally,
    they suffer from the non-availability of credit, specifically a limited
    access to mortgage credit. The consolidation of the banking industry
    that accelerated throughout the 1990s has had a significant impact on
    rural communities. Mergers among banks have replaced local community
    lenders with large centralized institutions located in urban areas.
    Aside from shifting the locus of loan making, this trend has eroded the
    competitive environment that, in the past, encouraged rural lenders to
    offer terms and conditions that were attractive to borrowers.

                             RURAL HOUSING SERVICE

    Section 515 Rural Rental Housing Program
        Although we often talk about the surge in homeownership and all of
    its benefits, not all of us, especially in rural areas, have the means
    to be homeowners. Thus, USDA's RHS Section 515 rural rental housing
    program is invaluable to low-income residents in rural communities. The
    portfolio contains 450,000 rented apartments in Section 515
    developments, the value of which is evident when compared to the
    900,000 rural renters in substandard housing. The average 515 tenant
    income is little more than $9,000, which is equal to only 30 percent of
    the Nation's rural median household income. Sixty percent of the
    tenants are elderly or disabled and one-quarter are minority.
        The Federal Government's present investment in rural rental housing
    is at its lowest level in more than 25 years. Over the last 15 years,
    Congress and Administrations of both parties have unwisely cut the
    rural rental housing budget, and lending has declined from over $500
    million a year in 1994 to just $114 million in fiscal year 2003 and
    2004. In fact, for the last 3 years the Administration's budget
    included no funding whatsoever for rural rental housing production. As
    a result, there is scant production of new rural rental housing. The
    Administration clams that low income rural renters can get housing
    assistance through the section 538 guarantee program. We think that is
    highly unlikely.
        As Congress considers future policy for rural housing, it has two
    opportunities to protect our Nation's rural renters and homeowners. The
    first is to maintain the existing stock of Section 515 units. The
    second is to increase the production of affordable rental housing units
    in rural communities. The current portfolio of Section 515 units
    represents an important resource to low-income families in Rural
    America, and as a result of declining Federal resources for the
    development of new housing developments, it is essential to preserve
    the existing stock.
        The existing Section 515 portfolio is aging. Of the 17,000
    developments across the country close to 10,000 are more than 20 years
    old. To maintain this stock, it will take a commitment of Federal funds
    for restoration. An injection of new debt or equity is required to
    finance repairs and upgrades, and keep rural housing safe and
    available.
        The Housing Act of 1987 regulated roughly two-thirds of rural
    rental housing principally financed under Section 515. This legislation
    placed a low-income use restriction on Section 515 and also established
    financial incentives to owners to maintain their properties for low-
    income housing. In theory, at the end of the initial 20-year use
    restriction, an owner could seek an incentive to extend long-term low-
    income use, or sell the project to a nonprofit organization or public
    body that would operate the housing for low-income use.
        However, the lack of adequate funding for incentives has raised a
    great concern among owners. Many wish to prepay, but cuts to Section
    515 have eliminated RHS's means to compel them to keep their properties
    affordable when they do. Moreover, the law restricts their ability to
    seek incentives or sell to a nonprofit organization or public body.
        In 2004, the administration initiated an important study of the
    Section 515 portfolio. It determined that only 10 percent of the units
    were in hot' markets in which they could be used for market rate
    tenants or owners. The balance of the units were in markets in which
    their highest and best use is low income housing. Most need repair and
    renovation and the price tag over a 20 year period is over $2 billion.
        So the Administration is to be congratulated in documenting the
    need for additional assistance for rural rental housing developments.
    They are also to be congratulated for gaining additional funds in the
    budget request: $214 million for housing vouchers for tenants living in
    development in hot markets where prepayment is a real possibility.
        But while it is important to protect vulnerable tenants, this
    policy ignores the long-term implications of an escalating decline in
    the affordable housing stock. We believe the administration's approach
    is too narrow. By focusing solely on protecting tenants in hot markets,
    the Administration may provide an incentive that encourages prepayment.
    The policy also ignores the other 90 percent of units that need repair
    and renovation.
        We urge the Subcommittee to approve the request for additional
    assistance for rural rental housing. However, we also urge that, in
    additional to providing some funding for vouchers, this assistance be
    distributed across Section 515 for use as equity loans, financing for
    transfer to non-profits and repair and renovation of existing projects.
    Section 502 Single Family Direct Loan Program
        Section 502 is the only Federal program providing home ownership
    opportunities to low income-families. The average income of households
    assisted under Section 502 is $18,500. About 3 percent of households
    have annual incomes of less than $10,000. Some 46 percent of Section
    502 families have incomes at 46 percent of area median. Since its
    inception, Section 502 has provided loans to almost two million
    families. The current average budget authority cost to the Federal
    Government is extremely low, less than $10,000 per unit.
        Despite low cost to the government and failing delinquency rates,
    the number of home ownership loans for low income people is falling. In
    fiscal year 2004, RHS provided 14,641 loans and in fiscal year 2005,
    10,800 loans, even though RHS had on hand more than 35,000 loan
    requests of over $2.3 billion at the end of fiscal year 2004. Even in
    the face of unprecedented demand the projected total falls in fiscal
    year 2006 to 9,000.
        The decline in direct loans for low-income families has been
    inversely proportional to the major trend in rural housing: the
    increase in homeownership loan guarantees. In fiscal year 2005, the
    total available for guaranteed loans was $3.309 billion. The fiscal
    year 2006 request is $3.374 billion. Unfortunately for low-income
    people, the average income for families receiving guaranteed loans is
    roughly double that of those families receiving direct loans.
        Under Mutual and Self-Help Housing, with the assistance of local
    housing agencies, groups of families eligible for Section 502 loans
    perform approximately 65 percent of the construction labor on each
    other's homes under qualified supervision. This program, which has
    received growing support because of its proven model, has existed since
    1961. The average number of homes built each year over the past 3 years
    has been approximately 1,500. Sixty-eight percent of the participants
    in self-help housing are minority households.
        The budget requests $34 million.

    Non-Profit Organizations
        Due to dramatic housing program reductions and the continuing
    strength of the Nation's real estate market, the private sector
    delivery system is not as prominent as it used to be and in many rural
    communities no longer exists. In some rural areas, non-profits have
    filled the void by pursuing a multiple funding strategy. Skilled local
    organizations meld Federal, State, local and private resources together
    to provide affordable housing financing packages to low-income
    families. But there is yet no comprehensive source of federal support
    to promote a non-profit delivery system.
        The Rural Community Development Initiative program enhances the
    capacity of rural organizations to develop and manage low-income
    housing, community facilities, and economic development projects. These
    funds are designated to provide technical support, enhance staffing
    capacity, and provide pre-development assistance--including site
    acquisition and development. RCDI provides rural community development
    organizations with some of the resources necessary to plan, develop,
    and manage community development projects. Using dollar-for-dollar
    matching funds and technical assistance from 19 intermediary
    organizations, some $12 million in capacity building funds were
    distributed in previous years to 240 communities. Yet this valuable
    program has been eliminated in this year's budget request. For fiscal
    year 2006, we recommend $6.5 million for the Rural Community
    Development Initiative, the current rate.
    Farm Labor Housing
        Two additional rental housing programs specifically address the
    needs of farm laborers. Migrant and seasonal farmworkers, who help keep
    our local and state economies growing, are some of the Nation's most
    poorly housed populations. The last documented national study indicated
    a shortage of almost 800,000 units of affordable housing for
    farmworkers.
        Farmworkers and their families are some of the poorest and least
    assisted people in the Nation. 61 percent of farmworkers earn incomes
    below the poverty-level and consequently some 60 percent of farmworker
    households live below the poverty threshold, almost six times the
    national rate. Despite this level of poverty, less than 20 percent of
    farmworker households receive public assistance; most commonly food
    stamps, rarely public or subsidized housing.
        There are only two Federal housing programs which specifically
    target farmworkers and their housing needs: USDA's Section 514 loans
    and 516 grants. Non-profit housing organizations and public bodies use
    the loan and grant funds, along with the Rural Housing Service's rural
    rental assistance, to plan and develop housing and related facilities
    for migrant and seasonal low-income farmworkers. Section 514 authorizes
    the Rural Housing Service to make loans with terms of up to 33 years
    and interest rates as low as one percent. Section 516 authorizes RHS to
    provide grant funding when the applicant will provide at least 10
    percent of the total development cost from his own resources or through
    a 514 loan.
        We appreciate the past support of this Subcommittee and urge an
    appropriation of $100 million for section 514 and 516.

                             RURAL UTILITY SERVICE

        Hundreds of rural communities nationwide do not have access to
    clean drinking water and safe waste disposal systems. According to the
    2000 Census, approximately 1.9 million people lack indoor plumbing and
    basic sanitation services, including potable water and sewer. According
    to 1999 EPA Safe Drinking Water Needs Survey, $48 billion will be
    required over the next 20 years to ensure that communities under 10,000
    have safe drinking water supplies. According to EPA's 2000 Clean Water
    Needs Survey $16 billion will be required over the next 20 years to
    provide the 19,000 wastewater treatment facilities needed for
    communities of fewer than 10,000 people. In all, small communities will
    need some $64 billion in order to meet their water and wastewater
    needs.
        The budget request cuts $99 million from rural water-sewer loans
    and grants. We urge the Subcommittee to restore these funds.
        The issue of affordability is critical to waste disposal systems,
    which are generally more expensive than water systems. Waste systems
    naturally succeed water systems. With central water comes indoor
    plumbing, washing machines, dishwashers, and other amenities, all of
    which eventually require an efficient wastewater disposal system. Low-
    income communities often pay as much as they can afford for water
    service alone and are unable to manage the combined user fees for water
    and waste. Furthermore, according to EPA data, ratepayers of small
    rural systems are charged up to four times as much per household as
    ratepayers of larger systems. In some extreme situations, some
    households are being forced out of homeownership because they cannot
    afford rising user costs. Small water and wastewater systems lack the
    economies of scale needed to reduce costs on their own.
        In order for communities to cut back on project costs and have
    affordable utility rates, they typically underestimate operation and
    maintenance costs in the budgets for new systems. Therefore, there is
    often limited or no investment in the kinds of upgrades and expansions
    of infrastructure needed for community development to stabilize local
    small businesses, develop affordable housing, and invest in other
    industrial development.
        USDA's Rural Utilities Service (RUS) is the primary Federal force
    in rural water and waste development, providing loans and grants to
    low-income communities in rural areas. The agency assists low-income
    rural communities that would not otherwise be able to afford such
    services. Nearly all the communities RUS served last year had median
    household income below their state's non-metro median household income.
        In providing these important services, RUS also protects public
    health and promotes community stabilization and development. Aging
    municipal sewage systems alone are responsible for 40,000 overflows of
    raw sewage each year. The overflows cause health hazards including
    gastrointestinal problems and nausea and inflict long-term damage on
    the environment. Additionally, businesses and industries are often
    unable or reluctant to locate in areas without functioning water and
    sewer systems. But with the assistance of RUS, communities are able to
    have the services they need to improve their health and their
    economies.
        Through Federal and State initiatives, RUS is working to confront
    the challenges faced by rural communities. With increasingly restricted
    time and money, state offices are using other resources such as
    leveraged funds and technical assistance from the Rural Community
    Assistance Program (RCAP), leveraged funds through HUD's Community
    Development Block Grant program, and the EPA's State Revolving Loan
    Funds, as well as through some private lenders.

    Other Federal Agencies
        Mr. Chairman, for many rural communities the USDA's Rural
    Development programs are the only source of housing and community
    development assistance. Other Federal agencies do not have a good
    record of supporting Rural America.
        Rural households have limited access to mortgage credit and the
    secondary mortgage market and are less likely to receive government-
    assisted mortgages than their urban counterparts--according to the 1995
    American Housing Survey, only 14.6 percent of non-metro residents
    versus 24 percent of metro residents receive Federal assistance.
        Moreover, poor rural renters do not fair as well as poor urban
    renters in accessing existing programs. Only 17 percent of very low-
    income rural renters receive housing subsidies, and, overall, only 12
    percent of HUD Section 8 assistance goes to rural areas; only seven
    percent of Federal Housing Administration (FHA) assistance goes to non-
    metro areas; on a per-capita basis, rural counties fared worse with
    FHA, receiving only $25 per capita versus $264 per capita in metro
    areas.
        Programs such as HOME, CDBG and FHA may have the intention of
    serving rural areas, but fail to do so to the appropriate extent. For
    these reasons we oppose the Strengthening America's Community
    Initiative and urge the Subcommittee and the Congress to continue to
    provide appropriations for Federal rural development programs.
        Mr. Chairman and members of the Committee, we look to you for
    continued support of the efforts of Rural Development. These programs
    are vital to the survival of our small communities nationwide. They
    address the most basic needs of affordable housing and clean water that
    still exist all over the country.
        We appreciate your past support and your present attention to this
    matter.
                                     ______

          Prepared Statement of the National Rural Telecom Association

                         SUMMARY OF TESTIMONY REQUESTS

        Project involved.--Telecommunications lending programs administered
    by the Rural Utilities Service of the U.S. Department of Agriculture.
        Actions proposed:
      --Supporting loan levels for fiscal year 2006 in the amounts
            requested in the President's budget for 5 percent direct ($175
            million) and cost of money ($425 million) and the associated
            subsidy, as required, to fund those programs at the requested
            levels. Supporting guaranteed loans in the same amount ($125
            million), as contained in the fiscal year 2005 Agriculture
            Appropriations Act. Supporting the budget recommendation to
            transfer $175 million in lending authority from the Rural
            Telephone Bank (RTB) to the cost-of-money program in connection
            with the administration's stated intention to dissolve the bank
            in fiscal year 2006.
      --Supporting the budget request for $358.9 million in direct loans
            for broadband facilities and internet service access provided
            through discretionary funding.
      --Supporting, subject to the successful implementation in fiscal year
            2006 of the administration initiative to dissolve the Rural
            Telephone Bank pursuant to Sec. 411 of the RTB enabling act,
            elimination of the restriction on retirement of Rural Telephone
            Bank Class A stock, the prohibition against the transfer of
            Rural Telephone Bank excess funds to the general fund as well
            as the requirement that Treasury pay interest on all Bank funds
            deposited with it. Opposing the proposal contained in the
            budget to transfer funds from the unobligated balances of the
            liquidating account of the Rural Telephone Bank for the bank's
            administrative expenses.
      --Supporting continued funding, as requested in the President's
            budget, in the amount of $25 million in grant authority
            designated for distance learning and medical link purposes.
        Mr. Chairman, Members of the Committee: My name is John F. O'Neal.
    I am General Counsel of the National Rural Telecom Association. NRTA is
    comprised of commercial telephone companies that borrow their capital
    needs from the Rural Utilities Service of the U.S. Department of
    Agriculture (RUS) to furnish and improve telephone service in rural
    areas. Approximately 1,000, or 71 percent of the Nation's local
    telephone systems borrow from RUS. About three-fourths of these are
    commercial telephone companies. RUS borrowers serve almost 6 million
    subscribers in 46 states and employ over 22,000 people. In accepting
    loan funds, borrowers assume an obligation under the act to serve the
    widest practical number of rural users within their service area.

                               PROGRAM BACKGROUND

        Rural telephone systems have an ongoing need for long-term, fixed
    rate capital at affordable interest rates. Since 1949, that capital has
    been provided through telecommunications lending programs administered
    by the Rural Utilities Service and its predecessor, the Rural
    Electrification Agency (REA).
        RUS loans are made exclusively for capital improvements and loan
    funds are segregated from borrower operating revenues. Loans are not
    made to fund operating revenues or profits of the borrower system.
    There is a proscription in the Act against loans duplicating existing
    facilities that provide adequate service and state authority to
    regulate telephone service is expressly preserved under the Rural
    Electrification Act.
        Rural telephone systems operate at a severe geographical handicap
    when compared with other telephone companies. While almost 6 million
    rural telephone subscribers receive telephone service from RUS borrower
    systems, they account for only 4 percent of total U.S. subscribers. On
    the other hand, borrower service territories total 37 percent of the
    land area--nearly 12 million squares miles. RUS borrowers average about
    six subscribers per mile of telephone line and have an average of more
    than 1,000 route miles of lines in their systems.
        Because of low-density and the inherent high cost of serving these
    areas, Congress made long-term, fixed rate loans available at
    reasonable rates of interest to assure that rural telephone
    subscribers, the ultimate beneficiaries of these programs, have
    comparable telephone service with their urban counterparts at
    affordable subscriber rates. This principle is especially valid today
    as this administration endeavors to deploy broadband technology and as
    customers and regulators constantly demand improved and enhanced
    services. At the same time, the underlying statutory authority
    governing the current program has undergone significant change. In
    1993, telecommunications lending was refocused toward facilities
    modernization. Much of the subsidy cost has been eliminated from the
    program. In fact, most telecommunications lending programs now generate
    revenue for the government. The subsidy that remains has been targeted
    to the highest cost, lowest density systems in accordance with this
    administration's stated objectives.
        We are proud to state once again for the record that there has
    never been a loan default by a rural telephone system borrower! All of
    their loans have been repaid in accordance with their terms, $12.4
    billion in principal and interest at the end of the last fiscal year.

               NEED FOR RUS TELECOMMUNICATIONS LENDING CONTINUES

        The need for rural telecommunications lending is great today,
    possibly even greater than in the past. Technological advances make it
    imperative that rural telephone companies upgrade their systems to keep
    pace with improvements and provide the latest available technology to
    their subscribers. And 3 years ago, Congress established a national
    policy initiative mandating access to broadband for rural areas. But
    rapid technological changes and the inherently higher costs to serve
    rural areas have not abated, and targeted support remains essential.
        Competition among telephone systems and other technological
    platforms have increased pressures to shift more costs onto rural
    ratepayers. These led to increases in both interstate subscriber line
    charges and universal service surcharges on end users to recover the
    costs of interstate providers' assessments to fund the Federal
    mechanisms. Pressures to recover more of the higher costs of rural
    service from rural customers to compete in urban markets will further
    burden rural consumers. There is a growing funding crisis for the
    statutory safeguards adopted in 1996 to ensure that rates, services and
    network development in rural America will be reasonably comparable to
    urban telecommunications opportunities.

          ONGOING CONGRESSIONAL MANDATES FOR RURAL TELECOMMUNICATIONS

        Considerable loan demand is being generated because of the mandates
    for enhanced rural telecommunications standards contained in the
    authorizing legislation. We are, therefore, recommending the following
    loan levels for fiscal year 2006 and the appropriation of the
    associated subsidy costs, as required, to support these levels:

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

    ------------------------------------------------------------------------
    5 percent Direct Loans..................................    $145,000,000
    Cost-of-Money Loans.....................................     425,000,000
    Guaranteed Loans........................................     125,000,000
    Broadband Loans.........................................     358,875,000
                                                             ---------------
          Total.............................................   1,053,875,000
    ------------------------------------------------------------------------

        These are the same levels established in the fiscal year 2005
    appropriations Act for the 5 percent direct and guaranteed loan
    programs and the same amounts for 5 percent direct and cost-of-money
    loans, as requested in the President's budget for fiscal year 2006. The
    authorized levels of loans in each of these programs were substantially
    obligated in fiscal year 2004 and current estimates are that authorized
    program levels will be met in fiscal year 2005. We believe that the
    needs of this program balanced with the minimal cost to the taxpayer
    make the case for its continuation at the stated levels.

                  RURAL TELEPHONE BANK DISSOLUTION INITIATIVE

        The Rural Telephone Bank was established by Congress in 1971 to
    provide supplemental financing for rural telephone systems with the
    objective that the bank ultimately would be owned and operated by its
    private shareholders. However, changed circumstances in the rural
    telephone industry and difficulties associated with accelerating
    privatization of the Rural Telephone Bank have made this transition to
    private ownership and control problematic raising difficult questions
    about the viability of a privatized bank and its future support among
    rural telephone systems.
        In recognition of these factors, the administration has determined
    to liquidate and dissolve the bank in fiscal year 2006 pursuant to Sec.
    411 of the RTB enabling act. We support this action as well as the
    budget recommendation to transfer the current lending authority of the
    RTB ($175 million) to the cost-of-money loan program so that rural
    telephone systems will continue to have adequate loan resources
    available for rural telecommunications infrastructure development at
    the levels intended by the Congress.

                           THE BROADBAND LOAN PROGRAM

        The administration is recommending again this year that the
    mandatory funding of loans for the deployment of broadband technology
    in rural areas provided in the recent farm act in the amount of $20
    million (new section 601(j)(1)(A) of the Rural Electrification Act of
    1936) be rescinded in fiscal year 2006 and in its place the budget
    requests $11.7 million in new discretionary authority for these
    purposes. NRTA supports the administration's budget request of the
    subsidy cost for this program that will provide approximately $358.9
    million in loan levels for fiscal year 2006. We applaud the
    administration's continuing commitment to this program to facilitate
    the deployment of broadband technology throughout our Nation's rural
    areas.

                          SPECIFIC ADDITIONAL REQUESTS

      --Subject to the successful implementation in fiscal year 2006 of the
            administration's initiative to liquidate and dissolve the Rural
            Telephone Bank pursuant to Sec. 411 of the RTB enabling act,
            NRTA supports elimination of the restriction on the retirement
            of class A government stock in the RTB, the prohibition against
            transfer of RTB funds to the general fund and the requirement
            for the payment of interest by Treasury
        The Administration has recommended in the budget that the general
    provision of the fiscal year 2005 act (Sec. 413) containing the 5
    percent annual statutory restriction on the retirement of class A
    government stock in the Rural Telephone Bank be eliminated in its
    entirety. In principle, the association supports that proposal.
    However, we urge the Committee to continue this provision in its
    entirety in the fiscal year 2006 act while providing an exception that
    would make the provision inapplicable in the event of liquidation or
    dissolution of the bank. This would assure that the protections
    provided the private stockholders by this provision would be maintained
    in the event that, for some unanticipated reason, the administration
    does not go forward with its stated intention to liquidate the bank or,
    if its implementation is delayed beyond fiscal year 2006. Previous
    appropriations acts (fiscal year 1997 through fiscal year 2005) have
    recognized the ownership rights of the private class B and C
    stockholders by prohibiting a transfer to the Treasury of the bank's
    excess, unobligated fund balances which otherwise would have been
    required by the Federal credit reform act. The balance of the current
    statutory provision, also contained in previous years' appropriations
    acts, that requires Treasury to pay interest on bank funds deposited
    with it should also be continued in fiscal year 2006, except in the
    event of dissolution of the bank.
      --Reject Budget Proposal to Transfer Funds from RTB Liquidating
            Account for Administrative Costs
        The President's budget again proposes that the bank assume
    responsibility for its administrative costs by a transfer of funds from
    the unobligated balances of the bank's liquidating account rather than
    through an appropriation. As NRTA has pointed out in its testimony in
    previous years, this recommendation is contrary to the specific
    language of Sec. 403(b) of the RTB enabling act. It would not result in
    budgetary savings and has been specifically rejected by this Committee
    in previous years. No new justification is contained in this year's
    budget and once again we request its rejection.
      --Grants for Medical Link and Distance Learning Purposes
        We support the continuation in fiscal year 2006 of the $25 million
    in grant authority provided in the President's budget for medical link
    and distance learning purposes. The purpose of these grants is to
    accelerate deployment of medical link and distance learning
    technologies in rural areas through the use of telecommunications,
    computer networks, and related advanced technologies by students,
    teachers, medical professionals, and rural residents.

                                   CONCLUSION

        Thank you for the opportunity to present the association's views
    concerning this vital program. The telecommunications lending programs
    of RUS continue to work effectively and accomplish the objectives
    established by Congress at a minimal cost to the taxpayer.
                                     ______

        Prepared Statement of the National Turfgrass Evaluation Program

        Mr. Chairman and Members of the Subcommittee: On behalf of the
    National Turfgrass Evaluation Program (NTEP), I appreciate the
    opportunity to present to you the turfgrass industry's need and
    justification for continuation of the $490,000 appropriated in the
    fiscal year 2005 budget for turfgrass research within the Agricultural
    Research Service (ARS) at Beltsville, MD. Secondly, we are asking for
    twelve individual research positions of $450,000 each. This amount is
    being requested by House members in individual districts where the
    positions are located. We appreciate the support of research funding at
    Logan, UT ($125,000) and Beaver, WV ($150,000) provided by the
    committee in fiscal year 2005 and request that funding be increased to
    $450,000 for each position in fiscal year 2006.

    Justification of $490,000 Appropriation Request for the Existing ARS
            Scientist Position and Related Support Activities
        NTEP and the turfgrass industry are requesting the Subcommittee's
    support for $490,000 to continue funding for the full-time scientist
    staff position within the USDA, ARS at Beltsville, MD, focusing on
    turfgrass research, that was appropriated in the fiscal year 2005
    budget, and in the three previous budget cycles.
        Turfgrass provides multiple benefits to society including child
    safety on athletic fields, environmental protection of groundwater,
    reduction of silt and other contaminants in runoff, and green space in
    home lawns, parks and golf courses. Therefore, by cooperating with
    NTEP, USDA has a unique opportunity to take positive action in support
    of the turfgrass industry. While the vast majority of the USDA's funds
    have been and will continue to be directed toward traditional ``food
    and fiber'' segments of U.S. agriculture, it is important to note that
    turfgrasses (e.g., sod production) are defined as agriculture in the
    Farm Bill and by many other departments and agencies. It should also be
    noted that the turfgrass industry is the fastest growing segment of
    U.S. agriculture, while it receives essentially no Federal support.
    There are no subsidy programs for turfgrass, nor are any desired.
        For the past 70 years, the USDA's support for the turfgrass
    industry has been modest at best. The turfgrass industry's rapid
    growth, importance to our urban environments, and impact on our daily
    lives warrant more commitment and support from USDA.
        A new turfgrass research scientist position within USDA/ARS was
    created by Congress in the fiscal year 2001 budget. Additional funding
    was added in fiscal year 2002 with the total at $490,000. A research
    scientist was hired, and is now working at the ARS, Beltsville, MD
    center. A research plan was developed and approved by ARS. This
    scientist has used the funding for a full-time technician, equipment
    and supplies to initiate the research plan and for collaborative
    research with universities. We have an excellent scientist in place and
    he is making good progress in establishing a solid program. At this
    point, losing the funding for the position would be devastating to the
    turf industry, as significant research has begun.

    Justification of Funding for 12 ARS Scientist Positions at ARS
            Installations Around the United States $450,000 Each; Total:
            $5,400,000 Appropriation Request for the First Installment on
            the National Turfgrass Research Initiative
        The turfgrass industry also requests that the Subcommittee
    appropriate an additional $5,400,000 for the National Turfgrass
    Research Initiative. This Initiative has been developed by USDA/ARS in
    partnership with the turfgrass industry. We are asking for twelve
    priority research positions at nine locations across the United States.
    These twelve positions address the most pressing research needs, namely
    water use/efficiency and environmental issues. $450,000 is being
    requested for each location.
        The USDA needs to initiate and maintain ongoing research on
    turfgrass development and improvement for the following reasons:
      --The value of the turfgrass industry in the United States is $40
            billion annually. There are an estimated 50,000,000 acres of
            turfgrass in the U.S. Turfgrass is the number one or two
            agricultural crop in value and acreage in many states (e.g.,
            MD, PA, FL, NJ, NC).
      --As our society becomes more urbanized, the acreage of turfgrass
            will increase significantly. In addition, state and local
            municipalities are requiring the reduction of water, pesticides
            and fertilizers on turfgrass. However, demand on recreational
            facilities will increase while these facilities will still be
            required to provide safe turfgrass surfaces.
      --Currently, the industry spends about $10 million annually on
            turfgrass research. However, private and university research
            programs do not have the time nor resources to identify
            completely new sources of beneficial genes for stress
            tolerance. ARS turfgrass scientists will enhance the ongoing
            research currently underway in the public and private sectors.
      --Water management is a key component of healthy turf and has direct
            impact on nutrient and pesticide losses into the environment.
            Increasing demands and competition for potable water make it
            necessary to use water more efficiently. Also, drought
            situations in many regions have limited the water available
            and, therefore, have severely impacted the turf industry as
            well as homeowners and young athletes. Therefore, new and
            improved technologies are needed to monitor turf stresses and
            to schedule irrigation to achieve the desired quality.
            Technologies are also needed to more efficiently and uniformly
            irrigate turfgrasses. Drought tolerant grasses need to be
            developed. In addition, to increase water available for
            irrigation, waste water (treated and untreated) must be
            utilized. Some of these waste waters contain contaminants such
            as pathogens, heavy metals, and organic compounds. The movement
            and accumulation of these contaminants in the environment must
            be determined.
      --USDA conducted significant turfgrass research from 1920-1988.
            However, since 1988, no full-time scientist has been employed
            by USDA, Agricultural Research Service (ARS) to conduct
            turfgrass research specifically, until the recently
            appropriated funds become available.
        The turfgrass industry has met on several occasions with USDA/ARS
    officials to discuss the new turfgrass scientist positions, necessary
    facilities, and future research opportunities. In January 2002, ARS
    held a customer workshop to gain valuable input from turfgrass
    researchers, golf course superintendents, sod producers, lawn care
    operators, athletic field managers and others on the research needs of
    the turfgrass industry. As a result of the workshop, ARS and the
    turfgrass industry have developed the National Turfgrass Research
    Initiative. The highlights of this strategy are as follows:

                 A NATIONAL STRATEGY FOR ARS TURFGRASS RESEARCH

        Research Objectives.--Conduct long-term basic and applied research
    to provide knowledge, decision-support tools and plant materials to aid
    in designing, implementing, monitoring and managing economically and
    environmentally sustainable turfgrass systems including providing sound
    scientifically based information for use in the regulatory process.
        Research Focus.--To make a significant contribution in developing
    and evaluating sustainable turfgrass systems, ARS proposes developing
    research programs in six major areas:
    Component I. Water Management Strategies and Practices
        Rationale.--New and improved technologies are needed to monitor
    turf stresses and to schedule irrigation to achieve desired turf
    quality but with greater efficiency or using other water sources.
    Component II. Germplasm: Collection, Enhancement and Preservation
        Rationale.--Grasses that better resist diseases, insects, drought,
    traffic, etc. are desperately needed. Also, a better understanding of
    the basic biology of turfgrass species is essential.
    Component III. Improvement of Pest Management Practices
        Rationale.--New tools and management practices are needed to
    adequately control weeds, diseases, insects and vertebrate pests while
    reducing input costs and pesticide use.
    Component IV. The Environment: Understanding and Improvement of
            Turfgrass' Role
        Rationale.--The need is great to quantify the contribution of turf
    systems to water quality and quantify of vital importance in addressing
    the potential role of turf systems in environmental issues.
    Component V. Enhancement of Soil and Soil Management Practices
        Rationale.--Research is needed to characterize limitations to turf
    growth and development in lessthan optimum soils and to develop cost-
    effective management practices to overcome these limitations.
    Component VI. Integrated Turf Management
        Rationale.--To develop needed tools for turf managers to select the
    best management practices for economic sustainability as well as
    environmental protection.

        ARS, as the lead agency at USDA for this initiative, has graciously
    devoted a significant amount of time to the effort. Like the industry,
    ARS is in this research endeavor for the long-term. To ARS' credit, the
    agency has committed staff, planning and technical resources to this
    effort. However, despite ARS' effort to include a budget request in the
    overall USDA budget request, USDA--at higher levels--has not seen fit
    to include this research as a priority. Thus, the industry is left with
    no alternative but to come directly to Congress for assistance through
    the appropriations process.
        The role and leadership of the Federal Government and USDA in this
    research are justifiable and grounded in solid public policy rationale.
    ARS is poised and prepared to work with the turfgrass industry in this
    major research initiative. However, ARS needs additional resources to
    undertake this mission.
        The turfgrass industry is very excited about this new proposal and
    wholeheartedly supports the efforts of ARS. Since the customers at the
    workshop identified turfgrass genetics/germplasm and water quality/use
    as their top priority areas for ARS research, for fiscal year 2006, the
    turfgrass industry requests that the following positions be established
    within USDA/ARS:

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

    ------------------------------------------------------------------------
    Position 1: Component I: Water: Agricultural Engineer--        $450,000
     Irrigation Southwest--Phoenix, AZ.........................
    Position 2: Component II: Germplasm: Molecular Biologist        450,000
     Southwest--Lubbock, TX....................................
    Position 3: Component IV: Environment: Agricultural             450,000
     Engineer--Fate & Transport Southwest--Phoenix, AZ.........
    Position 4: Component I: Water: Stress Physiologist--           450,000
     Salinity Southwest--Riverside, CA.........................
    Position 5: Component II: Germplasm: Geneticist--Stress         450,000
     Transition Zone--Beltsville, MD...........................
    Position 6: Component I: Water: Agricultural Engineer--         450,000
     Irrigation Transition Zone--Florence, SC..................
    Position 7: Component IV: Environment: Agricultural             450,000
     Engineer--Fate & Transport Northeast--University Park, PA.
    Position 8: Component III: Pest Management: Weed Scientist      450,000
     Northeast--University Park, PA............................
    Position 9: Component IV: Environment: Agricultural             450,000
     Engineer--Fate & Transport North Central--Ames, IA........
    Position 10: Component III: Pest Management: Pathologist        450,000
     Transition Zone--Beltsville, MD...........................
    Position 11: Component II: Germplasm: Geneticist--              450,000
     Biodiversity Upper West--Logan, UT........................
    Position 12: Component III: Pest Management: Entomologist       450,000
     North Central--Wooster, OH................................
                                                                ------------
          TOTAL................................................   5,400,000
    ------------------------------------------------------------------------

        For this research we propose an ARS-University partnership, with
    funding allocated to ARS for in-house research as well as in
    cooperation with university partners. For each of the individual
    scientist positions, we are requesting $300,000 for each ARS scientist
    position with an additional $150,000 attached to each position to be
    distributed to university partners, for a total of $450,000 per
    position. We are also asking that the funding be directed to ARS and
    then distributed by ARS to those university partners selected by ARS
    and industry representatives.
        In fiscal year 2005, in addition to restoring most of the $490,000
    appropriated in fiscal year 2004, the Subcommittee generously provided
    additional funding for turfgrass research at Beaver, WV ($150,000) and
    Logan, UT ($125,000). We appreciate the support of the Subcommittee for
    this new funding in fiscal year 2005 and ask for your continued support
    of that funding in fiscal year 2006 at $450,000 per location.
        In addition, you will be receiving Member requests for funding of
    each of the twelve positions described above. Therefore, we appreciate
    your strong consideration of each individual member request for the
    turfgrass research position in his or her respective congressional
    district.
        In conclusion, on behalf of the National Turfgrass Evaluation
    Program and the turfgrass industry across America, I respectfully
    request that the Subcommittee continue the funding appropriated in
    fiscal year 2005 for Beltsville, MD, ($490,000), Beaver, WV ($150,000)
    and Logan, UT ($125,000) within the Agricultural Research Service. I
    also request that the Subcommittee appropriate an additional $5,400,000
    for twelve new turfgrass scientist positions around the country, with
    $450,000 provided for each location.
        Thank you very much for your assistance and support.
                                     ______

                  Prepared Statement of The Nature Conservancy

        Mr. Chairman and members of the Subcommittee, I appreciate this
    opportunity to present The Nature Conservancy's recommendations for
    fiscal year 2006 appropriations. The Conservancy urges the Subcommittee
    to provide funding for Animal and Plant Health Inspection Service
    (APHIS) eradication efforts for four destructive invasive species--the
    Asian Longhorned Beetle, the Cactus Moth, the Emerald Ash Borer, and
    Sudden Oak Death. In addition we urge the Subcommittee to fully fund
    the Noxious Weed Control Act of 2004, and to place no limitation on the
    amount of acres to be enrolled in fiscal year 2006 in the Wetlands
    Reserve Program (WRP) administered by the Natural Resources
    Conservation Service.
        The Nature Conservancy is an international, non-profit organization
    dedicated to the conservation of biological diversity. Our mission is
    to preserve the plants, animals and natural communities that represent
    the diversity of life on Earth by protecting the lands and waters they
    need to survive. The Conservancy has more than 1,000,000 individual
    members and 1,900 corporate associates. We have programs in all 50
    States and in 27 foreign countries. We have protected more than 15
    million acres in the United States and Canada and more than 117 million
    acres with local partner organizations globally. The Conservancy owns
    and manages 1,400 preserves throughout the United States--the largest
    private system of nature sanctuaries in the world. Sound science and
    strong partnerships with public and private landowners to achieve
    tangible and lasting results characterize our conservation programs.
        Asian Longhorned Beetle (ALB).--The Asian Longhorned Beetle kills a
    wide variety of hardwood trees, particularly sugar maple. ALB threatens
    to devastate forests reaching from New England to the Great Lakes.
    Currently the beetle is found primarily in New York City and New
    Jersey. APHIS, State, and local officials are succeeding in a 9-year
    program to eradicate ALB. The President has proposed funding of $15.521
    million in fiscal year 2006 as compared to $28.933 million in fiscal
    year 2005. We urge the Subcommittee to fund ALB at $40 million in
    fiscal year 2006, so that the ongoing efforts to eradicate this pest
    are not jeopardized. Failure to eradicate the ALB exposes both urban
    and rural areas of northern States to substantial risk. If not stopped,
    ALB could kill 30 percent of the Nation's urban trees at a compensatory
    value of $669 billion.
        Maple trees are especially threatened. If unchecked, the New
    England maple syrup industry is threatened as well as autumn foliage
    tourism which generates $1 billion in revenue in New England every
    year.
        Cactus Moth.--The cactus moth kills prickly pear cacti. First found
    in Florida, the moth is rapidly moving along the Gulf Coast (currently
    it has traveled as far as Alabama) killing prickly pear cacti. APHIS
    has bred a sterile cactus moth that may help control the spread of this
    pest. Control of the cactus moth before it disperses around the Gulf
    Coast would protect the vast diversity of prickly pear cacti in the
    southwestern United States and Mexico. There are 31 likely host prickly
    pear species (opuntia) for the moth across the United States (9 found
    nowhere else in the world), including the federally endangered Opuntia
    treleasei, and 56 in Mexico (38 found nowhere else in the world).
    Additionally, control would protect agricultural interests.
    Horticultural production of prickly pears occurs in Arizona,
    California, Nevada, New Mexico, and Texas. Annual revenues for Arizona
    alone are estimated at $14 million. In drought years, ranchers in Texas
    have burned the spines off opuntias and fed them to cattle. This
    practice is even more important in Mexico, where opuntias are critical
    for the cattle industry. In Mexico, the agricultural impacts would be
    devastating: the area of cultivated and harvested wild cactus is
    estimated to be 3 million hectares. Opuntia products are the seventh
    most important agricultural product and the third most important
    subsistence food source. Further, opuntias are cultivated for
    agricultural purposes in at least 28 other countries. Thus, the cactus
    moth presents both a critical ecological and agricultural threat. We
    urge you to fund eradication efforts at $1.5 million in fiscal year
    2006 for a full sterile release program.
        Emerald Ash Borer (EAB).--The Emerald Ash Borer, an Asian native,
    was detected in 2002. Control programs began in 2003. The affected area
    covers 13,000 square miles in Michigan's Lower Peninsula and adjacent
    areas in Indiana, Ohio, and Ontario. At present, spread of the emerald
    ash borer to the Upper Peninsula, Illinois, and Wisconsin is partially
    prevented by lakes Michigan, Erie, and Huron. However, if eradication
    efforts are not sufficiently aggressive, EAB will spread further south
    into Ohio and Indiana, and be carried by people across bridges and
    through tunnels to other vulnerable areas in the East and Midwest.
    Seven billion ash trees are at risk across the Nation, at an estimated
    cost of $282 billion. We urge the Subcommittee to provide APHIS with
    $40 million to contain the Emerald Ash Borer in fiscal year 2006. The
    President's budget recognizes the urgent need to fight this pest and
    has requested $32.586 million for fiscal year 2006. In fiscal year
    2005, APHIS is spending $3.961 million in appropriated funds plus $11
    million in emergency funds drawn from the Commodity Credit Corporation
    (CCC). As you know, OMB does not usually allow emergency draws over
    several years from CCC so additional funding is needed in 2006 to
    eradicate this very dangerous pest.
        Sudden Oak Death (SOD).--Since 2000, APHIS has worked with
    California, Oregon, and other States to prevent the spread of SOD. This
    disease infects at least 38 native tree, shrub and herb species. The
    disease kills a variety of western and eastern oak trees. SOD has
    already killed tens of thousands of tanoaks, live oaks and black oaks
    in California. If SOD spreads into Oregon and Washington, it could
    severely disrupt production and movement of Douglas-fir seedlings used
    in replanting. If SOD spreads to the East, it is likely to kill large
    numbers of red oaks. Collectively the red and white oaks comprise 38
    percent of the Nation's total hardwood saw-timber volume.
        Containing Sudden Oak Death has become more challenging as the
    number of host plants has grown from 1 dozen to 3 dozen. The situation
    became a crisis in March 2004 when officials discovered that infected
    nursery plants had been shipped nationwide; more than 200 nurseries
    received these plants. APHIS has adopted highly restrictive regulations
    to prevent a recurrence of the 2004 crisis; the agency is receiving
    funding from CCC to fully implement these regulations in fiscal year
    2005. In fiscal year 2006, at least $12 million will be needed to
    ensure the efficacy of these regulations and curb the spread of this
    disease, approximately $10.5 million more than the President has
    requested. We recognize that funding is tight. However, relatively
    small investments now will go a long way toward eliminating these
    invasive species and prevent larger funding demands in the future.
        Noxious Weed Control and Eradication Act.--We respectfully request
    $15 million, the authorized amount, for implementation of the Noxious
    Weed Control and Eradication. As control and management of invasive
    species are important for agriculture, natural areas, forestry, and
    rangeland, this effort has strong bipartisan support. This issue is
    vital to the health of the Nation's economy and ecosystems.
        Interdepartmental National Invasive Species Crosscut Budget.--The
    Conservancy strongly supports the Interdepartmental National Invasive
    Species Crosscut Budget prepared by the National Invasive Species
    Council. This effort represents the most cost-effective way for Federal
    Government agencies to work together and prioritize their invasive
    species activities, and it will help them to measure success and
    achieve their goals of prevention, early detection, rapid response,
    control and management and restoration. When considering the
    Interdepartmental Crosscut Budget, the Conservancy recommends that you
    fund four requested increases for the Agricultural Research Service.
    These increases, on taxonomic knowledge of invasive species, biological
    control of tamarisk, nursery research for sudden oak death, and
    research to control yellow star thistle and leafy spurge across the
    Western States, would each benefit extensive agricultural and natural
    areas across the United States.
        Wetlands Reserve Program (WRP).--On Earth Day last year, President
    Bush committed to increasing the number of wetland acres in the United
    States. For fiscal year 2006, the President's budget proposes no cap
    via the appropriations bill on the number of acres that can be enrolled
    in WRP. We urge the subcommittee to not restrict the enrollment of
    wetland acres under WRP. Without a cap, we expect the Administration to
    enroll 250,000 acres consistent with 2002 farm bill authority. In 2005
    the appropriations bill limited WRP signup to 154,500 acres. WRP is the
    Nation's premier wetland protection program and without full funding
    the Administration will be hard pressed to meet its goal of adding
    wetlands to our national resources. Wetlands are critical for
    biodiversity in addition to the flood control and pollution filtering
    services they provide throughout the United States.
        Thank you for the opportunity to present The Nature Conservancy's
    comments on the U.S. Department of Agriculture's budget.
                                     ______

        Prepared Statement of the Northwest Indian Fisheries Commission

        Mr. Chairman and Members of the Committee, I am Billy Frank, Jr.,
    Chairman of the Northwest Indian Fisheries Commission (NWIFC), and on
    behalf of the twenty-Western Washington member Tribes, I submit this
    request for appropriations to support the research, sanitation and
    marketing of Tribal shellfish products. We request the following:
      --$500,000 to support seafood marketing costs which will assist the
            Tribes in fulfilling the commercial demands for their shellfish
            products both domestically and abroad;
      --$1,000,000 to support water and pollution sampling, sampling and
            research for paralytic shellfish poisoning and coordination of
            research projects with State agencies; and,
      --$1,000,000 to support data gathering at the reservation level for
            the conduct of shellfish population surveys and estimates.

                            TREATY SHELLFISH RIGHTS

        As with salmon, the Tribes' guarantees to harvest shellfish lie
    within a series of treaties signed with representatives of the Federal
    Government in the mid-1850s. In exchange for the peaceful settlement of
    what is today most of Western Washington, the Tribes reserved the right
    to continue to harvest finfish and shellfish at their usual and
    accustomed grounds and stations. The Tribes were specifically excluded
    from harvesting shellfish from areas ``staked or cultivated'' by non-
    Indian citizens. Soon after they were signed, the treaties were
    forgotten or ignored.
        The declining salmon resource in the Pacific Northwest negates the
    legacy Indian people in Western Washington have lived by for thousands
    of years. We were taught to care for the land and take from it only
    what we needed and to use all that we took.
        We depended on the gifts of nature for food, trade, culture and
    survival. We knew when the tide was out, it was time to set the table
    because we live in the land of plenty; a paradise complete. Yet,
    because of the loss of salmon habitat, which is attributable to
    overwhelming growth in the human population, a major pacific coastal
    salmon recovery effort ensues. Our shellfish resource is our major
    remaining fishery.
        At least ninety types of shellfish have been traditionally
    harvested by the Tribes in Western Washington and across the continent
    Indian people have called us the fishing Tribes because of our rich
    history of harvesting and caring for finfish and shellfish. Our
    shellfish was abundant and constituted a principal resource of export,
    as well as provided food to the Indians and the settlers, which greatly
    reduced the living expenses.
        Shellfish remain important for subsistence, economic, and
    ceremonial purposes. With the rapid decline of many salmon stocks, due
    to habitat loss from western Washington's unrelenting populous growth,
    shellfish harvesting has become a major factor in Tribal economies.
        The Tribes have used shellfish in trade with the non-Indian
    population since the first white settlers came into the region a
    century and a half ago. Newspaper accounts from the earliest days of
    the Washington Territory tell of Indians selling or trading fresh
    shellfish with settlers. Shellfish harvested by members of western
    Washington's Indian Tribes is highly sought after throughout the United
    States and the Far East. Tribal representatives have gone on trade
    missions to China and other Pacific Rim nations where Pacific Northwest
    shellfish--particularly geoduck--is in great demand. Trade with the Far
    East is growing in importance as the Tribes struggle to achieve
    financial security through a natural resources-based economy.
        Treaty language pertaining to Tribal shellfish harvesting included
    this section:
        ``The right of taking fish at usual and accustomed grounds and
    stations is further secured to said Indians, in common with all
    citizens of the United States; and of erecting temporary houses for the
    purposes of curing; together with the privilege of hunting and
    gathering roots and berries on open and unclaimed lands. Provided,
    however, that they not take shell-fish from any beds staked or
    cultivated by citizens.'' Treaty with the S'Klallam Tribes, January 26,
    1855.
        In exchange for the peaceful settlement of what is today most of
    western Washington, the Tribes reserved the right to continue to
    harvest finfish and shellfish at all of their usual and accustomed
    grounds and stations. The Tribes were specifically excluded from
    harvesting shellfish from areas ``staked or cultivated'' by non-Indian
    citizens.
        Tribal efforts to have the Federal Government's treaty promises
    kept began in the first years of the 20th Century when the United
    States Supreme Court ruled in U.S. v. Winans, reaffirming that where a
    treaty reserves the right to fish at all usual and accustomed places, a
    State may not preclude Tribal access to those places.
        Sixty years later, the Tribes were again preparing for battle in
    court. After many years of harassment, beatings and arrests for
    exercising their treaty-reserved rights, western Washington Tribes took
    the State of Washington to Federal court to have their rights legally
    re-affirmed. In 1974, U.S. District Court Judge George Boldt ruled that
    the Tribes had reserved the right to half of the harvestable salmon and
    steelhead in western Washington.
        The ``Boldt Decision,'' which was upheld by the U.S. Supreme Court,
    also re-established the Tribes as co-managers of the salmon and
    steelhead resources in western Washington. As a result of this ruling,
    the Tribes became responsible for establishing fishing seasons, setting
    harvest limits, and enforcing Tribal fishing regulations. Professional
    biological staffs, enforcement officers, and managerial staff were
    assembled to ensure orderly, biologically-sound fisheries.
        Beginning in the late 1970s, Tribal and State staff worked together
    to develop comprehensive fisheries that ensured harvest opportunities
    for Indians and non-Indians alike, and also preserved the resource for
    generations to come.
        It was within this new atmosphere of cooperative management that
    the Tribes sought to restore their treaty-reserved rights to manage and
    harvest shellfish from all usual and accustomed areas. Talks with their
    State counterparts began in the mid-1980s, but were unsuccessful. The
    Tribes filed suit in Federal court in May 1989 to have their shellfish
    harvest rights restored.
        The filing of the lawsuit brought about years of additional
    negotiations between the Tribes and the State. Despite many serious
    attempts at reaching a negotiated settlement, the issue went to trial
    in May 1994.
        In 1994, District Court Judge Edward Rafeedie upheld the right of
    the treaty Tribes to harvest 50 percent of all shellfish species in
    their usual and accustomed fishing areas. Judge Rafeedie also ordered a
    shellfish Management Implementation Plan that governs Tribal/State co-
    management activities. After a number of appeals, the U.S. 9th Circuit
    Court of Appeals let stand Rafeedie's ruling in 1998. Finally, in June
    1999, the U.S. Supreme Court denied review of the District court
    ruling, effectively confirming the treaty shellfish harvest right.
    assist the tribes in marketing efforts to fulfill the demands for their

                          SHELLFISH PRODUCTS, $500,000

        Shellfish harvested by members of Western Washington Indian Tribes
    are of extreme quality and are highly sought after throughout the
    United States, Europe and the Far East. Unfortunately, because Tribes
    are not centrally organized and it is the individual Tribal fisher who
    harvests the resource, such markets have never fully materialized.
        We request $500,000, which will assist the Tribes in promoting our
    shellfish products, both in domestic and international markets. Tribes
    anticipate the need to provide necessary health training to harvesters,
    possibly develop cooperative seafood ventures, develop marketing
    materials and engage in actual marketing operations. Specific earmarked
    funding from the Committee can jump start Tribal efforts in these
    areas. We also anticipate participating in intertribal consortiums that
    generally promote Tribal products, and urge the Committee to support
    necessary funding for those efforts. Funding from the Committee will
    allow the Tribes to realize the fair value for their product, help
    employ more Tribal members, and allow the Tribes to fulfill their
    treaty rights.

       WATER AND POLLUTION SAMPLING, SAMPLING AND RESEARCH FOR PARALYTIC
     SHELLFISH POISONING AND COORDINATION OF RESEARCH PROJECTS WITH STATE
                        AND FEDERAL AGENCIES, $1,000,000

        Shellfish growing areas are routinely surveyed for current or
    potential pollution impacts and are classified based on the results of
    frequent survey information. No shellfish harvest is conducted on
    beaches that have not been certified by the Tribes and the Washington
    Department of Health. Growing areas are regularly monitored for water
    quality status and naturally-occurring biotoxins to protect the public
    health.
        However, both Tribal and non-Indian fisheries have been threatened
    due to the lack of understanding about the nature of biotoxins,
    especially in subtidal geoduck clams. Research targeted to better
    understand the nature of biotoxins could prevent unnecessary illness
    and death that may result from consuming toxic shellfish, and could
    prevent unnecessary closure of Tribal and non-Indian fisheries.

     DATA GATHERING AT THE RESERVATION LEVEL FOR THE CONDUCT OF SHELLFISH
                  POPULATION SURVEYS AND ESTIMATES, $1,000,000

        Very little current data and technical information exists for many
    of the shellfish fisheries now being jointly managed by State and
    Tribal managers. This is particularly true for many free-swimming and
    deep-water species. This lack of information can not only impact
    fisheries and the resource as a whole, but makes it difficult to assess
    50/50 treaty sharing arrangements. Additionally, intertidal assessment
    methodologies differ between State and Tribal programs, and can lead to
    conflicts in management planning.
        Existing data systems must be enhanced for catch reporting,
    population assessment and to assist enhancement efforts. Research on
    methodology for population assessment and techniques also is critical
    to effective management.
        Onsite beach surveys are required to identify harvestable
    populations of shellfish. Regular monitoring of beaches is also
    necessary to ensure that the beaches remain safe for harvest.
    Additional and more accurate population survey and health certification
    data is needed to maintain these fisheries and open new harvest areas.
    This information will help protect current and future resources and
    provide additional harvest opportunities.

                                   CONCLUSION

        We ask that you give serious consideration to our needs. We are
    available to discuss these requests with committee members or staff at
    your convenience. Thank you.
                                     ______

           Prepared Statement of the Oregon Water Resources Congress

        I am Anita Winkler, Executive Director, Oregon Water Resources
    Congress (OWRC). Our organization was established in 1912 as a trade
    association to support member needs to protect water rights and
    encourage conservation and water management statewide. OWRC represents
    non-potable agriculture water suppliers in Oregon, primarily irrigation
    districts. as well as member ports, other special districts and local
    governments. The association represents the entities that operate water
    management systems, including water supply reservoirs, canals, pipeline
    and hydropower production.
        This testimony is submitted to the United States Senate
    Appropriations Committee, Agriculture, Rural Development and Related
    Agencies Subcommittee in support of the fiscal year 2006 appropriation
    request of our member irrigation district, the Three Sisters Irrigation
    District for their McKenzie Canyon Project.
        The McKenzie Canyon Project (MCP) focuses on water conservation to
    improve instream flows in Squaw Creek for fish and water quality and to
    provide farmers with a more economical and reliable supply of water.
    The project would be constructed under the Department of Agriculture's
    Watershed Protection and Flood Prevention Act (Public Law 83-566
    program). The Natural Resource Conservation Service (NRCS) has
    completed the engineering for the project under the Bridging-The-
    Headgates Program Memorandum of Understanding. NCRS has completed a
    watershed plan and environmental assessment for the McKenzie Canyon
    Project. The project has been approved by NRCS Chief Bruce Knight.
        The total project cost is $1,130,148, and OWRC and the Three
    Sisters Irrigation District are requesting $386,776 for fiscal year
    2006.
        This project will significantly decrease system water losses.
    Currently the water is delivered to 31 farms through a series of open
    canals and on-farm ditches that experience seepage losses on the order
    of 40 percent to 50 percent. Phase one of this project will replace
    approximately 10,265 feet of an open canal irrigation water conveyance
    system with buried High-Density Polyethylene pipeline. This will return
    1.2 cfs instream to Squaw Creek permanently through the Oregon Water
    Resources Department conserved water program. Squaw Creek is important
    for providing habitat for Endangered Species Act (ESA) listed bull
    trout, as well as, redband and other resident trout. Fishery agencies
    and the tribes are also counting on improving conditions in Squaw Creek
    to support spawning and rearing for Chinook and steelhead once
    anadromous fish are reintroduced above Pelton and Round Butte Dams on
    the Deschutes River. Efforts to reintroduce anadromous fish are
    expected to start in 2007 as part of the Federal Energy Regulatory
    Commission (FERC) re-licensing requirements.
        Thank you for the opportunity to provide this statement for the
    hearing record.
                                     ______

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

    Summary of Request
        The Organization for the Promotion and Advancement of Small
    Telecommunications Companies (OPASTCO) seeks the Subcommittee's support
    for fiscal year 2006 loan levels for the telecommunications loans
    program administered by the Rural Utilities Service (RUS) in the
    following amounts:

                            [In millions of dollars]
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    5 percent hardship loans................................             145
    Treasury rate loans.....................................             425
    Guaranteed loans........................................            125
    ------------------------------------------------------------------------
    Note: The $425 million recommended for Treasury rate loans assumes that
      the President's budget proposal to dissolve the RTB is carried out.
      Dissolution of the RTB would necessitate additional funds for RUS
      telecommunications loans in order to maintain the level of funds
      available to rural telecommunications borrowers.

        In addition, OPASTCO requests the following action by the
    Subcommittee: (1) eliminate the 5 percent limitation on the retirement
    of Class A stock of the Rural Telephone Bank (RTB); (2) maintain the
    prohibition on the transfer of unobligated RTB funds to the general
    fund of the Treasury and the requirement that interest be paid on these
    funds; and (3) fund the distance learning, telemedicine, and broadband
    program at sufficient levels.

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

    The 5 Percent Limitation on the Retirement of Class A Stock of the RTB
            Should be Eliminated
        OPASTCO supports the elimination of the provision adopted in prior
    Agriculture Appropriations Acts that limits the retirement of Class A
    stock of the RTB to no more than 5 percent. Elimination of this
    restriction is necessary for the Administration to move forward with
    its proposal to dissolve the RTB. OPASTCO is receptive to this
    proposal, assuming it can be accomplished in a manner that equitably
    compensates the private Class B and C stockholders for their holdings
    in the bank. In addition, even if the dissolution of the RTB does not
    occur, elimination of the 5 percent limitation on the retirement of
    Class A stock would provide the bank's board of directors with the
    necessary flexibility to accelerate the bank's privatization.

    The Prohibition on the Transfer of Any Unobligated Balance of the RTB
            Liquidating Account to the Treasury and Requiring the Payment
            of Interest on These Funds Should be Continued
        OPASTCO urges the Subcommittee to reinstate language prohibiting
    the transfer of any unobligated balance of the RTB liquidating account
    to the Treasury or the Federal Financing Bank which is in excess of
    current requirements and requiring the payment of interest on these
    funds. As a condition of borrowing, the statutory language establishing
    the RTB requires telephone companies to purchase Class B stock in the
    bank. Borrowers may convert Class B stock into Class C stock on an
    annual basis up to the principal amount repaid. Thus, all current and
    former borrowers maintain an ownership interest in the RTB. As with
    stockholders of any concern, these owners have rights which may not be
    abrogated. The Subcommittee's inclusion of the aforementioned language
    into the fiscal year 2006 appropriations bill will ensure that RTB
    borrowers are not stripped of the value of this required investment.

    The Distance Learning, Telemedicine, and Broadband Program Should
            Continue to be Funded at Adequate Levels
        In addition to RUS's telecommunications loans program, OPASTCO
    supports adequate funding of the distance learning, telemedicine, and
    broadband program. Through distance learning, rural students gain
    access to advanced classes which will help them prepare for college and
    jobs of the future. Telemedicine provides rural residents with access
    to quality health care services without traveling great distances to
    urban hospitals. In addition, the broadband program will allow more
    rural communities to gain high-speed access to the Internet and receive
    other advanced services. In light of the Telecommunications Act's
    purpose of encouraging deployment of advanced technologies and services
    to all Americans--including schools and health care providers--
    sufficient targeted funding for these purposes is essential in fiscal
    year 2006.

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

            Prepared Statement of Pickle Packers International, Inc.

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

            VEGETABLE CROPS RESEARCH LABORATORY, MADISON, WISCONSIN

        First, we thank the Committee for $200,000 in additional funding it
    provided the fiscal year 2002 budget to carry out field and processing
    research vital to the membership of PPI. However, to continue this
    important work it is necessary for Congress to restore this funding in
    fiscal year 2006, since the funds were not included in the budget sent
    to the Congress. The USDA/ARS Vegetable Crops Research Unit at the
    University of Wisconsin is the only USDA research unit dedicated to the
    genetic improvement of cucumbers, carrots, onions and garlic. Three
    scientists in this unit account for approximately half of the total
    U.S. public breeding and genetics research on these crops. Their past
    efforts have yielded cucumber, carrot and onion cultivars and breeding
    stocks that are widely used by the U.S. vegetable industry (i.e.,
    growers, processors, and seed companies). These varieties account for
    over half of the farm yield produced by these crops today. All U.S.
    seed companies rely upon this program for developing new varieties,
    because ARS programs seek to introduce economically important traits
    (e.g., virus and nematode resistance) not available in commercial
    varieties using long-term high risk research efforts. The U.S.
    vegetable seed industry develops new varieties of cucumbers, carrots,
    onions, and garlic and over twenty other vegetables used by thousands
    of vegetable growers. The U.S. vegetable seed, grower, and processing
    industry, relies upon the USDA/ARS Vegetable Crops Research Unit for
    unique genetic stocks to improve varieties in the same way the U.S.
    health care and pharmaceutical industries depend on fundamental
    research from the National Institutes of Health. Their innovations meet
    long-term needs and bring innovations in these crops for the United
    States and export markets, for which the United States has successfully
    competed. Past accomplishments by this USDA group have been
    cornerstones for the U.S. vegetable industry that have resulted in
    increased profitability, and improved product nutrition and quality.
        Both consumers and the vegetable production and processing industry
    would like to see fewer pesticides applied to food and into the
    environment in a cost-effective manner. Scientists in this unit have
    developed a genetic resistance for many major vegetable diseases.
    Perhaps the most important limiting factor in the production of
    cucumbers has been its susceptibility to disease. New research progress
    initiated in the 1990s and continuing today in Madison has resulted in
    cucumbers with improved pickling quality and suitability for machine
    harvesting. Viral and fungal diseases threaten much of the U.S.
    cucumber production. New sources of genetic resistance to these
    diseases have recently been mapped on cucumber chromosomes to provide a
    ready tool for our seed industry to significantly accelerate the
    development of resistant cultivars for U.S. growers. Likewise, new
    cultivar resistances to environmental stress like cold, heat and salt
    stress discovered by these scientists will help cucumber growers
    produce a profitable crop where these stressful conditions occur. The
    development of DNA markers that are associated with traits for
    tolerance of biological stress will help public and private breeders
    more efficiently develop stress-resistant varieties because selection
    for improved varieties can be done in the laboratory as well as in the
    field saving time and the costly expenses associated with field
    testing. Nematodes in the soil deform carrot roots to reduce yield from
    10 percent to over 70 percent in major production areas. A new genetic
    resistance to nematode attack was recently discovered and found to
    almost completely protect the carrot crop from one major nematode. This
    genetic resistance assures sustainable crop production for growers and
    reduces pesticide residues in our food and environment. Value of this
    genetic resistance developed by the vegetable crops unit is estimated
    at $655 million per year in increased crop production, not to mention
    environmental benefits due to reduction in pesticide use. This group
    improved both consumer quality and processing quality of vegetables
    with a resulting increase in production efficiency and consumer appeal.
    This product was founded on carrot germplasm developed in Madison,
    Wisconsin. Carrots provide approximately 30 percent of the U.S. dietary
    vitamin A. With new carrots that have been developed, nutritional value
    of this crop has tripled, including the development of nutrient-rich
    cucumbers with increased levels of provitamin A. Using new
    biotechnological methods, a system for rapidly and simply identifying
    seed production ability in onions has been developed that reduces the
    breeding process up to 6 years! A genetic map of onion flavor and
    nutrition will be used to develop onions that are more appealing and
    healthy for consumers. Garlic is a crop familiar to all consumers, but
    it has not been possible to breed new garlic varieties until a new
    technique for garlic seed production was recently developed and is now
    being bred like other crops.
        There are still serious vegetable production problems, which need
    attention. For example, losses of cucumbers, onions, and carrots in the
    field due to attack by pathogens and pests remains high, nutritional
    quality needs to be significantly improved and U.S. production value
    and export markets could certainly be enhanced. Genetic improvement of
    all the attributes of these valuable crops are at hand through the
    unique USDA lines and populations (i.e., germplasm) that are available
    and the new biotechnological methodologies that are being developed by
    the group. The achievement of these goals will involve the utilization
    of a wide range of biological diversity available in the germplasm
    collections for these crops. Classical plant breeding methods combined
    with bio-technological tools such as DNA marker-assisted selection and
    genome maps of cucumber, carrot and onion will be the methods to
    implement these genetic improvements. With this, new high-value
    vegetable products based upon genetic improvements developed by our
    USDA laboratories can offer vegetable processors and growers expanded
    economic opportunities for United States and export markets.

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

        The USDA/ARS Food Fermentation Laboratory in Raleigh, NC is the
    major public laboratory that this industry looks to as a source for new
    scientific information on the safety of our products and development of
    new processing technologies related to fermented and acidified
    vegetables. Over the years this laboratory has been a source for
    innovations in this industry, which have helped us remain competitive
    in the current global trade environment. We expect the research done in
    this laboratory to lead to new processing and product ideas that will
    increase the economic value of this industry and provide consumers with
    high quality, more healthful vegetable products. In addition to the
    newer challenges related to protecting our products from acid tolerant
    pathogens (E. coli O157:H7, Listeria, and Salmonella) this industry
    needs better technology for waste minimization related to the salt and
    organic waste generated in our processing plants.
        We thank Congress for the additional funding it provided to this
    laboratory in the fiscal year 2004 ($270,000) and fiscal year 2005
    ($100,000) budgets to hire a microbial physiologist and to enhance the
    capabilities of this research program that is so important to our
    industry. After 6 years of stable funding, these budget increases have
    made it possible for the laboratory to return to four scientists and to
    proceed with a very active research program. It is very important that
    Congress restore the full $370,000 funding in the fiscal year 2006
    budget, since the funds were not included in the budget sent to the
    Congress.
        For the future safety and security of the food supply of the United
    States, PPI supports the Food Safety and Security Initiative the
    President has proposed in his fiscal year 2006 budget. It takes
    continuous vigilance and good science to deal with the natural threats
    to human health posed by pathogenic bacteria. However, the possibility
    that the acid tolerant pathogens might be used to intentionally disrupt
    the food supply, adds a different and more dangerous element to the
    already difficult job of assuring safety throughout the complex food
    chain. We believe the special expertise of the ARS Food Fermentation
    Laboratory scientists in working with these pathogens in acid and
    acidified foods can make an important contribution to this initiative.

           SUGAR BEET AND BEAN RESEARCH UNIT, EAST LANSING, MICHIGAN

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

             U.S. VEGETABLE LABORATORY, CHARLESTON, SOUTH CAROLINA

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

                          FUNDING NEEDS FOR THE FUTURE

        It remains critical that funding continue to maintain the forward
    momentum in pickled vegetable research the United States now enjoys and
    to increase funding levels as warranted by planned expansion of
    research projects to maintain U.S. competitiveness. We also understand
    that discretionary funds are now used to meet the rising fixed costs
    associated with each location. Additional funding is needed at the
    Wisconsin and South Carolina programs for genetic improvement of crops
    essential to the pickled vegetable industry, and at North Carolina and
    Michigan for development of environmentally-sensitive technologies for
    improved safety and value to the consumer of our products. The
    fermented and acidified vegetable industry is receptive to capital
    investment in order to remain competitive, but only if that investment
    is economically justified. The research needed to justify such capital
    investment involves both short term (6-24 months) and long term (2-10
    years or longer) commitments. The diverse array of companies making up
    our industry assumes responsibility for short-term research, but the
    expense and risk are too great for individual companies to commit to
    the long-term research needed to insure future competitiveness. The
    pickled vegetable industry currently supports research efforts at
    Wisconsin and North Carolina and anticipates funding work at South
    Carolina and Michigan as scientists are put in place. Donations of
    supplies and processing equipment from processors and affiliated
    industries have continued for many years.
    U.S. Vegetable Laboratory, Charleston, South Carolina
        The newly constructed laboratory-office building at the U.S.
    Vegetable Laboratory was occupied in April 2003. Design of the
    accompanying greenhouse and head house using the funds appropriated for
    this purpose in fiscal year 2003 was completed in July 2004. In fiscal
    year 2004, construction of the head house component of this project was
    funded. In fiscal year 2005, $2.976 million was appropriated for
    construction of greenhouses, but $8.251 million is still needed for the
    planned $11.227 million greenhouse complex. This new facility replaces
    and consolidates outmoded laboratory areas that were housed in 1930s-
    era buildings and trailers. Completion of the total research complex
    will provide for the effective continuation and expansion of the
    excellent vegetable crops research program that has been conducted by
    the Agricultural Research Service at Charleston for over 60 years. It
    is most critical to the mission of the U.S. Vegetable Laboratory that
    the fiscal year 2002, fiscal year 2003, and fiscal year 2004
    appropriated funds for expansion of the Charleston research staff is
    maintained in fiscal year 2006. In addition, new funds are still needed
    to hire additional scientists to expand the research program. An
    Entomologist is needed to facilitate development of host resistance and
    new management approaches to a wider range of established insect pests
    of vegetable crops; a Molecular Biologist is needed to develop and
    utilize molecular techniques for pathogen and pest population studies
    necessary to development of new management approaches and resistant
    genetic stocks. Both of these new scientific positions will greatly
    contribute to the accomplishment of research that will provide for the
    effective protection of vegetable crops from disease and pests without
    the use of conventional pesticides. Each of these positions requires a
    funding level of $350,000 for their establishment.

    ------------------------------------------------------------------------
                                                               Gross Funds
           Appropriations to Restore          Fiscal year       Impacted
    ------------------------------------------------------------------------
    Minor Use Pesticides (IR-4)...........            2002            $5,000
    U.S. Vegetable Laboratory.............            2003           490,000
    U.S. Vegetable Laboratory.............            2004           266,000
                                                           -----------------
          Total Funds to Restore..........  ..............           761,000
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
       New Scientific Staff Needed        Current Status    New Funds Needed
    ------------------------------------------------------------------------
    Entomologist.....................  Needed.............          $350,000
    Molecular Biologist..............  Needed.............           350,000
                                                           -----------------
          Total New Funds............  ...................           700,000
    ------------------------------------------------------------------------

    Food Fermentation Laboratory, Raleigh, North Carolina
        The current funding for the laboratory is $1,274,000. This includes
    the new funds provided in fiscal year 2004 ($270,000) and in fiscal
    year 2005 ($100,000) that are not in the fiscal year 2006 budget
    proposal that was sent to the Congress. We request that the additional
    funding provided by the Congress in fiscal year 2004 and fiscal year
    2005 be restored in the fiscal year 2006 budget, so that the funds
    available to the Food Fermentation Laboratory remain constant.

    ------------------------------------------------------------------------
             Scientific Staff              Current Status      Funds Needed
    ------------------------------------------------------------------------
    Microbiologist....................  Active..............        $300,000
    Chemist...........................  Active..............         300,000
    Food Technologist/Biochemist......  Active..............         300,000
    Microbial Physiologist............  Hiring process               300,000
                                         active.
    Post-doctoral microbiologist......  Active..............          74,000
                                                             ---------------
          Total Funding Required......  ....................       1,274,000
          Current funding (fiscal year  ....................       1,274,000
           2005).
                                                             ---------------
    Additional Funding Needed.........  ....................               0
    ------------------------------------------------------------------------

    Vegetable Crops Research Laboratory Unit, Madison, Wisconsin
        Current base funding for three scientists is $832,400, of which
    $200,000 was added in fiscal year 2002. An additional $267,600 is
    needed to fully fund the scientists and support staff, including
    graduate students and post-doctorates.

    ------------------------------------------------------------------------
         Scientific Staff in Place         Current Status      Funds Needed
    ------------------------------------------------------------------------
    Geneticist........................  Active..............        $300,000
    Horticulturist....................  Active..............         300,000
    Geneticist........................  Active..............         300,000
                                                             ---------------
          Total Funding Required......  ....................         900,000
          Current Funding.............  ....................         832,400
                                                             ---------------
          Shortage....................  ....................          67,600
          Proposed Reduction..........  ....................         200,000
                                                             ---------------
    Additional Funding Needed.........  ....................         267,600
    ------------------------------------------------------------------------

        A temporary addition of $200,000 was provided to enhance the
    research effort of this program in fiscal year 2002, and we greatly
    appreciate that additional support, but that addition is being proposed
    for reduction in fiscal year 2006. Thus, the restoration of the funds
    proposed for reduction, is urgently requested. We request a $267,600
    permanent addition this year to sustain the long-term research of this
    group.
    Sugar Beet and Bean Research Unit, East Lansing, Michigan
        The location urgently needs to hire a full-time research engineer
    to develop a comprehensive research program on nondestructive
    inspection, sorting and grading of pickling cucumbers and other
    vegetable crops to assure the processing and keeping quality of pickled
    products. The current base funding for the cucumber engineering
    research is $200,000. An increase of $100,000 in the current base
    funding level would be needed to fund the research engineer position.

    ------------------------------------------------------------------------
         Scientific Staff in Place         Current Status      Funds Needed
    ------------------------------------------------------------------------
    Postdoctoral Research Associate...  Active..............        $200,000
    Research Engineer.................  Needed..............         100,000
                                                             ---------------
          Total Funding Required......  ....................         300,000
          Current Funding.............  ....................         200,000
                                                             ---------------
    Additional Funding Needed.........  ....................         100,000
    ------------------------------------------------------------------------

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

       Prepared Statement of the Public Citizen's Energy and Environment
                                    Program

        Chairman Bennett, Ranking Member Kohl and Members of the
    Subcommittee: My name is Wenonah Hauter. I am Director of Public
    Citizen's Energy and Environment Program. As you know, Public Citizen
    is a non-profit consumer organization, representing 150,000 members. We
    welcome this opportunity to present our views on the fiscal year 2006
    Agriculture, Rural Development, Food and Drug Administration and
    Related Agencies Appropriations Bill.

                USDA--FOOD SAFETY AND INSPECTION SERVICE (FSIS)

        We are adamantly opposed to the Administration's proposal to
    collect $139 million in user fees in order to recover the cost of
    providing inspection services beyond an approved eight-hour primary
    shift, as it could compromise the effectiveness of FSIS inspectors.
    This proposal has been rejected in the past by Congress and we request
    that you do so again this year. Furthermore, FSIS has already taken
    action to de-list foreign establishments that had been previously
    approved to export their meat and poultry products to the United States
    on the basis that inspection services were paid for by the companies
    involved instead of by the foreign government. Given this history,
    implementation of the Administration's proposal would be hypocritical.
        While not fully under its jurisdiction, we believe that the
    subcommittee needs to look into the mixed signals top USDA officials
    have been sending in regards to FSIS' authority. On March 19, 2003,
    former USDA Secretary Ann Veneman delivered a speech before an
    industry-sponsored conference in which she stated:
        ``. . . we are working under a Meat Inspection Act that pre-dates
    the Model T. In an effort to modernize food safety authorities, we want
    to work with Congress and our partners to consider various ideas, some
    of which have been discussed in the past. These include: ``Mandatory
    notification to USDA when a federally inspected establishment has
    reason to believe that meat or poultry has been adulterated or
    misbranded; Authority to impose civil penalties after notice in writing
    and continued lack of compliance. This authority would involve due
    process before an administrative law judge, and liabilities would be
    limited to penalties based on continued noncompliance; And cease-and-
    desist orders and potential suspensions at earlier phases and on an
    expedited basis arising from HACCP violations.'' \1\
    ---------------------------------------------------------------------------
        \1\ http://www.usda.gov/news/releases/2003/03/0092.htm.
    ---------------------------------------------------------------------------
        Industry opposition was quick and ferocious, and nothing has
    occurred since her speech. In light of adverse court rulings which FSIS
    has suffered in recent years regarding its attempts to exert authority
    over meat processors that have violated food safety regulations, we
    believe that the Congress needs to take action to plug the current
    legal loopholes.
        We are also concerned that FSIS does not have adequate in-plant
    inspection staffing to ensure that our meat and poultry products are
    safe. In recent years, the requests for additional staffing by the
    Administration have been modest. FSIS has been engaged over the past
    year in a process to realign staffing based on new standards that take
    into account food safety risk. While the agency claims that the new
    staffing model is based on ``science,'' we are concerned that the data
    upon which the agency is basing its decisions may not be sufficient or
    reliable. The agency is relying on data that it has collected through
    its Field Automation and Information Management (FAIM) system. We have
    learned from inspection personnel that the FAIM system has been fraught
    with problems. For example, inspection personnel have had difficulty
    logging on to the system and the system often crashes before
    inspectors' reports have been completely transmitted. Consequently,
    there may be a ``garbage-in-garbage-out'' scenario whereby the agency
    will find itself having re-deployed its inspection staff based on
    faulty and/or incomplete data. There have been a number of product
    recalls in recent months that seem to be directly attributable to lack
    of inspection resources.\2\ We request that the subcommittee fully
    investigate this issue before the agency completes its staffing
    reassignments.
    ---------------------------------------------------------------------------
        \2\ http://www.fsis.usda.gov/Fsis_Recalls/RNR_013_2005/index.asp.
        http://www.fsis.usda.gov/Fsis_Recalls/RNR_007_2005/index.asp.
        http://www.fsis.usda.gov/Fsis_Recalls/RNR_003_2005/index.asp.
        http://www.fsis.usda.gov/Fsis_Recalls/RNR_001_2005/index.asp.
        http://www.fsis.usda.gov/Fsis_Recalls/RNR_042_2004/index.asp.
        http://www.fsis.usda.gov/Fsis_Recalls/RNR_047_2004/index.asp.
    ---------------------------------------------------------------------------
        In a related area, the USDA Office of Inspector General (OIG) found
    serious security weaknesses in the FSIS information technology systems.
    Specifically, the OIG stated:
        ``Our vulnerability scans of selected FSIS systems disclosed
    weaknesses that may be exploited both internally and externally from
    the Internet. FSIS had not adequately protected physical access to its
    headquarters computer facility by limiting it to users who need access
    to perform their duties, and it had not completed all security plans
    required by OMB Circular A-130. FSIS database administrators were
    allowed to make changes to FSIS data without following up with
    appropriate personnel to verify the validity of the changes.\3\
    ---------------------------------------------------------------------------
        \3\ http://www.usda.gov/oig/webdocs/OIG-Report010604.pdf, p. 6.
    ---------------------------------------------------------------------------
        On the issue of equivalence and import re-inspections, we believe
    that FSIS needs to do a better job of safeguarding consumers against
    unsafe food that may be imported. In July 2003, Public Citizen released
    a report entitled, ``The WTO Comes to Dinner: USDA Implementation of
    Trade Rules Bypasses Food Safety Requirements'' in which we documented
    shortcomings in the FSIS food safety program for imported meat and
    poultry products. For example, we have not been able to determine how
    FSIS permanently bans a country from exporting food to the United
    States if FSIS finds habitual violations of food safety regulations. We
    have also become alarmed that since the fall of 2002, when FSIS
    instituted a new sampling regime, the amount of imported meat and
    poultry products re-inspected at our ports of entry has dropped
    precipitously. During a period in which we must be more vigilant about
    the security of our food supply, FSIS seems to have adopted a policy
    that is counterintuitive. In 2004, there were three recalls of imported
    products that should not have entered into U.S. commerce.\4\ We ask
    that the subcommittee review FSIS' food safety program for imported
    products.
    ---------------------------------------------------------------------------
        \4\ http://www.fsis.usda.gov/News_&_Events/Recall_028_2004_Release/
    index.asp;
        http://www.fsis.usda.gov/News_&_Events/Recall_038_2004_Release/
    index.asp;
        http://www.fsis.usda.gov/News_&_Events/Recall_046_2004_release/
    index.asp.
    ---------------------------------------------------------------------------
        While we applaud FSIS' steps in protecting consumers from beef that
    may be contaminated with bovine spongiform encephalopathy (BSE), the
    initiatives announced on December 30, 2003 still do not go far enough.
    First, we are concerned that meat product that is obtained through the
    use of advanced meat recovery (AMR) systems is still permissible for
    cattle that are slaughtered under the age of 30 months. AMR systems
    recover meat close to the spinal column. The spinal column is an area
    of concern since that is where infected tissue is often found. There
    have been cases of BSE-infected cattle reported abroad that were
    younger than 30 months. Consequently, we believe that the 30-month
    cutoff is too high, and that AMR should be banned entirely. Second,
    there needs to be a rigorous training program on BSE for FSIS
    inspectors and veterinarians to ensure that FSIS personnel fully
    comprehend the symptoms of BSE and the new regulations FSIS has put in
    place. There have been allegations made by FSIS inspection personnel
    that the regulation on the removal of specified risk materials from
    beef entering the food supply has not been fully enforced,\5\ and we
    urge the subcommittee to investigate this matter fully, including
    requesting copies of non-compliance reports that document these
    shortcomings. Third, there has been much controversy over the
    ``downer'' ban that FSIS announced. We believe that the definition of
    ``non-ambulatory, disabled'' animal is adequate to prevent any
    confusion at the slaughter facilities, but we are concerned about how
    USDA will continue to thoroughly conduct BSE surveillance since such
    animals will no longer be presented for slaughter. Fourth, the recall
    of meat from the slaughtered BSE-contaminated cow in Washington State
    illustrated, once again, the weaknesses of the FSIS recall process,
    which restricts state and local departments of health from publicizing
    recall information. Fifth, we are concerned that USDA may have
    prematurely lifted its ban on Canadian beef imports in August 2003. It
    is obvious that there was confusion over what was eligible to be
    imported into the United States which led to a systematic breakdown
    between the fall 2003 and spring 2004 that was vividly described in a
    recent Office of Inspector General Report.\6\ In light of the fact all
    recent cases of BSE-contaminated cows on the North American continent
    were of Canadian origin, it is too soon to allow the import of beef
    from Canada.
    ---------------------------------------------------------------------------
        \5\ http://www.citizen.org/documents/PiersonLetter12-20-04.pdf.
        \6\ http://www.usda.gov/oig/webdocs/33601-01-HY.pdf, pp. 15-20.
    ---------------------------------------------------------------------------
                     USDA--REGULATORY AND MARKETING AFFAIRS

        At the outset, we request that the subcommittee revisit the issue
    of country-of-origin labeling and provide funding for the full
    implementation of this provision of the 2002 Farm Bill as quickly as
    possible. USDA is responsible for implementing country-of-origin-
    labeling for seafood, which includes notice of whether the seafood is
    farm-raised or wild caught. Unfortunately, the final rules that the
    USDA developed fall short of the original mandate by exempting half of
    imported seafood due to the definition of ``processed'' put forth by
    the agency. The USDA's final rules define ``processed'' so broadly that
    any seafood altered from its natural state is exempt from COOL. We urge
    the subcommittee to allocate sufficient resources to USDA to strengthen
    and adequately enforce the labeling rule for seafood.
        Some industry and non-governmental organizations are also
    developing organic standards for aquatic species. Without any
    accountability, these standards will simply confuse consumers and
    weaken the term ``organic.'' The USDA must develop national organic
    standards for aquatic species. A National Organic Standards Board
    committee is currently being formed and will require resources to
    thoroughly and effectively develop organic standards for aquatic
    species.
        We believe that recent announcements by the Animal and Plant Health
    Inspection Service (APHIS) regarding its surveillance program for BSE
    are less than adequate. First, we do not believe that re-opening our
    border to live Canadian cattle is prudent at this time. Prior to the
    finding of the BSE-positive cow in Washington State, APHIS had
    published a proposed rule permitting the import of live cattle from
    countries that had a minimal risk of BSE. Published in October 2003,
    the rule was an attempt to reshape previous U.S. policy which shut our
    borders to any country that had a reported case of BSE. We believe this
    proposed rule was APHIS' attempt to make an exception to existing
    policy because the border closure which resulted from the May 2003
    discovery of a BSE-infected cow in Alberta impacted the U.S.
    agribusiness interests which have operations on both sides of the
    border.
        Since May 2003, three more cows in North America have been
    diagnosed with BSE--all of Canadian origin.\7\ There have been
    investigative reports by Canadian journalists that indicate that Canada
    has had a difficult time enforcing its bovine feed rules.\8\ In
    addition, our own Food and Drug Administration has documented
    contamination in cattle feed produced in Canada and exported to the
    United States, issuing at least nineteen import alerts since October
    2003.\9\ As we have already cited above, the recent USDA Office of
    Inspector General Report on the importation of Canadian beef clearly
    showed that APHIS was not equipped to handle this permitting process.
    Furthermore, we are concerned that there was undue outside influence
    brought to bear on the agency to expand the importation of Canadian
    beef products in clear violation of departmental policy.\10\
    ---------------------------------------------------------------------------
        \7\ http://www.citizen.org/cmep/foodsafety/madcow/
    articles.cfm?ID=12776.
        \8\ Skelton, Chad. ``Secret tests reveal cattle feed contaminated
    by animal parts; Mad cow fears spark review of vegetable-only'
    livestock feeds,'' Vancouver Sun, December 16, 2004.
        \9\ Statement of Senator Kent Conrad, Congressional Record, March
    3, 2005, pp. S 1964.
        \10\ Hisey, Peter. ``DeLauro: Inspector General said White House
    pressured USDA on Canadian beef,'' The MeatingPlace.com, February 24,
    2005.
    ---------------------------------------------------------------------------
        While the enhanced BSE surveillance program announced by APHIS on
    March 15, 2004 was a step in the right direction, it still leaves many
    questions unanswered. The size of the sample is still not finite. We
    have been critical of APHIS in the past for its sampling
    techniques,\11\ and it seems that the agency is leaving itself
    vulnerable to criticism with its new program. In fact, Dr. George Gray,
    Executive Director of the Harvard Center for Risk Analysis recently
    stated that APHIS was basing its new surveillance regime on faulty
    assumptions and cautioned APHIS to adjust its sampling to reflect the
    possibility of BSE being found in so-called low risk animal
    populations.\12\ We are also concerned that APHIS has not decided what
    its surveillance regime will be after the ``enhanced'' program is
    completed later this year.
    ---------------------------------------------------------------------------
        \11\ http://www.citizen.org/documents/madcowreport.pdf.
        \12\ Sugarman, Carol. ``USDA's Ambitious BSE Testing Program Gets
    Guarded Support,'' Food Chemical News, March 22, 2004.
    ---------------------------------------------------------------------------
        On the issue of food irradiation, we believe that APHIS is opening
    up our borders to increased fruit and vegetables imports from abroad,
    leaving our domestic farmers vulnerable to unfair competition, and
    possibly exposing American consumers to harmful health effects from
    consuming irradiated food. In October 2002, APHIS approved the use of
    irradiation as an approved phytosanitary measure for imported fruits
    and vegetables. We opposed this rule.\13\ When APHIS issued its final
    rule in October 2002, we were perplexed by the convoluted structure of
    the rule.\14\ APHIS is still reviewing applications from foreign
    governments that wish to use irradiation as a phytosanitary measure.
    There has been interest expressed in a number of countries to use this
    technology on their products for export. On April 1, 2005, APHIS
    published a proposed rule that will permit the importation of
    irradiated apples from Australia and New Zealand that will compete with
    our domestic apple industry.\15\
    ---------------------------------------------------------------------------
        \13\ http://www.citizen.org/documents/aphiscomments.PDF.
        \14\ http://www.citizen.org/pressroom/release.cfm?ID=1254.
        \15\ http://frwebgate.access.gpo.gov/cgi-bin/
    getdoc.cgi?dbname=2005_register&docid=fr31mr05-16.pdf.
    ---------------------------------------------------------------------------
        In 2004, APHIS approved the use of irradiation to treat Hawaiian
    sweet potatoes to be shipped to the mainland of the United States. This
    approval came even after mainland sweet potato growers opposed the
    approval of the rule.\16\ What is even more troubling is that APHIS
    seemed to have approved this rule to assist a financially ailing food
    irradiation company. In fact, in approving this new rule, APHIS stated:
    ``The irradiation facility in Hawaii will benefit from having more
    crops available to treat. The treatment available at this facility has
    enabled many producers in Hawaii to move their products to the
    mainland, thus providing them with access to markets that were not
    previously available. For several years, the State of Hawaii has
    encouraged farmers to diversify agricultural production, given the
    significant decline in the production of sugarcane as a major crop. The
    approval of irradiation as a treatment for sweet potatoes moved
    interstate from Hawaii will help to provide steady throughput for this
    facility. The facility currently treats seasonal crops whose volume is
    more variable than that of sweet potatoes and is thus sometimes
    underutilized. A steady source of revenues from treatment, such as
    revenues from treating sweet potatoes to be moved interstate, would
    help assure this facility's continued operation and availability for
    all the producers in Hawaii who can use it.'' \17\
    ---------------------------------------------------------------------------
        \16\ Skrzycki, Cindy. ``Approval of Irradiated Sweet Potatoes Has
    Critics Steamed,'' Washington Post, March 9, 2004.
        \17\69 FR 7547.
    ---------------------------------------------------------------------------
        The facility in question is owned by Hawaii Pride, a company that
    was created using a USDA Rural Development Administration loan.\18\ The
    firm was having difficulty making payments on the loan because of its
    precarious financial condition.\19\ In essence, APHIS is running an
    irradiation ``industrial policy'' by helping bail out Hawaii Pride from
    total financial ruin with the approval of this rule. We filed a Freedom
    of Information Act request with the agency on March 12, 2004 requesting
    all documents related to this decision and we have yet to receive a
    response. The subcommittee should review APHIS' activities regarding
    this rule.
    ---------------------------------------------------------------------------
        \18\ http://www.hiedb.org/
    showtext.asp?ArticleID=26&Category=Articles.
        \19\ Titan Corporation. Form 10-K filed with the Securities and
    Exchange Commission, March 10, 2004, p.21.
    ---------------------------------------------------------------------------
       usda--cooperative state research, education, and extension service
        It has come to our attention that the Cooperative State Research,
    Education, and Extension Service (CSREES) provided funds to Texas A&M
    University to establish a National Center for Electronic Beam Research
    at its campus. The initial grant of $185,000 was approved on July 28,
    2003, and certain Texas congressional delegation members were credited
    for securing the funds.\20\ The timing of the grant approval raised
    suspicions since Texas A&M and the SureBeam Corporation, a leading food
    irradiation processor and electron-beam irradiation equipment
    manufacturer, entered into a strategic partnership only 3 years
    earlier.\21\ SureBeam donated to the University $10 million worth of
    electron-beam irradiation equipment in exchange for the use of a
    building on the campus where the company could use the equipment for
    commercial purposes and University could use it for research purposes.
    In the summer of 2003, SureBeam's dubious accounting practices began to
    surface in the press, and among the areas of concern was the manner in
    which SureBeam was reporting ``revenues'' from its relationship with
    Texas A&M.\22\ On January 19, 2004, SureBeam filed for Chapter 7
    bankruptcy and is in the process of liquidating its assets.\23\ On
    August 12, 2004, CSREES awarded the Texas A&M Electron Beam Facility
    another $328,357 grant.\24\ In September 2004, the supermarket chain
    Wegman's revealed that it was offering irradiated frozen hamburger
    patties in its stores that were treated at the Texas A&M facility.\25\
    We believe that the subcommittee needs to investigate this matter
    further to determine whether there were any improprieties in the award
    of these grants.
    ---------------------------------------------------------------------------
        \20\ http://www.meatandpoultryonline.com/content/news/
    article.asp?docid=(d63bd189-14d2-450d-b399-bd02eac5cbc6).
        \21\ http://www.ift.org/publications/docshop/ft_shop/10-00/
    10_00_pdfs/10-00-p&t-proc.pdf.
        \22\ Norris, Floyd. ``SureBeam Revenue Policy Questioned,'' New
    York Times, August 27, 2003.
        \23\ Freeman, Mike. ``SureBeam's Bankruptcy Filing Offers Few
    Details,'' San Diego Union-Tribune, January 21, 2004.
        \24\ http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_01OB/.cmd/
    ad/.ar/sa.retrievecontent/.c/
    6_2_1UH/.ce/7_2_5JM/.p/5_2_4TQ/.d/5/_th/J_2_9D/_s.7_0_A/7_0_1OB?PC_7_2_
    5JM_contentid=2004%2F08%2F0330.xml&PC_7_2_5JM_navtype=RT&PC_7_2_5JM_
    parentnavid=LATEST_RELEASES&PC_7_2_5JM_navid=NEWS_RELEASE#7_2_5JM.
        \25\ http://www.wegmans.com/meb/columns/091804.asp.
    ---------------------------------------------------------------------------
                          FOOD AND DRUG ADMINISTRATION

        We applaud the Food and Drug Administration (FDA) for revisiting
    its feeding restrictions for ruminant animals in light of the discovery
    of a BSE-infected cow in Washington State. Unfortunately, while the FDA
    made its announcement on January 26, 2004 that it intended to
    promulgate interim final rules creating new BSE firewalls, none of
    those rules have yet been published in the Federal Register. That means
    that cattle in this country are still being fed under the old feeding
    rules that the FDA has found to be deficient. The FDA needs to take
    immediate action to place those new restrictions in effect. While we
    believe the new rules proposed are a step in the right direction, we
    believe that further restrictions are needed that include the
    prohibition of any mammalian and poultry protein to be fed to cattle,
    as recommended by the International Advisory Panel appointed by USDA
    Secretary Ann Veneman.\26\
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        \26\ http://www.aphis.usda.gov/lpa/issues/bse/US_BSE_Report.pdf.
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        We are also concerned that the FDA is not able to increase its
    surveillance over imported foods that fall under its jurisdiction. In
    fact, the FDA is being overwhelmed with imports--leaving U.S. consumers
    vulnerable to unsafe imported food making its way into commerce. The
    subcommittee needs to review the staffing levels for FDA, especially as
    they relate to import inspection.
        Shrimp is currently the number one seafood choice for American
    consumers and 80 percent of it is imported, at least half of which is
    farm-raised. Chemicals banned in the United States., such as
    chloramphenicol and nitrofurons, are used to raise shrimp that are
    exported to the United States. Yet the FDA only inspects one to two
    percent of all imported seafood. The FDA must be appropriated funds to
    inspect a significant amount of imported seafood.
        In his testimony in 2003, then-FDA Commissioner Mark McClellan
    reported that an FDA working group has been considering a re-definition
    of the term ``pasteurization'' to include such new technologies as
    irradiation. Such a re-definition could be used by food processors on
    product labeling. The group that has been charged with this
    responsibility is a subcommittee of the National Advisory Committee on
    the Microbiological Criteria for Food. As we have testified in the past
    on this issue, consumers have repeatedly rejected such a re-definition
    in focus group studies conducted by the USDA and FDA.\27\ We believe
    that such an exercise is a waste of resources since re-defining
    pasteurization would lead to consumer deception and confusion.
    ---------------------------------------------------------------------------
        \27\ http://www.citizen.org/documents/agappropsmarch03.pdf.
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                                     ______

             Prepared Statement of the Red River Valley Association

        Mr. Chairman and members of the Committee, I am Wayne Dowd, and I
    am pleased to represent the Red River Valley Association as its
    President. Our organization was founded in 1925 with the express
    purpose of uniting the citizens of Arkansas, Louisiana, Oklahoma and
    Texas to develop the land and water resources of the Red River Basin.
        The Resolutions contained herein were adopted by the Association
    during its 80th Annual Meeting in Bossier City, Louisiana on February
    24, 2005, and represent the combined concerns of the citizens of the
    Red River Basin Area as they pertain to the goals of the Association.
        As an organization that knows the value of our precious water
    resources we support the most beneficial water and land conservation
    programs administered through the Natural Resources Conservation
    Service (NRCS). We understand that attention and resources must be
    given to our national security and the war in Iraq; however, we cannot
    sacrifice what has been accomplished on our Nation's lands. NRCS
    programs are a model of how conservation programs should be
    administered and our testimony will address the needs of the Nation as
    well as our region.
        The President's fiscal year 2006 budget for NRCS indicates a
    decrease of $70 million from what Congress appropriated in fiscal year
    2005. In reality, NRCS is taking a major decrease in program funding
    and staff years. This is reflected in the fact that NRCS manpower for
    fiscal year 2006 would have to decrease by over 2,000 staff years, if
    the President's budget is implemented. This is unacceptable.
        This means that NRCS assistance to landowners will not be
    adequately funded, to the detriment of the Nation and our natural
    resources. We would like to address several of the programs
    administered by NRCS. Failure to adequately fund these initiatives
    would reduce assistance to those who want it and the resources that
    need protection..
        Conservation Operations.--This has been in steady decline, in real
    dollars, over the past several years. The President's budget included
    $767.8 million, which is a decrease of $69.6 million from fiscal year
    2005. Maintaining a ``level'' funding level is actually a cut, due to
    mandated increases in pay and benefits, in addition to continuing
    increases in the ``cost of doing business''.
        We request a total of $930 million be appropriated for Conservation
    Operations for NRCS to meet the demands it faces today.
        Conservation Technical Assistance is the foundation of technical
    support and a sound, scientific delivery system for voluntary
    conservation to the private users and owners of lands in the United
    States. It is imperative that we provide assistance to all ``working
    lands'' not just those fortunate few who are able to enroll in a
    Federal program. Working lands are not just crops and pasture
    (commodity staples) but includes forests, wildlife habitat and coastal
    marshes. The problem is that NRCS personnel funded from ``mandatory
    programs'' can only provide technical assistance to those enrolled in
    these programs, leaving the majority of the agricultural community
    without technical assistance. We recommend that adequate funding be
    placed in ``Conservation Technical Assistance'', and allow NRCS to
    provide assistance to all who are in need of assistance.
        It is our understanding that the Technical Service Providers (TSP)
    program has not lived up to its expectations. It has been difficult to
    fund this initiative at or below what it would cost to use NRCS
    manpower. Therefore, it is an increase in funding to delivery these
    services. We believe that TSPs should be used only after NRCS staffing
    is brought up to levels commensurate with the increase in workload
    caused by the Farm Bill, not to replace NRCS staffing.
        Watershed and Flood Prevention Operations (Public Law 566 & 534).--
    We are greatly disappointed that the President's Budget provided no
    funding for watershed operations. There is no doubt that this is a
    Federal responsibility, in conjunction with a local sponsor. This
    program addresses all watershed needs to include: flood protection,
    water quality, water supply and the ecosystem. There is no Corps of
    Engineer, Bureau of Reclamation or FEMA program to address small
    watershed needs, before disaster strikes. We recommend that Congress
    hold oversight hearings to understand the importance and hear how
    popular this program is to our communities.
        We are very appreciative for the funding level of $75.6 million
    enacted in fiscal year 2005. It is reassuring to know that both the
    House and Senate realize the importance of this program to the
    agricultural community.
        There are many new projects, which are awaiting funds for
    construction under this program. We strongly recommend that a funding
    level of $200 million be appropriated for Watershed Operations
    Programs, Public Law 534 ($20 million) and Public Law 566 ($180
    million).
        The Red River has proven, through studies and existing irrigation,
    to be a great water source for supplemental irrigation. The two
    projects mentioned below, will use existing, natural bayous to deliver
    water for landowners to draw from. The majority of expense will be for
    the pump system to take water from the Red River to the bayous. These
    projects will provide the ability to move from ground water dependency
    to surface water, an effort encouraged throughout the Nation. Both will
    enhance the environmental quality and economic vitality of the small
    communities adjacent to the projects.
        Walnut Bayou Irrigation Project, AR.--Plans and specifications have
    been completed and it is ready to proceed into the construction phase.
    An irrigation district has been formed and they are prepared to take on
    the responsibility to generate the income for the O&M required to
    support this project. We request that $4,000,000 be appropriated for
    these projects in fiscal year 2006.
        Red Bayou Irrigation Project, LA.--The plans and specifications
    have been completed, making this project ready for construction in
    fiscal year 2006. An irrigation district has been formed and is
    prepared to collect funds to support the O&M for this proposed system.
    We request that $2,500,000 be specifically appropriated to begin
    construction in fiscal year 2006.
        Watershed Rehabilitation.--More than 10,400 individual watershed
    structures have been installed nationally, with approximately one-third
    in the Red River Valley. They have contributed greatly to conservation,
    environmental protection and enhancement, economic development and the
    social well being of our communities. More than half of these
    structures are over 30 years old and several hundred are approaching
    their 50-year life expectancy. Today you hear a lot about the watershed
    approach to resource management. These programs offer a complete
    watershed management approach and should continue for the following
    reasons:
      --They protect more people and communities from flooding now than
            when they were first constructed.
      --Their objectives and functions sustain our Nation's natural
            resources for future operations.
      --They are required to have local partners and be cost shared.
      --The communities and NRCS share initiatives and decisions.
      --They follow NEPA guidelines and enhance the environment
      --They often address the need of low income and minority communities.
      --The benefit to cost ratio for this program has been evaluated to be
            2.2:1.
        What other Federal program can claim such success?
        There is no questioning the value of this program. The cost of
    losing this infrastructure exceeds the cost to reinvest in our existing
    watersheds. Without repairing and upgrading the safety of existing
    structures, we miss the opportunity to keep our communities alive and
    prosperous. It would be irresponsible to dismantle a program that has
    demonstrated such great return and is supported by our citizens. We
    cannot wait for a catastrophe to occur where life is lost to decide to
    take on this important work.
        A 1999 survey, conducted in 22 States, showed that 2,200 structures
    are in need of immediate rehabilitation at an estimated cost of $543
    million. The President's budget neglects the safety and well being of
    our community needs by placing only $15.1 million for this program.
    This is drastically lower than the levels authorized in the 2002 Farm
    Bill. We request that $65 million be appropriated to provide financial
    and technical assistance to those watershed projects where sponsors are
    prepared to commence rehabilitation measures, as directed in the 2002
    Farm Bill.
        Watershed Survey and Planning.--In fiscal year 2005 $7.1 million
    was appropriated to support this extremely important community program.
    NRCS has become a facilitator for the different community interest
    groups, State and Federal agencies. In our States such studies are
    helping identify resource needs and solutions where populations are
    encroaching into rural areas. The Administration decided to fund this
    program with only $5.1 million. We disagree with this low level and ask
    Congress to fund this program at the appropriate level. As our
    municipalities expand, the water resource issue tends to be neglected
    until a serious problem occurs.
        Proper planning and cooperative efforts can prevent problems and
    insure that water resource issues are addressed.
        We request this program be funded at a level of $35 million.
        We request that the following two studies be specifically
    identified and funded in the fiscal year 2006 appropriation bill.
        Maniece Bayou Irrigation Project, AR.--This is a project in its
    initial stage of planning. An irrigation district is being formed to be
    the local sponsor. This project transfers water from the Red River into
    Maniece Bayou where landowners would draw water for supplemental
    irrigation. We request that $200,000 be appropriated to initiate the
    plans and specifications.
        Lower Cane River Irrigation Project, LA.--The transfer of water
    from the Red River to the Lower Cane River will provide opportunities
    for irrigation and economic development. Funds are needed to initiate a
    Cooperative River Basin Study. We request that $250,000 be appropriated
    for this study.
        Emergency Watershed Protection Program.--This program has
    traditionally been funded through Emergency Supplemental Appropriations
    and administered by NRCS through its Watershed and Flood Prevention
    Operations. It has traditionally been a zero budget line item, and has
    relied on supplemental appropriations. Since the Administration has
    decided to ``zero out'' Watershed and Flood Prevention Operations do
    they intend to eliminate this program, since both are included in the
    same authorization?
        As our populations expand and shift, land use changes and
    intensifies. Impacts of severe weather events are becoming more of an
    impact on our communities, rivers and related eco-systems. These major
    weather events will have an adverse impact requiring urgent NRCS
    assistance. It is important that NRCS is prepared for a rapid response,
    not waiting for legislative action to provide funds for emergency work.
    With some funds available, they would be able respond immediately to an
    emergency when it occurs and not have to wait for an emergency
    supplemental to be passed.
        We request that $20 million be appropriated as ``seed'' funding to
    allow NRCS to react to an emergency while the full need is determined
    and added through a supplemental appropriation.
        Resource Conservation and Development (RC&D).--This has always been
    a well-received program by the Administration. Their budget proposal of
    $25.6 million is not adequate to accomplish the needs of the Nation.
    This program leverages its resources at 4 to 1, with communities, local
    sponsors and non-government organizations. The benefits are realized at
    over 14 to 1, average per project. What other Federal program can claim
    such a return on investment?
        We request that $51 million be appropriated for this program.
        Mandatory Accounts (CCC) Technical Assistance (TA).--Request for
    assistance through the CCC programs has been overwhelming. Requests far
    exceed the available funds and place an additional workload on NRCS's
    delivery system. Adequate funding for TA must be provided at the full
    cost for program delivery. This includes program administration,
    conservation planning and contracting with each applicant. Congress, in
    the 2002 Farm Bill, wisely increased conservation programs each year.
    This increased investment, with the multi-year CCC programs, will
    increase the NRCS workload. It is imperative that NRCS receive the TA
    funding levels required to administer these programs. If they do not
    receive full funding these programs will not realize their full
    capability.
        Over 70 percent of our land is privately owned. This is important
    in order to understand the need for NRCS programs and technical
    assistance. Their presence is vital to ensuring sound technical
    standards are met in conservation. These programs not only address
    agricultural production, but sound natural resource management. Without
    these programs and NRCS properly staffed to implement them, many
    private landowners will not be served adequately to apply conservation
    measures needed to sustain our natural resources for future
    generations.
        We are all aware of the issue with TMDL levels in our waterways. If
    our Nation is to seriously address this we must look at the impacts
    from our farmlands. Assistance for land treatment plans and plan
    implementation is exactly what the NRCS Watershed programs are intended
    to address. Watershed programs should be receiving an increase in
    funds, not zeroed out!
        With these new clean water initiatives why do we ignore the agency
    that has a proven record for implementing watershed conservation
    programs? Congress must decide; will NRCS continue to provide the
    leadership within our communities to build upon the partnerships
    already established? It is up to Congress to insure NRCS is properly
    funded and staffed to provide the needed assistance to our taxpayers
    for conservation programs.
        These NRCS studies and watershed projects are an example of true
    cooperative ``conservation'' initiatives. There is an interface with
    communities and local sponsors at each step of the process and local
    sponsors do cost share at the levels expected of them.
        All these programs apply to the citizens in the Red River Valley
    and their future is our concern. The RRVA is dedicated to work toward
    the programs that will benefit our citizens and provide for high
    quality of life standards. We therefore request that you appropriate
    the requested funding within these individual programs, to insure our
    Nation's conservation needs are met.
        I thank you for the opportunity to present this testimony on behalf
    of the members of the Red River Valley Association and we pledge our
    support to assist you in the appropriation process. Please direct your
    comments and questions to our Executive Director, Richard Brontoli,
    P.O. Box 709, Shreveport, LA 71162, (318) 221-5233, E-mail:
    redriverva@hotmail.com.
                                     ______

         Prepared Statement of the Society for Women's Health Research

        On the behalf of the Society for Women's Health Research and the
    Women's Health Research Coalition, we are pleased to submit testimony
    in support of increased funding for biomedical research, and more
    specifically women's health research.
        The Society is the only national non-profit women's health
    organization whose mission is to improve the health of women through
    research, education, and advocacy. Founded in 1990, the Society brought
    to national attention the need for the appropriate inclusion of women
    in major medical research studies and the need for more information
    about conditions affecting women disproportionately, predominately, or
    differently than men.
        The Coalition was created by the Society in 1999 as a way to
    strengthen our grassroots advocacy with scientists and researchers and
    clinicians from across the country who are concerned and committed to
    improving women's health research. The Coalition now has more than 620
    members from across the country, including leaders within the
    scientific community and medical researchers from many of the country's
    leading universities and medical centers, directors from various
    Centers of Excellence on Women's Health as well as leading voluntary
    health associations, and pharmaceutical and biotechnology companies.
        The Society and the Coalition are committed to advancing the health
    status of women through the discovery of new and useful scientific
    knowledge. We believe that sustained funding for the women's health
    research programs that are conducted across the federal research
    agencies is necessary if we are to accommodate the health needs of the
    population and advance the Nation's research capability. Therefore, we
    urge your support for the Food and Drug Administration (FDA) Office of
    Women's Health and request funding of $5 million in order that it may
    meet its program goals.

             FOOD AND DRUG ADMINISTRATION OFFICE OF WOMEN'S HEALTH

        As you know, the FDA has jurisdiction over drugs, medical devices,
    vaccines, blood and tissue products, foods and cosmetics. Within the
    FDA, we would like to highlight women's health and sex and gender-based
    research, areas in which the Society long has been a proponent.
        The Office of Women's Health at the FDA was administratively
    established in 1994 and has been critical to women's health, both
    within and outside the agency. The office aims to provide scientific
    and policy expertise on gender sensitive regulatory and oversight
    issues; to correct gender disparities in the areas for which the FDA is
    responsible--drugs, devices, and biologics and to monitor women's
    health priorities, providing leadership and an integrated approach
    across the agency. Finally, it forms partnerships, within the
    government and with outside groups and organizations. Currently, the
    Office of Women's Health at the FDA is doing admirable work, but its
    inadequate budget prevents this Office from fully accomplishing its
    mission.
        In 2001, the Society submitted testimony on behalf of the Office of
    Women's Health and in support of a centralized database at the FDA to
    coordinate clinical trial oversight, monitor the inclusion of women in
    clinical trials, oversee the parameters of informed consent, and
    identify training needs. Due to Society efforts and this Committee's
    commitment, in 2002 Congress provided the Office of Women's Health at
    the FDA with funds to develop an agency-wide database focused on women
    health activities to include demographic data on clinical trials. The
    FDA has been developing this database now known as the ``Demographic
    Information and Data Repository'' to review clinical studies, enhance
    product labeling, identify knowledge gaps, and coordinate data
    collection.
        While progress has been made, the database is far from up and
    running. Currently, the FDA receives large volumes of information in
    applications from drug manufacturers for review and evaluation. The FDA
    reviewers must comb through the submitted drug trial reports and
    digital data in as many as twelve formats to evaluate a new drug's
    safety and effectiveness. With no database, reviewers must handpick
    gender, age, and ethnicity information from stacks of reports and craft
    their own data comparisons. This is time consuming, makes the review
    process less efficient, and delays access to important information.
    Scientific and medical advances are occurring rapidly and the public
    needs and deserves access to the most recent and accurate information
    regarding their health. Therefore, in order to fully capitalize on the
    potential of the data warehouse and the resulting wealth of
    information, we urge Congress to commit $1 million for the Demographic
    Information and Data Repository.
        Scientists have long known of the anatomical differences between
    men and women, but only within the past decade have they begun to
    uncover significant biological and physiological differences. Sex
    differences have been found everywhere from the composition of bone
    matter and the experience of pain to the metabolism of certain drugs
    and the rate of neurotransmitter synthesis in the brain. Sex-based
    biology, the study of biological and physiological differences between
    men and women, has revolutionized the way that the scientific community
    views the sexes. The evidence is overwhelming, and as researchers
    continue to find more and complex biological differences, they are
    gaining a greater understanding of the biological and physiological
    composition of both sexes.
        Much of what is known about sex differences is the result of
    observational studies, or is descriptive evidence from studies that
    were not designed to obtain a careful comparison between females and
    males. The Society has long recognized that the inclusion of women in
    study populations by itself was insufficient to address the inequities
    in our knowledge of human biology and medicine, and that only by the
    careful study of sex differences at all levels, from genes to behavior,
    would science achieve the goal of optimal health care for both men and
    women. This has given rise to sex-based biology.
        Many sex differences are already present at birth, whereas others
    develop later in life. These differences play an important role in
    disease susceptibility, prevalence, time of onset and severity and are
    evident in cancer, obesity, coronary heart disease, autoimmune, mental
    health disorders, and other illnesses. Physiological and hormonal
    fluctuations may also play a role in the rate of drug metabolism and
    effectiveness of response in females and males. This research needs to
    be supported and encouraged.
        Building upon sex differences research, the Society encourages the
    establishment of drug-labeling requirements to ensure that drug labels
    include language about differences experienced by women and men.
    Further, we advocate for research on the comparative effectiveness of
    drugs with specific emphasis on data analysis by sex.
        Our country's drug development process has succeeded in developing
    new and better medicines for the health of both women and men. However,
    there is no requirement that the research data about a new drug's
    safety and effectiveness be analyzed for sex differences or that
    information about the ways drugs may differ in various populations
    (e.g., women requiring a lower dosage because of different rates of
    absorption or chemical breakdown) be included in prescription drug
    labels and other patient educational and instructional materials.
        Additionally, proper drug labeling is not always the complete
    solution. If the drug is not a new type of product or if the sex-
    specific information is detected only in post-marketing studies, the
    drug label will not be the primary source of information for the
    prescribing physician, and it may be difficult to get new information
    incorporated into physicians' prescribing habits.
        The Society is encouraged by the FDA's commitment to improve the
    health of women and its recognition of the need for more specific drug
    labeling by sex. We believe the opportunity is before us to communicate
    the sex differences data discovered from clinical trials to the medical
    community and consumers (patients) through drug labeling and packaging
    inserts. As part of advancing the need to analyze and report sex
    differences, the Society encourages the FDA to continue adequately
    addressing the need for accurate drug labeling to identify important
    sex and gender differences as well as to ensure appropriate data
    analysis of post market surveillance reporting for these differences.
        As part of their outreach and education efforts, the Office of
    Women's Health at the FDA has been committed to ensuring that women in
    every community in the United States have the vital information they
    need to make healthy choices for themselves and their families. For
    example, the office launched a nationwide menopausal hormone therapy
    information campaign in collaboration with other agencies and women's
    health organizations. The campaign distributed materials for women to
    use as tools to gain a better understanding of the health risks and
    benefits of hormone therapy.
        To ensure adequate analysis and recording of sex and gender
    disparities in drugs, devices and biologics and appropriate regulatory
    policy, and accurate drug labeling, we believe that the Office of
    Women's Health at the FDA should be funded at a total of $5 million so
    that it can create, implement, and coordinate gender sensitive programs
    vital to women and men throughout the Nation.
        In conclusion, Mr. Chairman, we thank you and this Committee for
    its strong record of support for women's health. We look forward to
    continuing to work with you to build a healthier future for all
    Americans.
                                     ______

            Prepared Statement of the Society of American Foresters

        The Society of American Foresters (SAF) represents over 15,000
    forestry professionals dedicated to the conservation of our forest
    resources. SAF members use their education and experience to better use
    and manage public and private forest resources for this generation and
    the next. Only with the proper resources can these professionals both
    within and outside the Federal agencies help to make this happen. SAF
    offers the following suggestions that we believe will ensure forest
    resource professionals can continue to conserve and improve the
    Nation's forest resources and ensure the many forest goods and services
    are provided to benefit society.
        SAF is deeply concerned with the proposed cuts to several forestry
    programs within the U.S. Department of Agriculture budget, as noted
    below. We strongly urge reconsideration of these cuts in light of the
    impacts they will have on the Nation's forests and their conservation.
    Cooperative Forestry Research Program (McIntire-Stennis Act)
        The funding provided through the Cooperative Forestry Research
    Program has provided the backbone of forestry research in the United
    States at the various forestry universities and colleges across the
    country since 1962. At the same time, this program helps to train
    tomorrow's forestry professionals. Offering opportunities for graduate
    students to gain real research experience while also getting an
    advanced education, ensures that this country retains the capacity to
    manage its forests today and in the future. For these reasons, SAF
    strongly disagrees with the proposed 50 percent cut to the Cooperative
    Forestry Research Program and urges Congress to ensure this program is,
    at a minimum, funded at $22 million, the level provided in fiscal year
    2005.
        Forestry research is critically important to conserving forests
    while at the same time enabling society to benefit from the diverse
    array of goods, services and values that forests can provide through
    sustainable management.
        SAF believes that forestry research should be funded through both
    public and private investments. The Cooperative Forestry Research
    Program helps to make this happen. With each dollar provided through
    this program, forestry schools leverage an additional $9 from other
    Federal, State, and private sources. In fact, this program provides
    only 10 percent of the funding for public forestry research, extension
    and education at public colleges and universities, but without this 10
    percent the other 90 percent could not be leveraged. SAF recognizes
    that formula funds are sometimes regarded as ``entitlements'' and are
    perceived as lacking in accountability. However, we believe that this
    program provides important and different research opportunities
    relative to the larger competitive grant programs. Perceptions of
    improved accomplishment reporting can be readily dealt with. Cutting
    this program's funding in half simply halves the program's
    effectiveness without addressing the perceived problems. We look
    forward opening a dialogue with Congress and the Administration about
    this program and potential improvements and urge that this conversation
    take place before changes are made to this critical program.

    National Research Initiative
        SAF supports the proposed $70 million increase in the National
    Research Initiative's Competitive Grants Program (NRICGP) but
    recommends allocating at least 10 percent of this funding to renewable
    natural resource research. Forestland constitutes over 30 percent of
    this country's land base and currently, less than 6 percent of funding
    provided through the NRICGP funds forestry research. As noted above,
    these forests provide high-demand goods and services such as clean
    water and air, wildlife habitat, hunting, fishing, and other outdoor
    recreation opportunities that are an increasing part of rural
    economies, and forest products that the Nation cannot survive without.
    Through the NRICGP, funding is provided for research on various issues
    in the biological and environmental sciences arena. While the research
    currently conducted through this program is important, we believe that
    this program should place more emphasis on forestry research to ensure
    our professionals have the information and new ideas to succeed at a
    time when more and more demands are being placed on the Nation's
    forests.
        We strongly believe this combination of formula-based funding
    through the Cooperative Forestry Research Program and competitive-based
    research funding through NRI to be appropriate if we are to maintain
    the long-term stability and focus required in forestry research, and
    foster new and innovative thinking characteristic of competitive
    grants.

    Renewable Resources Extension Act
        SAF recommends funding the Renewable Resources Extension Act
    through the Cooperative State Research and Extension Service at the
    authorized level of $30 million. We recommend a modest increase in this
    program because we believe this program has potential to greatly
    improve the Nation's forests and their management.
        Current budget deficits demand that every dollar invested be
    leveraged as much as possible. Research funding is no exception.
    Outreach and extension, which assists in the translation of research
    findings to solve real world problems, greatly increase the value of
    research investments. Through the RREA program, much needed outreach
    and extension is provided through universities around the country.
    These efforts utilize research findings, making investments in research
    increasingly important.
        This outreach and extension provided through the RREA program helps
    the every growing number of family forest owners who own over 40
    percent of the forestlands in this country, deal with the pressing
    problems they face. Development pressures, wildfire and forest health
    problems, declining U.S. forest products markets, and increasing
    demands on family forests for environmental services such as clean
    water and wildlife habitat, are just a few of the challenges family
    forest owners must deal with. Family forest owners need information and
    assistance to be able to address these problems, the RREA program helps
    make this possible.

    Natural Resources Conservation Service
        SAF is extremely concerned with the proposed cuts to the Natural
    Resources Conservation Service (NRCS) conservation operations account
    and recommends funding this account at $837 million, as provided in
    fiscal year 2005. The Administration's proposal would cut funding for
    this account by almost 10 percent of current funding levels,
    drastically affecting the Agency's capacity to provide much needed
    technical assistance to family forest owners and farmers with
    incidental forest land.
        Through NRCS' conservation operations account, family forestland
    owners receive much needed assistance for a variety of conservation
    practices, influencing the stewardship of these valuable resources. In
    addition, the conservation operations account helps ensure conservation
    programs can be implemented as mandated. Several programs administered
    by NRCS are key to assisting family forest owners, including the
    Environmental Quality Incentives Program, the Wildlife Habitat
    Incentives Program, the Conservation Reserve Program, and the Wetlands
    Reserve Program. We strongly support full funding for these programs
    and will continue to work with NRCS to address family forest owner
    needs through these programs.
        Thank you for your consideration. We are happy to provide
    additional details on any of the programs mentioned above upon request.
                                     ______

                Prepared Statement of the U.S. Apple Association

        The U.S. Apple Association (U.S. Apple) appreciates the opportunity
    to provide this testimony on behalf of our Nation's apple industry.
        Our testimony will focus on the following areas: the Market Access
    Program (MAP); funding for the Specialty Crop Competitiveness Act,
    Cooperative State Research, Extension and Education Service (CSREES)
    and Agricultural Research Service (ARS) funding, nutrition education
    and expansion of the fruit and vegetable snack program.
        U.S. Apple is the national trade association representing all
    segments of the apple industry. Members include 36 State and regional
    apple associations representing the 7,500 apple growers throughout the
    country as well as more than 500 individual firms involved in the apple
    business. Our mission is to provide the means for all segments of the
    U.S. apple industry to join in appropriate collective efforts to
    profitably produce and market apples and apple products.

    Market Access Program (MAP)
        U.S. Apple encourages Congress to appropriate $200 million in MAP
    funds, the level authorized in the farm bill for fiscal 2006.
        The apple industry receives $3.1 million annually in export
    development funds from the U.S. Department of Agriculture's (USDA)
    Market Access Program (MAP). These funds are matched by grower dollars
    to promote apples in more than 20 countries throughout the world. One-
    quarter of U.S. fresh apple production is exported, with an annual
    value of approximately $370 million.
        Strong MAP funding is critical to the U.S. apple industry's efforts
    to maintain and expand exports, and to increase grower profitability.
    Congress recognized the importance of MAP by authorizing increased
    funding in the 2002 farm bill. Over the past 2 years, congressional
    appropriations have kept pace with the farm bill's authorized level.

    Food Quality Protection Act (FQPA) Implementation
        U.S. Apple urges full funding for the following U.S. Department of
    Agriculture (USDA) administered programs to mitigate the negative
    impact of FQPA implementation on apple growers.
      --$16 million for the Pesticide Data Program, administered by the
            Agricultural Marketing Service (AMS);
      --$8.0 million for the National Agricultural Statistics Service
            (NASS) pesticide-usage surveys;
      --$2.0 million for the Office of Pest Management Policy administered
            by the Agricultural Research Service (ARS);
      --$3.7 million for minor-use registration of crop protection tools
            (IR-4) administered by ARS;
      --$7.2 million for area-wide IPM research administered by ARS;
      --$13.5 million for the Integrated Pest Management Research Grant
            Program administered by the Cooperative State Research,
            Extension and Education Service (CSREES);
      --$10.8 million for minor-use registration of crop protection tools
            (IR-4) administered by CSREES; and
      --$12.5 million for the Pest Management Alternatives Program,
            Regional Pest Management Centers, Crops at Risk and Risk
            Avoidance and Mitigation Program also administered by CSREES.

    National Tree Fruit Technology Roadmap
        U.S. Apple urges the Committee to support the apple industry's
    efforts to improve its competitiveness by providing increased Federal
    funding for the development and application of new technologies as
    outlined below.

    Codling Moth Research
        The U.S. apple industry needs better pest management techniques,
    improved understanding of secondary pests and the biology of pest
    predators, improved mating disruption techniques, rapid and efficient
    pest detection and instrumentation methods. Geographic differences in
    codling moth control capabilities requires a regional approach to
    research funding. U.S. Apple requests the following additional
    appropriations for this problem:
        $400,000 Agricultural Research Service--Yakima, Washington
        $400,000 Agricultural Research Service--Kearneysville, West
    Virginia

    Soil Replant Disease and Rootstock Breeding Research
        Soil replant disease is a poorly understood phenomenon that reduces
    tree vigor and stunts tree growth in new orchards, which are planted on
    the site of a previously existing orchard. A combination of organisms
    such as bacteria, fungi, nematodes and viruses are suspected to play a
    role in attacking the roots of new apple trees, limiting their growth
    potential. This problem has surfaced as a high priority problem because
    of the scarcity of new orchard sites, the need to replant existing
    orchards, the high per acre cost of planting new orchards and shortage
    of good options to control replant disease. Soil replant disease is a
    problem for all tree fruits, including apples, pears, peaches and
    cherries. Genetics and genomics research on resistance issues would be
    applicable to all of these tree fruit crops.
        Research is needed to better understand site-specific drivers
    causing the disease and how the disease causes damage. Research is
    necessary to develop biorational and sustainable controls. Research is
    needed to explore possible avenues for genetic resistance of
    rootstocks. U.S. Apple requests the following additional appropriations
    for this problem:
        $400,000 Agricultural Research Service--Geneva, New York
        $400,000 Agricultural Research Service--Wenatchee, Washington

    Fruit Quality Research
        The future of the U.S. apple industry will depend on the ability of
    apple growers to consistently grow and market apples with superior
    quality. Improved fruit quality will not only ensure greater
    international competitiveness, but it will increase consumer demand for
    apples.
        Research is needed on the physical, chemical and genetic
    composition of apples so apple growers can produce apples with superior
    consumer traits, such as texture, aroma, and nutrition, and apples with
    superior production traits including uniform ripening and better
    storage characteristics and systems to deliver better fruit quality to
    consumers through improved defect and quality sorting. This research
    would also be useful for other tree fruits such as peaches. U.S. Apple
    requests the following additional appropriations for this problem:
        $750,000 Agricultural Research Service--Albany, California
        $750,000 Agricultural Research Service--Wenatchee, Washington

    Automation, Sensors and Precision Agriculture Research
        Improving labor productivity is a critically important goal for the
    apple industry as it strives to remain competitive with low-wage
    international competitors. Labor accounts for approximately 50 percent
    of the cost of producing U.S. apples. Tree fruit industries must
    identify and incorporate new technologies that will minimize low skill
    tasks, enhance worker productivity and safety, reduce production and
    handling costs, decrease seasonality of labor, and maximize fruit
    quality delivered to consumers. This research would also be applicable
    to a host of tree fruits including cherries, peaches, almonds and
    apples and pears.
        $4,000,000 Agricultural Research Service--Kearneysville, West
    Virginia

    Genetics and Breeding
        Research on genetics, genomics, and plant breeding are high
    priority area for tree fruit growers who produce a variety of crops,
    such as apples, cherries, peaches and almonds. Genetics and genomics
    have to be applied through an active plant-breeding program to be
    successful.
        The U.S. apple industry supports the appropriations of $350,000 in
    Federal research funds for cherry genetics, genomics and plant
    breeding, which will also benefit tree fruit crops such as apples,
    peaches and almonds using functional genomics approaches to extend the
    research benefits. The effort would be national in scope and lead by
    Dr. Amy Iezzoni at Michigan State University (MSU). This research,
    which will provide the much needed scientific knowledge needed to
    develop better varieties in the future that would reduce labor costs,
    provide new disease and insect resistant varieties, and enhance overall
    fruit quality. The U.S. apple industry believes strongly in aggressive
    research programs in this area. This research keeps U.S. growers on the
    cutting edge of new varieties and rootstocks. U.S. Apple requests the
    following additional funding to address this need:
        $350,000 Cooperative State Research Education And Extension
    Service--Michigan State University

    Temperate Fruit Fly Research Position--Yakima, Wash.
        U.S. Apple requests continued funding of $300,000 to conduct
    critical research at the USDA ARS laboratory in Yakima, Wash. on
    temperate fruit flies, a major pest of apples.
        The Yakima, Wash., USDA ARS facility is conducting research
    critical to the crop protection needs of the apple industry. FQPA
    implementation has reduced the number of pesticides currently available
    to growers for the control of pests, such as cherry fruit fly and apple
    maggot. Left unchecked, these temperate fruit flies can be devastating.
    Thus, research is needed to develop alternative crop protection methods
    as growers struggle to cope with the loss of existing tools. While
    Congress appropriated $300,000 last fiscal year for this critical
    research, the administration's proposed budget for fiscal 2006 rescinds
    this funding.

    Post Harvest Quality Research Position--East Lansing, Mich.
        U.S. Apple urges Congress to maintain baseline funding of $309,600
    in the USDA ARS fiscal year 2006 budget for the postharvest quality
    research position in East Lansing, Mich.
        The East Lansing, Mich., USDA ARS facility is conducting research
    critical to the future survival of the U.S. apple industry. Using a
    series of new sensing technologies, researchers at this facility are
    developing techniques that would allow apple packers to measure the
    sugar content and firmness of each apple before it is offered to
    consumers. Research indicates consumer purchases will increase when
    products consistently meet their expectations, suggesting consumers
    will eat more apples once this technology is fully developed and
    employed by our industry. While Congress appropriated $309,600 last
    fiscal year for this critical research, the administration's proposed
    budget for fiscal 2006 rescinds this funding.

    Specialty Crops Competitiveness Act
        U.S. Apple urges Congress to fund the Specialty Crop
    Competitiveness Act at the authorized level of $54.5 million for fiscal
    year 2006.
        The Specialty Crop Competitiveness Act (SCCA) was introduced in the
    108th Congress by Reps. Cal Dooley (D-CA) and Doug Ose (R-CA) and in
    the Senate by Sens. Craig (R-ID) and Stabenow (D-MI). The bill was
    designed to strengthen demand, reduce production costs, and enhance
    production and marketing efficiencies.
        A scaled-back version of the SCCA passed Congress last fall and was
    signed into law by President Bush in December. The law authorizes a
    total of $54.5 million per year but does not mandate funding. The
    majority of the funds authorized funds would go toward block grants,
    with each State department of agriculture being guaranteed a minimum of
    $100,000.

    Fresh Fruit and Vegetable Snack Program
        U.S. Apple urges Congress to include $42 million in the USDA budget
    to expand the fruit and vegetable snack program to 25 schools in each
    of the 42 remaining States.
        The 2002 farm bill established the Fruit and Vegetable Pilot
    Program to promote consumption of fruits and vegetables among school
    children by providing free produce to schools in 25 schools in each of
    four States (Iowa, Indiana, Michigan, Ohio and one Indian Tribal
    Organization in New Mexico). The Child Nutrition and WIC
    Reauthorization Act of 2004 made the pilot permanent and expanded it to
    25 schools in Mississippi, three additional States (North Carolina,
    Pennsylvania and Washington were chosen by USDA) and two additional
    Indian Reservations.
        Reports from the original pilot showed that students were
    increasing their consumption of fruits and vegetables, choosing more
    fruits and vegetables for lunch, and asking their parents for fruits
    and vegetables at home. The fruit and vegetable snack program works to
    educate children about the healthy eating habits that will last a
    lifetime. The fruit and vegetable snack program should be expanded to
    25 schools in every State.

    Nutrition Education to Promote Health and Fight Obesity
        U.S. Apple strongly encourages Congress to fully fund the nutrition
    education programs authorized under the Child Nutrition and WIC
    Reauthorization Act of 2004.
        Childhood obesity is a national epidemic. Numerous studies have
    shown that children in the United States are not getting anywhere near
    the recommended servings of fruits and vegetables per day. According to
    the Centers for Disease Control (CDC) obesity treatment cost over $90
    million per year. USDA estimates that we could save over $70 billion
    per year with better diets.
        Nutrition education will be key in changing these behavior
    patterns. The Child Nutrition and WIC Reauthorization Act of 2004
    authorized funding up to 1 cent per school lunch served ($58 million)
    for nutrition education programs, materials and staffing. The
    President's budget did not include this funding.
        The U.S. Apple Association thanks the committee for this
    opportunity to present testimony in support of the U.S. apple
    industry's Federal agricultural funding requests.
                                     ______

        Prepared Statement of the U.S. Marine Shrimp Farming Consortium

        Mr. Chairman, we greatly appreciate the opportunity to provide
    testimony to you and the Subcommittee, to thank you for your past
    support, and to discuss the achievements and opportunities of the U.S.
    Marine Shrimp Farming Consortium (USMSFC), funded under the Federal
    initiative, Shrimp Aquaculture.
        We bring to your attention the success of the U.S. Marine Shrimp
    Farming Consortium and its value to the Nation. The Consortium consists
    of institutions from seven States: the University of Southern
    Mississippi/Gulf Coast Marine Laboratory, Mississippi; the Oceanic
    Institute, Hawaii; Tufts University, Massachusetts; Texas Agricultural
    Experiment Station, Texas A&M University, Texas; Waddell Mariculture
    Center, South Carolina; the University of Arizona, Arizona; and
    Nicholls State University, Louisiana. These institutions, which oversee
    the USMSFC, have made major advances in technology development and
    services to support the U.S. shrimp farming industry. The USDA in its
    2004 program review recognized the program's excellent scientific
    performance, output, and multi-state collaborative efforts. The
    Consortium is at the crossroads of contributing to major growth of the
    U.S. shrimp farming industry, consolidating its competitive advantages,
    and satisfying consumer's demands for safe and wholesome seafood
    products. Shrimp is the number one consumed seafood product in the
    United States, yet contributes to a $3.6 billion trade deficit, second
    only to the import of oil for the deficit contributed by natural
    resource products.

    Accomplishments
        The Consortium, in cooperation with private industry, industry
    associations, and government agencies has generated new technologies
    for producing safe and premium quality marine shrimp at competitive
    prices. To date, the program has: (1) established the world's first and
    currently most advanced breeding and genetic selection program for
    marine shrimp; (2) completed pioneering research and development of
    advanced diagnostic tools for disease screening and control; (3)
    described the etiology of shrimp diseases associated with viral
    pathogens; (4) fostered shrimp production at near-shore, inland/rural
    farm and even desert sites; (5) served a lead role in the Joint
    Subcommittee on Aquaculture's efforts to assess the threat of globally
    transported shrimp pathogens; (6) served on the Office of International
    Epizootics, recommending country-of-origin labeling of imported shrimp
    products to combat the spread of exotic disease pathogens, subsequently
    adopted by the USDA in its 2002 Farm Bill; (7) supplied the U.S.
    industry with selectively bred and disease-resistant shrimp stocks; (8)
    developed advanced technology for biosecure shrimp production systems
    to protect both cultured and native wild stocks from disease; and (9)
    developed new feed formulations to minimize waste generation and
    enhance the use of domestic grains and oilseed products. These
    substantial accomplishments advance the continued growth of the
    domestic industry, place an important emphasis on environmental
    sustainability, address concerns for the safety and quality of our
    seafood supply, and increase market competitiveness.
        Judging from the state of the industry today, USMSFC efforts
    continue to have measurable positive effect. Coastal farming continues
    to lead in the production of cultured shrimp in the United States, and
    inland farming has added new dimensions and growth to the industry.
    Improvements in farm management practices coupled with the widespread
    use of disease-resistant stocks have resulted in bumper crops for the
    industry over the last several years. Domestic farmed shrimp production
    has tripled over the last 6 years, yielding an average growth rate of
    20 percent per year. The year 2004 recorded over 12 million pounds of
    shrimp produced in addition to nearly $5 million recorded in sales of
    broodstock animals for improved market characteristics.
        With reliable production in place, we have also seen a commensurate
    geographic expansion of the industry within the United States from
    three to seven States in the last 10 years. A broader industry base,
    while increasing production through the addition of new farms, also
    provides additional protection to the industry by geographically
    isolating different regional sectors in the event of disease outbreaks
    or natural disaster. Significant amounts of shrimp are now being
    produced in Texas, South Carolina, Florida, Hawaii, Arizona, Alabama,
    and Arkansas. Several other States are now beginning to explore
    production with the newer technologies being developed.

    Industry Vulnerability
        While exceptional progress has been made, this emerging industry is
    continually confronted with new challenges. The industry depends on the
    USMSFC for leadership and innovative technology development. As a
    result of development of high-health and improved stocks, disease
    diagnosis, new feeds, and new production technologies and farming
    approaches, the domestic industry has maintained relative stability,
    while other countries have had major losses in their production due to
    diseases and environmental problems. Disease losses due to exotic
    viruses in Asia and Latin America during the past 5 years have
    approached $6 billion USD.
        Diseases present in imported commodity shrimp products threaten not
    only the emerging domestic shrimp farming industry, but also the
    Nation's native shrimp stocks. During 2004, limited disease outbreaks
    did occur in Texas and Hawaii that were caused by a breakdown in
    biosecurity protocols against imported shrimp products. A quick
    response of the USMSFP, working in concert with the USDA's Animal and
    Plant Health Inspection Services and other agencies in the State of
    Texas, helped identify and isolate these outbreaks, limit the spread,
    and minimize the loss in production nationwide.
        While significant progress has been made in risk assessment and
    risk management with visible success, the industry and the USMSFC must
    remain constantly vigilant and proactive to further improve global
    competitiveness. In addition to providing significant input on the
    development of national and international regulatory standards for
    shrimp farmers, important service work for governmental agencies and
    NGOs keeps us continuously apprised of new developments pertaining to
    emerging regulations so that USMSFC research plans can be kept
    proactively responsive to dynamic shifts in industry needs.
        The overwhelming threat facing the U.S. marine shrimp farming
    industry today is the significant decline in market prices for domestic
    shrimp due to a surge of foreign imports over the last 3 years. The
    decline has also seriously threatened the domestic shrimp harvest
    industry. Average U.S. farm gate prices have fallen 40 percent percent
    since then, constraining profitability and plans for industry
    expansion. Anti-dumping tariffs imposed in February 2005 have not nor
    are forecasted to stem the tide of rising imports, or improve domestic
    shrimp prices as intended. Affected buyers and distributors have
    largely absorbed those costs or producers have switched to product
    forms not covered by the tariffs. Moreover, other countries not named
    on the order have filled any voids with increased imports into the
    United States.
        Concerns also have been heightened over food safety issues
    associated with unregulated use of antibiotics and fecal-borne
    contaminants due to questionable production practices in certain
    countries. Further, due to disease outbreaks worldwide, several foreign
    countries have switched production to the dominant species in the
    United States, eroding a previous competitive advantage. While it is
    important that a level playing field be created through reexamination
    of trade and food safety issues, more technologically advanced and
    innovative approaches are now critically needed to leverage U.S.
    industry gains, create competitive advantage, and improve
    profitability. Innovative ways need to be sought to offset low prices
    and to distinguish and add value to the domestic product to provide a
    competitive edge in the marketplace and to ensure the safety of the
    domestic seafood supply.

    Industry Independence
        In fact, despite recent price and profitability trends, investor
    confidence is rising as a result of the work of the Consortium. New
    farms are emerging utilizing new and improved technologies, while
    others are working in cooperation with the Consortium on more advanced
    approaches that are nearing fruition. In addition to supporting today's
    industry, our advanced, high-density biosecure shrimp production
    systems are now developed to the point for further expansion of shrimp
    farming into near-shore, inland/rural and desert sites away from the
    environmentally sensitive coastal zone. We now have in place the
    economic models that will appropriately direct research to ensure
    economic viability, taking in consideration all associated biological,
    regional, and economic risk factors. Importantly, these new production
    technologies produce the highest quality and safest shrimp, utilize
    U.S. grain and oilseed products for feed production, and do not pose
    any threat to the environment. These important traits of an evolving
    domestic industry can be exploited to gain competitive edge, offset
    declining prices, and ensure the quality and safety of shrimp for the
    consumer. Clearly, the U.S. shrimp farming industry has emerged solid
    from near collapse in the early 1990s, and appears well poised for a
    new phase of growth, provided the technologies and innovations are in
    place to support a larger, more diverse, and more competitive domestic
    industry for the new millennium.
        To support existing efforts and technology transfer and plans for
    new dimensions to the research to address recent profitability issues,
    an increase in the current funding level from $3.941 million to $6
    million is requested. The increase will be used to: strengthen the
    Consortium's biotechnology and molecular capabilities and activities to
    support rapid and more advanced disease monitoring and genetic
    selection efforts; accelerate the development of new genetic lines for
    market advantage; advance high-density production prototypes to
    commercial-scale testing; determine the mechanisms of disease immunity
    in shrimp for protection of both farmed and wild shrimp stocks; and
    address niche market technologies for competitive advantage. In
    addition to these needed technological innovations, increased funding
    will support new efforts to promote institutional innovations that will
    enable expansion and vertical integration of the domestic industry,
    including examination of regulatory impediments to shrimp aquaculture;
    the effect of farm insurance; development of cooperatives; and the
    socioeconomics of existing and advanced, high-density production
    systems.
        Mr. Chairman, the U.S. shrimp farming industry and our Consortium
    deeply appreciate the support of the Committee and respectfully ask for
    a favorable consideration of this request.
                                     ______

          Prepared Statement of the United States Telecom Association

                               SUMMARY OF REQUEST

    Project Involved
        Telecommunications Loan and Grant Programs Administered by the
    Rural Utilities Service of the U.S. Department of Agriculture.
    Actions Proposed
      --Supporting Rural Utilities Service (RUS) loan levels and the
            associated funding subsidy, as required, for the 5 percent
            direct loan program and cost of money programs in fiscal year
            2006 in amounts requested in the President's budget. Supporting
            a continuation of the $125 million loan level as contained in
            the fiscal year 2005 Agriculture Appropriations Act for the
            guarantee program. Also supporting $358,875,000 in funding for
            broadband telecommunications loans, as recommended in the
            President's budget. Supporting the Administration's proposal to
            transfer the $175 million in loan authority currently allocated
            to the Rural Telephone Bank to the cost of money program.
      --Also, except in the event of liquidation or dissolution of the
            Rural Telephone Bank per Sec. 411 of the Rural Electrification
            Act of 1936, as amended, supporting an extension of the
            prohibition on retiring more than 5 percent of the Class A
            stock of the Rural Telephone Bank, supporting the prohibition
            on maintaining any account or subaccount within the accounting
            records of the Rural Telephone Bank which has not specifically
            been authorized by statute, supporting the prohibition against
            the transfer of Rural Telephone Bank funds to the general fund
            as well as the requirement that Treasury pay interest on all
            Bank funds deposited with it.
      --Opposing the proposal contained in the budget to transfer funds
            from the unobligated balances of the liquidating account of the
            Rural Telephone Bank for the Bank's administrative expenses.
      --Opposing the rural recertification proposal through denial of funds
            for a rule change.
      --Supporting $25 million for telemedicine and distance learning
            grants in rural areas.
        I am Walter B. McCormick, Jr., President and CEO of the United
    States Telecom Association (USTA), the premier trade association
    representing service providers and suppliers for the telecom industry.
    USTA's 1,200 member companies offer a wide range of services, including
    local exchange, long distance, wireless, Internet, VOIP, IP video and
    cable television service. Our membership ranges from the smallest rural
    co-op to some of the largest corporations in American. I submit this
    testimony in the interests of the members of USTA and the customers
    they serve.
        USTA members firmly believe that the targeted assistance offered by
    a strong RUS telecommunications loan program remains essential to a
    healthy and growing rural telecommunications industry that contributes
    to the provision of universal telecom service. We appreciate the strong
    support this Committee has provided for the RUS telecom program since
    its inception in 1949 and look forward to a vigorous program for the
    future.

                              A CHANGING INDUSTRY

        Nearly a decade has passed since the President signed the
    Telecommunications Act of 1996, a landmark piece of legislation in its
    time, and calls are multiplying for the Act to be updated to address
    today's reality of intermodal competition. The current system of
    government-managed competition in the telecom industry is a tremendous
    obstacle to investment, economic growth and jobs creation which are
    important to all Americans, but particularly for those living in
    telecom-dependent rural America. The financial markets recognize that
    the current system of inequitable government-managed competition cannot
    stand. That recognition is reflected in the availability and pricing of
    capital to telecommunications entities. Dramatic changes in technology,
    such as Voice over Internet Protocol (VOIP), and the wide use of
    wireless service to the point of market parity, have caused great
    uncertainty for carriers serving the most challenging areas of our
    Nation. During these changing times, access to a reliable source of
    capital such as the RUS loan programs is key to the system upgrades
    which will enable rural areas to experience the economic growth and job
    creation that a freely competitive market with ready access to fairly
    priced capital can provide.
        The need for modernization of the telecommunications technology
    employed by RUS borrower rural telecom companies has never been
    greater. In addition to upgrading to next generation networks to allow
    new services to be extended to rural subscribers, it is critically
    important that rural areas be included in the nationwide drive for
    greater bandwidth capacity. In order to provide higher speed data
    services, such as Digital Subscriber Line (DSL) or even fiber optic
    connections to the Internet, outside plant must be modernized and
    switching must be migrated to new platforms. With current technology,
    DSL services cannot be provided to customers located on lines more than
    a few miles from the switching office. Rural areas have a significant
    percentage of relatively long loops and are therefore particularly
    difficult to serve with higher speed connections. Rural telecom
    companies are doing their best to restructure their networks to shorten
    loops so that DSL may be provided, but this is an expensive proposition
    and may not be totally justified by market conditions. However, these
    services are important for rural economic development, distance
    learning and telemedicine. RUS-provided financial incentives for
    additional investment encourage rural telecommunications companies to
    build facilities which allow advanced services to be provided. The
    externalities measured in terms of economic development and human
    development more than justify this investment in the future by the
    Federal Government.
        Greater bandwidth and packet switching capabilities are crucial
    infrastructure elements which will allow rural businesses, schools and
    health care facilities to take advantage of the other programs
    available to them as end users. The money spent on having the most
    modern and sophisticated equipment available at the premises of
    businesses, schools or clinics is wasted if the local
    telecommunications company cannot afford to build facilities that
    quickly transport and switch the large amounts of voice, video and data
    that these entities generate. RUS funding enhances the synergies among
    the FCC and RUS programs targeted at improving rural education and
    health care through telecommunications.
        The RUS program helps to offset regulatory uncertainties related to
    universal service support, interstate access revenues and
    interconnection rules with a reliable source of fairly priced, fixed-
    rate long term capital. It is a voluntary program designed to provide
    incentives for local telecom companies to build the facilities
    essential to economic growth.
        RUS endures because it is a brilliantly conceived public-private
    partnership in which the borrowers are the conduits for the Federal
    Government benefits that flow to rural telephone customers, the true
    beneficiaries of the RUS program. The government's contribution is
    leveraged by the equity, technical expertise and dedication of local
    telecommunications companies. The small amount of government capital
    involved is more than paid back through a historically perfect
    repayment record by telecommunications borrowers, as well as the
    additional tax revenues generated by the jobs and economic development
    resulting from the provision and upgrading of telecommunications
    infrastructure. RUS is the ideal government program--it generates more
    revenues than it costs, it provides incentives where the market does
    not for private companies to invest in infrastructure promoting needed
    rural economic development, it allows citizens to have access to
    services which can mean the difference between life and death, and it
    has never lost a nickel of taxpayer money because of a telecom carrier
    default.

                                RECOMMENDATIONS

        For fiscal year 2006, this Committee should set the loan levels and
    necessary associated subsidy amounts for the 5 percent direct loan
    program and cost of money loan programs consistent with the levels
    recommended in the President's budget. The guaranteed
    telecommunications loan program should be maintained at the fiscal year
    2005 level. These levels would preserve our members' ability to serve
    the Nation's telecommunications needs, maintain universal service and
    bring advanced telecom services to rural America.
        Congress has recognized the tremendous potential of broadband
    technology to enhance human and economic development in rural areas by
    providing mandatory funding of loans for the deployment of such
    technology in rural areas. USTA urges the provision of funding for this
    program in the amount of $358,875,000 as proposed in the President's
    budget. The capital intensive nature of the telecommunications
    industry, particularly with respect to implementation of broadband,
    requires a stable and predictable source of funds. The President should
    be lauded for his recognition of the importance of broadband deployment
    to our Nation's economy and particularly for his recognition, through
    support of the RUS program, of the tremendous impact broadband
    telecommunications can have on economic growth and development in rural
    America.

    Elimination of the 7 Percent Cap on the Interest Rate for the ``Cost of
            Money'' Program
        For a number of years, through the appropriations process, Congress
    has eliminated the 7 percent ``cap'' placed on the insured cost-of-
    money loan program. The elimination of the cap should continue. If long
    term Treasury interest rates exceeded the 7 percent ceiling contained
    in the authorizing act, the subsidy would not be adequate to support
    the program at the authorized level. This would be extremely disruptive
    and hinder the program from accomplishing its statutory goals.
    Accordingly, USTA supports continuation of the elimination of the 7
    percent cap on cost-of-money insured loans in fiscal year 2006.

    Recommended Loan Levels
        USTA recommends that the telephone program loan levels for fiscal
    year 2006 be set as follows:

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

    ------------------------------------------------------------------------
    Insured 5 percent Direct Loans (5 percent)..............             145
    Insured Cost-of-Money Loans.............................             425
    Loan Guarantees.........................................             125
    Broadband Telecommunications Loans......................         358,875
                                                             ---------------
          Total.............................................       1,053,875
    ------------------------------------------------------------------------

    Loans and Grants for Telemedicine and Distance Learning
        USTA supports the continuation of $25 million in grants for
    distance learning and telemedicine, as provided in the President's
    budget. As we move into the Information Age with the tremendous
    potential of the Internet to increase productivity and economic
    development and promote education and medicine, such funds can help
    continue the historic mission of RUS to support the extension of vital
    new services to rural America.

    Recertification of Rural Status Would Be Disruptive and Chill Rural
            Telecom Investment
        The Administration's budget notes that USDA will propose rule
    changes to require recertification of rural status for each electric
    and telecommunications borrower on the first loan request received in
    or after 2006 and on the first loan request received after each
    subsequent Census.
        Telecom construction and investment is a long term continuous
    process, not a project by project proposition. The uncertainty created
    by the possibility of decertifying a borrower as rural after it has
    established a relationship with RUS and begun borrowing funds for
    expansion and upgrading according to a long term plan would be
    disruptive and discourage borrowers from participating in the RUS
    program, thereby denying its benefits to subscribers. The ``once rural
    always rural'' practice of RUS has been extraordinarily successful at
    providing needed long term capital, at a careful and measured pace, to
    telecom carriers intent on expanding and upgrading service to promote
    rural economic development. Congress should deny funding in fiscal year
    2006 for such a rule change.

    Liquidation and/or Dissolution of the Rural Telephone Bank Under the
            Proper Conditions Will Benefit the Government and RUS Telecom
            Borrowers
        The Rural Telephone Bank (RTB) was created by Congress under
    extraordinary circumstances in 1971 when the President seemed intent on
    shutting down the rural telephone lending program. USTA applauds the
    commitment of the current Administration to supporting telecom
    infrastructure development in rural America through the RUS telecom
    programs, and particularly the Administration's goal of universal
    broadband availability within the next two years. Given that support,
    the ongoing administratively cumbersome privatization scheme of the
    Rural Telephone Bank is no longer necessary as long as the
    Administration continues to support, and Congress adopts, an equivalent
    level of capital available in the RUS cost of money program.
        When the RTB was formed, Congress provided a variety of options for
    its future. USTA supports the Administration's recommended choice of
    liquidation and/or dissolution of the RTB per the statutory
    requirements included in Section 411 of the Rural Electrification Act
    of 1936, as amended, with the equivalent increase in loan level in the
    cost of money program, as the optimal direction for the future of the
    RTB. Return of the paid in capital of the RTB stockholders, both
    government and private, at par value per Section 411 is a proper and
    fair deal for both the government and the stockholders.

                                   CONCLUSION

        Our members take pleasure and pride in reminding the Committee that
    the RUS telecommunications program continues its perfect record of no
    defaults by telecommunications carriers in over a half century of
    existence. RUS telecommunications carrier borrowers take seriously
    their obligations to their government, their Nation and their
    subscribers. They will continue to invest in our rural communities, use
    government loan funds carefully and judiciously, and do their best to
    assure the continued affordability of telecommunications services in
    rural America. Our members have confidence that the Committee will
    continue to recognize the importance of assuring a strong and effective
    RUS Telecommunications Program through authorization of sufficient loan
    levels.
                                     ______

     Prepared Statement of the University of Southern Mississippi and the
                         Mississippi Polymer Institute

        Mr. Chairman, distinguished Members of the Subcommittee, I thank
    you for this opportunity to provide testimony describing ongoing
    research and commercializing efforts of The University of Southern
    Mississippi (USM) and the Mississippi Polymer Institute. I am very
    grateful to the Subcommittee for its leadership and the continued
    support of the Institute and its work. This testimony will include an
    update on the progress of the Institute since my testimony of
    approximately 1 year ago. Research efforts over the last year have
    focused on agricultural-based polymeric emulsions, and the production
    of a commercial quality, formaldehyde-free, soybean-based adhesive for
    use in particleboard manufacture. The emulsion polymer research has
    resulted in higher levels of agricultural-derived monomer incorporation
    and better control over the polymerization process that provides high
    performance environmentally friendly coatings. We are excited about
    this development as we believe the agricultural-derived monomers used
    in the polymer formation clearly and convincingly produces superior
    latex polymer with numerous potential advantages and applications.
    Furthermore, we have successfully produced lab-scale fiberboards that
    exceed all medium density particleboard commercial specifications.
    Thus, we have designed, synthesized, and utilized a soybean-derived
    adhesive with no added formaldehyde. This is, to our knowledge, the
    first such glue prepared from agricultural products with absolutely no
    added formaldehyde. This continued success demands the expansion of
    formaldehyde-free soybean-based adhesive for use in the very large
    oriented strand and medium density fiberboard markets if the technology
    is to be adequately exploited. Such technical achievements guarantee
    more potential revenue for U.S. farmers. Coupled with the reduction in
    air pollution and the absence of formaldehyde, the new adhesive is a
    winning product. With these and other previously reported achievements,
    we have clearly shown that many products manufactured heretofore from
    petroleum can be replaced with agricultural products if adequate
    funding, facilities, and commitment are available. This is exciting
    work and we are most appreciative of your support. This document
    provides an overview of our research to date and validates the
    necessity for continued funding.
        In the research and development of vegetable oil macromonomers
    (VOMMs), we have chemically modified various vegetable oils such as
    castor, soy, linseed, safflower, sunflower, and tung oil to design and
    synthesize over 100 novel monomers, derivatives, and methods for
    functionalization. This year's main focus has been the tailoring of
    monomer structures that encourage higher polymerization efficiencies.
    The molecular changes affected have broadened the options for polymer
    building blocks while increasing real performance potential. The
    technology success is dependent upon the use of agricultural materials
    as the primary building blocks for emulsion-derived polymers, and
    offers opportunities for using ag-derived materials as a basic
    feedstock in the polymer industry. In developing a variety of VOMMs,
    our synthetic techniques have been optimized to achieve greater than 90
    percent conversion of usable oil in VOMMs, producing in some cases only
    glycerol as a byproduct. The revised and now accepted synthetic
    procedure affords a useful, polymerizable VOMM without extraordinary
    methods or processes. During this year, our synthetic efforts have
    produced emulsion polymers containing greater than 40 percent of VOMM
    by weight (based upon polymer solids), and provide chemically and
    physically stable polymers suitable for a variety of end uses,
    particularly in coating formulations. A significant advancement this
    year is attributed to our new level of control and understanding
    between monomer design and partitioning during the emulsion
    polymerization process. These new VOMMs are readily copolymerizable
    with common commercial monomers, and exhibit higher degrees of useful
    crosslinking after application and cure. The fundamental scientific
    principles regarding the transfer of hydrophobic monomers across the
    aqueous phase have been confirmed, yet additional data must be
    collected as more of these novel monomers building blocks are being
    designed, synthesized, and studied.
        VOMMs that function both as a monomer and as the stabilizing
    surfactant have been synthesized and evaluated. These unique monomers
    are termed surfmers. Three soybean oil-derived surfmers were
    successfully synthesized and polymerized to produce new polymer
    structures. The first was a nonionic surfmer possessing poly(ethylene
    oxide) moieties of three different chain lengths, and concurrently
    three levels of hydrophilicity. The idealized structures were named
    EMMSO 35, EMMSO 55, and EMMSO 75. Stable styrene emulsion copolymers
    containing as high as 44 weight percent of EMMSO 35 were synthesized.
    Moreover, a latex with 30 weight percent copolymerized EMMSO 35 was
    formulated into architectural coatings that exhibited good film
    formation and performance stability. The second one was an anionic
    surfmer, based upon a neutralized version of an earlier VOMM, soybean
    acrylate monomer (SAM). All-acrylic latexes containing 5-40 weight
    percent of 100 percent neutralized SAM have been successfully
    synthesized. Latexes containing 30 percent by weight of 100 percent
    neutralized SAM provided good gloss and adhesion, and was formulated as
    an environmentally friendly binder for nail polish.
        Our sustained efforts to patent the technology developed in these
    collective projects have resulted in a total of 21 patents and patent
    applications, both United States and foreign. More applications will be
    submitted during the coming year.
        Commercial nail polishes contain very high amounts of solvents
    which constitute volatile organic compounds (VOCs) and negatively
    impact the environment. Novel VOMM-based latexes have been designed for
    use in nail polishes that are environmentally-friendly and possess high
    gloss. We are continuing to optimize our VOMM-based latexes to provide
    faster dry time while maintaining a zero-VOC formulation.
        Paper coatings derived from VOMM-based emulsions have been
    formulated for paper coating applications. Testing equipment has been
    purchased and installed, and testing is underway to enhance our
    understanding of polymer performance on paper substrates. VOMM latexes
    formulated into paper coatings have exhibited performance properties
    similar to those of styrene-acrylic commercial controls. VOMM coating
    properties continue to be evaluated and optimized using various co-
    monomer compositions.
        A soybean-derived product, SAM, was successfully incorporated into
    a permanent press textile treatment to replace the previous VOMM,
    castor oil acrylate monomer (CAM). The novel product increases military
    uniform durability over 30 percent, and increases the acceptable level
    of wrinkle resistance from 20 washes to 170 wash cycles, thereby
    reducing laundry costs, at a significant savings for service personnel
    and the Department of Defense. This polymer was utilized for the
    treatment of Marine camo uniforms during Iraqi freedom campaign.
    Warmkraft, the company who purchased our textile latex cited cost
    issues and over engineering (meaning the product was too good) and
    therefore chose an alternate formulation after more than 2 years of
    treating Marine uniforms. However, they recently contacted us and noted
    experiencing consistency problems with their current product, and thus
    may purchase the latex from us again. Textile latex research is
    expanding to understand the fundamental mechanisms for its adhesion,
    longevity, and the efficacy of antimicrobial agents to provide added
    combat force protection.
        In yet another of our novel ag-based technologies, we have
    developed a formaldehyde-free adhesive for use in particleboard
    composites. The primary component in the developmental adhesive is soy
    protein isolate (SPI), and lab produced particleboards have met or
    exceeded industry performance requirements as defined by ANSI standards
    for M1, M2, M3, and M-S grade boards. Processing and board production
    are compatible with current equipment and methodologies. Efforts are
    underway to reduce the water content of the current adhesive to
    decrease dry time and increase line speeds. The new adhesive was scaled
    up to semi-commercial quantities for process and formulation robustness
    testing in preparation for full-scale evaluations with a commercial
    partner. Alternative less expensive proteins have also been evaluated
    in our current shelf-stable formulation, and have demonstrated similar
    immediate performance characteristics (long-term testing is in
    progress). Last year, formulations only met a single industry
    performance standard, and required higher curing temperatures and
    times. We have successfully exceeded M1, M2, M3 and M-S particleboard
    standards while providing higher moisture resistance and improved
    structural integrity even after 24 hours of water immersion when
    evaluated against particleboards formulated with formaldehyde-based
    adhesives.
        In 1983, the Mississippi Legislature authorized the Polymer
    Institute at USM to work closely with emerging and other existing
    polymer-related industries to assist with research, problem solving,
    commercializing efforts, and workforce development. This effort
    complements existing strong ties with industry and government involving
    exchange of information and improved employment opportunities for USM
    graduates. Most importantly, through basic and applied research coupled
    with developmental and commercializing efforts of the Institute, the
    School of Polymers and High Performance Materials continues to address
    national needs of high priority.
        Our research remains focused on the study and development of a
    technology platform that facilitates further commercialization of
    alternative agricultural crops for use in the polymer industry. The
    polymer industry maintains its position as the single largest consumer
    of petroleum chemical intermediates in the world. The finite supply of
    petroleum resources has resulted in extreme price pressures as
    worldwide demand continues to increase. Unfortunately, this feedstock
    normally generates non-biodegradable raw materials that are not carbon
    neutral, and therefore do not represent a sustainable alternative for
    economic development in the polymer industry. The theme of our work is
    to develop high performance and environmentally friendly technology
    utilizing agricultural intermediates. In this way, we as a Nation can
    improve our environment, reduce our dependence on imported petroleum,
    and keep America's farmlands in production. As farm products meet the
    industrial needs of the American society, rural America is the
    benefactor. Heretofore, these successful efforts to utilize alternative
    agricultural products as an industrial feedstock continue to receive
    more and more attention but drastically less than these high tech
    innovations and opportunities warrant. Your decisions are crucial to
    the accomplishment of these goals as funding from this Subcommittee has
    enabled us to implement and maintain an active group of university-
    based polymer scientists whose energies are devoted to commercializing
    alternative crops. We are most grateful to you for this support, and
    ask for your continued commitment.
         The faculty, the University, and the State of Mississippi are
    strongly supportive of the Mississippi Polymer Institute and its close
    ties with industry. Most faculty maintain at least one industrial
    contract as an important part of extramural research efforts.
        Polymers, which include fibers, plastics, composites, coatings,
    adhesives, inks, and elastomers, play a key role in the materials
    industry. They are used in a wide range of industries including
    textiles, aerospace, automotive, packaging, construction, medical
    prosthesis, and health care. In the aerospace and automotive
    applications, reduced weight and high strength make them increasingly
    important as fuel savers. Their non-metallic character and almost
    unlimited design potential support their use for many national defense
    purposes. Moreover, select polymers are possible substitutes for so-
    called strategic materials, some of which come from potentially
    unreliable sources.
        As a polymer scientist, I am intrigued by the vast opportunities
    offered by American agriculture. As a professor, however, I continue to
    be disappointed that few of our science and business students receive
    training in the polymer-agricultural discipline despite its enormous
    potential. The School of Polymers and High Performance Materials and
    the Mississippi Polymer Institute at USM are attempting to make a
    difference by showing others what can be accomplished if appropriate
    time, energy, and resources are devoted to the understanding of ag-
    based products. I became involved in the polymer field more than 40
    years ago, and have watched its evolution where almost each new product
    offered the opportunity for many more. Although polymer science as a
    discipline has experienced expansion and a degree of public acceptance,
    alternative agricultural materials in the polymer industry continue to
    be an underutilized national treasure. Today, society displays less
    acceptance of petroleum-derived materials than ever before, and
    consequently, the timing is ideal for agricultural materials to make
    significant inroads as environmentally-friendly, biodegradable, and
    renewable raw materials. Agricultural materials have always been
    available for our use, yet society for many reasons, continues to
    ignore their potential.
        U.S. agriculture has made the transition from the fields to the
    kitchen tables, but America's industrial community continues to be
    frightfully slow in adopting ag-based industrial materials. The prior
    sentence was included in my previous testimonies but continues to ring
    true. We are making progress and must continue to aggressively pursue
    this opportunity by:
      --Intensify United States efforts to commercialize alternative crops
            and dramatically reduce atmospheric VOC emissions and odor.
      --Reduce United States reliance on imported petroleum.
      --Maintain a healthy and prosperous farm economy.
      --Foster new cooperative opportunities between American farmers and
            American industry.
      --Create advanced polymer technology-based manufacturing jobs that
            cannot be easily exported to other countries.
      --Maintain our innovative and developmental competitive edge over
            other less environmentally-friendly countries and less
            competitive economies.
        Mr. Chairman, your leadership and support are deeply appreciated by
    the entire USM community. While I can greatly appreciate the financial
    restraints facing your Subcommittee, I feel confident that further
    support of the Mississippi Polymer Institute will continue to pay
    dividends by way of increasing commercialization opportunities for
    agricultural materials in the American industry. Advances in polymer
    research are crucial to food, transportation, housing, and defense
    industries. Our work has clearly established the value of ag products
    as industrial raw materials, and we must move it from the laboratories
    to the industrial manufacturing sector. Only then can the United States
    enjoy the cleaner and safer environment that these technologies offer,
    as well as new jobs, and expanded opportunities for the U.S. farmer. Of
    course, while working to achieve commercialization, we are committed to
    continue technology advancement, as will basic research on those topic
    areas where knowledge is required.
        Since our testimony last year, we have continued to research,
    develop, and trial larger scales for commercializing agricultural-based
    products. Indeed, the technology on a lab scale has matured, and
    marketing and sales must move parallel with continued research and
    commercial development of novel products. Thus, we are in need of
    additional resources to advance these infant technologies to the market
    place, and to continue our development of other exciting technologies.
    We therefore respectfully request $1.7 million in Federal funding to
    more fully exploit the potential of commercializing the technologies
    described herein. We have shown that we can be successful, yet we need
    additional resources in order to ultimately utilize the potential of
    this technology. Our efforts will be recognized as instrumental in
    developing a ``process'' for the commercialization of new ag-based
    products. The development of this process, and to show it is
    successful, is extremely important to all entrepreneurs who believe in
    and support ag-based products. Thank you, Mr. Chairman and Members of
    the Subcommittee, for your support and consideration.
                                     ______

      Prepared Statement of the Upper Mississippi River Basin Association

        The Upper Mississippi River Basin Association (UMRBA) is the
    organization created in 1981 by the Governors of Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating
    the five States' river-related programs and policies and for
    collaborating with Federal agencies on regional water resource issues.
    As such, the UMRBA has an interest in the budget for the U.S.
    Department of Agriculture's conservation programs and technical
    assistance.
        Of particular importance to the UMRBA is funding for the
    Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP),
    Environmental Quality Incentives Program (EQIP), and Conservation
    Security Program (CSP). Taken together, these four Commodity Credit
    Corporation-funded programs provide an invaluable means for the USDA to
    work with landowners, local conservation districts, and the States to
    maintain agricultural productivity while protecting the Nation's soil
    and water resources. Moreover, they do this in a voluntary, non-
    regulatory fashion. CRP, WRP, EQIP, and CSP will be key non-regulatory
    elements in the States' efforts to address agricultural sources of
    water quality impairment through the Total Maximum Daily Load program.
    Successful application of conservation programs to this region's water
    quality problems will also help address the growing national concern
    with hypoxia in the Gulf of Mexico, which has been linked to nutrient
    loads from agriculture and other sources. As stewards of some of the
    Nation's most productive agricultural lands and important water
    resources, the five States of the Upper Mississippi River Basin believe
    these programs are vital.

    Conservation Reserve Program
        The UMRBA supports President Bush's fiscal year 2006 budget request
    of $2.02 billion for the Conservation Reserve Program, a modest
    increase over fiscal year 2005. This increase is testament to the
    strong landowner interest and high environmental benefits resulting
    from enrollment of fragile cropland acres in CRP. Through CRP, farmers
    and ranchers can voluntarily establish long term conservation
    practices, such as filter strips and riparian buffers, on highly
    erodible and environmentally sensitive cropland.
        In Illinois, Iowa, Minnesota, Missouri, and Wisconsin, total CRP
    enrollment is currently 6.9 million acres, or approximately 20 percent
    of the national CRP acreage. Yet the five States' CRP enrollment
    represents 42 percent of the total number of CRP contracts and 40
    percent of the total number of farms enrolled nationwide in the CRP. In
    the most recent general sign-up (#29), producers with eligible lands
    competed nationally for acceptance into CRP, based on an environmental
    benefits index. In the five States of the Upper Mississippi River Basin
    (UMRB), 80 percent of the offers made were accepted for enrollment,
    adding over 200,000 acres to the CRP.
        All five States also have active Conservation Reserve Enhancement
    Programs tailored to meet their priority conservation needs. Current
    CREP enrollment in the UMRB States is approximately 240,000 acres, or
    38 percent of the national total. These rates of participation clearly
    demonstrate the importance of the CRP and CREP in the Nation's
    agricultural heartland and reflect the compatibility of these programs
    with agricultural productivity.

    Wetlands Reserve Program
        The President's fiscal year 2006 budget proposes $321 million for
    the Wetlands Reserve Program, nearly a 17 percent increase over fiscal
    year 2005 funding. UMRBA applauds this increase and urges Congress to
    provide sufficient funding to meet WRP's annual enrollment goal of
    250,000 acres.
        Since the WRP was established in 1996, its easements have proven to
    be important tools for restoring and protecting wetlands in
    agricultural areas. This is clearly evident from the overwhelming
    landowner response and the resulting improvements to water quality and
    habitat. Through fiscal year 2003, WRP enrollment in Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin totaled more than 271,000 acres, or
    18 percent of the national total. In fiscal year 2004, landowners in
    the five States enrolled an additional 38,000 acres in the WRP.
    However, there were eligible, but unfunded, applications to enroll
    another 136,000 acres from the five States in fiscal year 2004. This
    represents 25 percent of the total national backlog of applications for
    that year.

    Environmental Quality Incentives Program
        In contrast to conservation programs that protect land and water
    resources by curtailing production on sensitive lands, the
    Environmental Quality Incentives Program supports conservation on
    working lands. Promoting agricultural production and environmental
    quality as compatible goals is particularly important in the Midwest
    agricultural heartland.
        The 2002 Farm Bill provides $1.2 billion of budget authority for
    the EQIP in fiscal year 2006. However, the President is proposing to
    fund EQIP at only $1.0 billion in fiscal year 2006. The UMRBA urges
    Congress to fund EQIP at its full authorized level. Like many other
    conservation programs, EQIP funding has not kept pace with demand. Even
    at full funding, there will likely be significant numbers of unfunded
    EQIP applications. In fiscal year 2004, the EQIP allocation to the
    States of Illinois, Iowa, Minnesota, Missouri, and Wisconsin totaled
    $111 million. Yet that amount still left a backlog of $180 million in
    unmet requests for EQIP assistance, 12 percent of the Nation's total
    unfunded EQIP applications. In fiscal year 2005, the EQIP allocation to
    the five basin States has increased to $121 million, still well below
    the need, as reflected in unfunded applications for the past 3 years.

    Conservation Security Program
        The President's budget request of $274 million for the CSP reflects
    a 36 percent increase over fiscal year 2005 and is nearly 7 times what
    was spent in fiscal year 2004, when the program began. Yet it is
    unlikely that this will be sufficient to meet the demand for this
    popular voluntary program, which provides financial and technical
    assistance to agricultural producers who implement conservation
    measures on working lands.
        In fiscal year 2004, CSP contracts were limited to farmers and
    ranchers in 18 priority watersheds across the country. Five of those
    watersheds were in the five States of the Upper Mississippi River
    Basin. In those five watersheds, NRCS approved contracts totaling $15.5
    million, which was 44 percent of the total CSP contract payments that
    year.
        It is too early to judge what effect the fiscal year 2005 CSP
    funding cap of $202 million will have. The fiscal year 2005 sign-up
    opened March 28, 2005 and is scheduled to close May 27, 2005. In
    contrast to fiscal year 2004, when only 18 watersheds were eligible, in
    fiscal year 2005, 220 watersheds are eligible. Thus, while CSP funding
    increased 5-fold in fiscal year 2005, the number of eligible watersheds
    has increased more than 12-fold and the number of eligible farms has
    increased 8-fold. Of the 220 eligible watersheds nationwide, 22 are in
    the five States of Illinois, Iowa, Minnesota, Missouri, and Wisconsin.
    Those 22 watersheds include over 19 percent of the total number of
    farms that will be eligible for CSP in fiscal year 2005. It remains to
    be seen what the ultimate level of landowner interest will be in the
    CSP, as the number of eligible watersheds grows. But the UMRBA is
    encouraged that CSP is continuing to expand and funding levels are
    increasing.

    Conservation Technical Assistance
        Through the Conservation Technical Assistance program, NRCS
    provides the technical capability that helps people plan and apply
    conservation on the land. NRCS works through and in partnership with
    conservation districts to assist individuals and groups in assessing
    conservation needs and planning, designing, and installing conservation
    practices. In addition, the CTA program assists in preparing landowners
    to participate in USDA conservation financial assistance and easement
    programs, provides emergency disaster technical assistance, and enables
    NRCS to coordinate with other programs such as U.S. EPA's nonpoint
    source management program and U.S. Fish and Wildlife Service's Partners
    for Wildlife.
        Given that CTA is the foundation for much of the Nation's private
    lands conservation assistance, it is disappointing that the President's
    fiscal year 2006 budget proposes a $61 million, or 8 percent, decrease
    in the CTA account. The UMRBA urges that, at a minimum, funding for CTA
    be maintained at the fiscal year 2005 level.

    Watershed Programs
        The UMRBA is deeply concerned that the President is proposing deep
    cuts to NRCS's watershed programs, including total elimination of the
    Watershed and Flood Prevention Operations program, which funds Public
    Law 566 and Public Law 534 projects. Funding for Watershed Operations
    has declined substantially over the past 20 years, from an historical
    high of $199 million in fiscal year 1994 to only $75 million in fiscal
    year 2005. And yet this program provides significant local, regional,
    and national benefits, by addressing watershed protection, flood
    prevention, erosion and sediment control, water supply, water quality,
    water conservation, agricultural drought problems, rural development,
    municipal and industrial water needs, upstream flood damages, fish and
    wildlife habitat enhancement, and wetland creation and restoration. In
    fiscal year 2004 there were $191 million in Public Law 566 and Public
    Law 534 projects ready for construction, and a total project backlog
    estimated at $1.56 billion. Nearly $230 million of that backlog was in
    the States of Illinois, Iowa, Minnesota, Missouri, and Wisconsin.
    Despite the fact that Public Law 566 and Public Law 534 projects in the
    five States were allocated over 22 percent of the total national
    funding in fiscal year 2004, that amount ($17.9 million) was far less
    than the $230 million backlog. Rather than eliminating this important
    program, UMRBA urges that it be funded at least equal to the fiscal
    year 2005 level of $75 million.
        In addition to continuing to invest in watershed and flood
    prevention projects, the rehabilitation of aging flood control dams
    must also be addressed. Of the 11,000 Public Law 534 and Public Law 566
    dams nationwide, more than 3,000 will reach the end of their design
    life by 2013. Recognizing this fact, Congress authorized the Watershed
    Rehabilitation Program in 2000 and authorized significant new funding
    for the program in the 2002 Farm Bill. In particular, $60 million is
    authorized for the Watershed Rehabilitation Program in fiscal year
    2006. Yet the President's fiscal year 2006 budget request is only $15
    million, a 44 percent decrease over the fiscal year 2005 funding level.
    In fiscal year 2005, $27.3 million was appropriated for the Watershed
    Rehabilitation Program, only 60 percent of the $46 million of project
    requests that year. Rehabilitation of aging dams, which could become a
    threat to public health and safety, is extremely important and UMRBA
    thus urges Congress to fund the Watershed Rehabilitation Program at
    least equal to its fiscal year 2005 level.
        Also of concern is the Watershed Surveys and Planning account which
    is slated to be cut in the President's fiscal year 2006 budget. The
    fiscal year 2006 request of $5.1 million for Watershed Surveys and
    Planning compares with pending projects totaling $18.8 million in
    fiscal year 2004. UMRBA thus urges Congress to provide funding at least
    equal to the fiscal year 2005 level for this important watershed
    program.
                                     ______

      Prepared Statement of the Western Coalition of Arid States (WESTCAS)

        The Western Coalition of Arid States (WESTCAS) is submitting this
    testimony to the United States Senate Appropriations Committee,
    Agriculture, Rural Development and Related Agencies Subcommittee
    regarding the U.S. Department of Agriculture's fiscal year 2006 Federal
    budget. The USDA's budget is of particular concern for our members
    because of the tie-in to water use in irrigation that consumes a large
    percentage of available water resources in many of our member States.
        WESTCAS is an organization created in 1992 with coalition
    membership of approximately 125 water and wastewater districts, cities
    and towns, and professional associates focused on water quality issues
    in many western States.
        Most of the water and wastewater related funding in the USDA's
    budget is found in the Natural Resources Conservation Service (NRCS)
    budget. Some programs received slight increases for fiscal year 2006,
    in particular the Ground and Surface Water Conservation program, and we
    support these increases. However, most programs' budgets have been cut
    and WESTCAS advocates restoring these cuts to at least fiscal year 2005
    enacted levels. These programs include:
      --Environmental Quality Incentives Program (EQIP), which provides
            funding for ``innovative approaches to leveraging Federal
            investment in environmental enhancement and protection in
            conjunction with agricultural production'';
      --Watershed and Flood Prevention Program which had funding eliminated
            entirely for three of its programs;
      --Watershed Surveys and Planning's budget, which has been decreased
            each of the last 2 years;
      --Conservation Technical Assistance program;
      --Watershed Rehabilitation Program which provides funding for dam
            safety; and
      --technical assistance budget for Resource Conservation and
            Development, which was reduced by 50 percent.
        WESTCAS feels that other water-related program cuts also need close
    review since it appears that the President's USDA budget took the
    biggest cut of all Federal budgets this year. For example, the
    Agriculture Research Service funding for the Environmental Stewardship
    program was reduced from $219 million to $178 million. And the
    Cooperative State Research, Education and Extension Service's Water
    Quality research and education budget line item was completely
    eliminated.
        WESTCAS believes that budget cuts regarding these types of
    programs, which affect a scarce natural resource so vital to continued
    growth and prosperity in the West, are not warranted, and we urge the
    Committee to restore these programs' funding levels.
        The Colorado River Basin Salinity Control Program, as set forth in
    the Colorado River Basin Salinity Control Act, is another program under
    EQIP that is supported by WESTCAS. The Colorado River Basin Salinity
    Control Act provides that the seven Colorado River Basin States will
    cost share on Federal funds received for salinity control efforts for
    the river. Over the past few years, the NRCS has designated that about
    2.5 percent of the EQIP funds be allocated to the Colorado River
    Salinity Control Program. WESTCAS supports continued designation of 2.5
    percent of EQIP dollars to be dedicated to the Salinity Control Program
    for the Colorado River.
        We thank you for the opportunity to provide this statement for the
    hearing record.
                                     ______

                   Prepared Statement of The Wildlife Society

        The Wildlife Society appreciates the opportunity to submit
    testimony concerning the fiscal year 2006 budgets for the Natural
    Resources Conservation Service (NRCS), Farm Service Agency (FSA),
    Animal Plant Health Inspection Service (APHIS), and Cooperative State
    Research, Education and Extension Services (CSREES). The Wildlife
    Society is the association of almost 9,000 professional wildlife
    biologists and managers dedicated to sound wildlife stewardship through
    science and education. The Wildlife Society is committed to
    strengthening all Federal programs that benefit wildlife and their
    habitats on agricultural and other private land.

    Natural Resources Conservation Service
        Wildlife Habitat Incentives Program (WHIP).--WHIP is a voluntary
    program that provides technical and financial support to farmers and
    ranchers to create high quality wildlife habitat. The Wildlife Society
    recommends funding WHIP at $85 million in 2006, the full amount
    authorized by the 2002 Farm Bill.
        Wetland Reserve Program (WRP).--WRP is a valuable program designed
    to assist farmers and ranchers protect and restore wetland habitat. The
    Wildlife Society appreciates the continued targeting of 200,000 acres
    annually for enrollment in WRP. However, we recognize that if the
    authorized level of 250,000 acres is not enrolled every year, then
    enrollment must increase in future years to reach the authorized level
    of 2,275,000 acres. Full WRP enrollment is needed if the Administration
    intends to achieve the President's goal of no-net-loss of wetlands. The
    Wildlife Society supports an enrollment target of 250,000 acres in
    fiscal year 2006.

    Animal and Plant Heath Inspection Service
        Wildlife Services.--Wildlife Services (WS), a unit of APHIS, is
    responsible for controlling wildlife damage to agriculture,
    aquaculture, forest, range, and other natural resources, for
    controlling wildlife-borne diseases, and for controlling wildlife at
    airports. Its activities are based on the principles of wildlife
    management and integrated damage management, and are carried out
    cooperatively with State fish and wildlife agencies.
        The Wildlife Society is concerned about the proposed $3.4 million
    decrease in funding for Methods Development for 2006. Many current
    wildlife control tools such as traps, snares, and wildlife toxicants
    are becoming less acceptable to the public and are being prohibited in
    many States as the result of public referenda. The only credible way to
    identify and perfect new methods is through research. However, WS
    funding is only adequate to cover maintenance and operating costs and
    no funding is being provided for the development of new innovative
    wildlife damage management methods. We strongly recommend that Congress
    restore the reductions of $3.413 million in this program category, and
    add an additional $1.5 million to provide for uncontrollable costs and
    to accelerate research in cormorant management and feral hog control.
    Further, we recommend Congress fully fund the trap standards and
    testing program at $0.5 million and to direct the Agency to allocate
    the $500,000 to fulfill international commitments to trap evaluation in
    full cooperation with State fish and wildlife agencies and the IAFWA.
        Veterinary Services.--The Wildlife Society commends APHIS-
    Veterinary Services' cooperation and sincerely appreciates funding for
    State wildlife management agencies for CWD surveillance and management
    in free-ranging deer and elk. Additionally, we strongly supports APHIS
    efforts to eliminate CWD from captive cervids in order to eliminate the
    risk of spread of the disease from these animals to free-ranging deer
    and elk. The surveillance and monitoring efforts conducted by all 50
    States during 2004 and 2005 would not have been possible without this
    cooperative funding. Additionally, knowledge of the presence and
    prevalence of CWD, as well as knowledge on the range of the disease,
    has been enhanced by this program. Without continued funding, States
    will be unable to maintain the level of CWD surveillance and monitoring
    necessary to track the disease. The National CWD Plan calls for
    additional efforts on management activities to prevent the spread of
    CWD in the United States. The Wildlife Society recommends increased CWD
    funding to a total of $30 million in fiscal year 2006, with $20 million
    designated for cooperative grants to the States for surveillance and
    management of CWD in free-ranging deer and elk.

    Cooperative State Research, Education, and Extension Service
        Renewable Resources Extension Act.--RREA provides an expanded,
    comprehensive extension program for forest and rangeland renewable
    resources. The RREA funds, which are apportioned to State Extension
    Services, effectively leverage cooperative partnerships at an average
    of four to one, with a focus on private landowners. The need for RREA
    educational programs is greater today than ever because of continuing
    fragmentation of ownership, urbanization, the diversity of landowners
    needing assistance and increasing societal concerns about land use and
    the impact on natural resources including soil, water, air, wildlife
    and other environmental factors. The Wildlife Society recommends that
    the Renewable Resources Extension Act be funded at $30 million as
    authorized in the 2002 Farm Bill.
        McIntire-Stennis.--The proposed budget for fiscal year 2006
    reflects a significant decrease in the McIntire-Stennis Cooperative
    Forestry formula funding program and reported elimination in the fiscal
    year 2007 budget process. These funds are essential to the future of
    resource management on non-industrial private forestlands as forest
    products are produced while conserving natural resources, including
    fish and wildlife. As societal pressures for forest products grows,
    private land forests will increasingly be needed to supplement supplies
    but trees suitable for harvest take decades to produce versus the
    single year in which crops such as corn and soybeans can be produced.
    In the absence of long-term and on-going research such as provided
    through McIntire-Stennis, the Nation could easily become ill-suited to
    meet future forest product needs. Replacement of McIntire-Stennis
    funding with competitive grants will leave long-term and stable forest
    research to chance. The Wildlife Society strongly believes that the
    reasons for continuing the McIntire-Stennis Cooperative Forestry
    program into the future are compelling and urges Congress to increase
    the fiscal year 2006 budget amount to $25 million, an amount more
    consistent with historic funding levels.
        National Research Initiative.--National Research Initiative
    Competitive Grants (NRI) are open to academic institutions, Federal
    agencies, and private organizations to fund research on improving
    agricultural practices, particularly production systems that are
    sustainable both environmentally and economically, and to develop
    methods for protecting natural resources and wildlife. Innovative grant
    programs such as NRI help broaden approaches to land management, such
    as integrating timber and wildlife management on private lands. The
    Wildlife Society supports funding of $240 million for National Research
    Initiative Competitive Grants.
        Thank you for considering the views of wildlife professionals. We
    look forward to working with you and your staff to ensure adequate
    funding for wildlife conservation.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Ad Hoc Coalition, Prepared Statement of..........................   409
    American:
        Farm Bureau Federation, Prepared Statement of................   412
        Forest and Paper Association, Prepared Statement of..........   415
        Honey Producers Association, Inc., Prepared Statement of.....   416
        Indian Higher Education Consortium, Prepared Statement of....   420
        Nursery & Landscape Association and the Society of American
          Florists, Prepared Statement of............................   423
        Public Power Association, Prepared Statement of..............   425
        Sheep Industry Association, Prepared Statement of............   426
        Society for Microbiology, Prepared Statements of...........431, 436
    Anderson, Curtis M., Acting Administrator, Rural Utilities
      Service, Department of Agriculture, Prepared Statement of......   113

    Bennett, Senator Robert F., U.S. Senator from Utah:
        Opening Statements of....................................1, 81, 217
        Questions Submitted by.............41, 178, 194, 205, 210, 321, 357
    Bond, Senator Christopher S., U.S. Senator from Missouri,
      Statement of...................................................     4
    Bosecker, R. Ronald, Administrator, National Agricultural
      Statistic Service, Department of Agriculture, Prepared
      Statement of...................................................   137
    Bost, Eric M., Under Secretary for Food, Nutrition, and Consumer
      Services, Department of Agriculture............................   217
        Prepared Statement of........................................   219
        Statement of.................................................   218
    Burns, Senator Conrad, U.S. Senator from Montana:
        Prepared Statement of........................................     4
        Questions Submitted by................................206, 212, 323
        Statement of.................................................     3
    Byrd, Senator Robert C., U.S. Senator from West Virginia,
      Questions Submitted by.........................................    58

    California Industry and Government Central California Ozone Study
      Coalition, Prepared Statement of...............................   438
    City of Avondale, Arizona, Prepared Statement of.................   439
    Clayton, Kenneth C., Acting Administrator, Agricultural Marketing
      Service, Department of Agriculture, Prepared Statement of......   249
    Coalition:
        On Funding Agricultural Research Missions, Prepared Statement
          of.........................................................   441
        To Promote U.S. Agricultural Exports, Prepared Statement of..   442
    Cochran, Senator Thad, U.S. Senator from Mississippi:
        Prepared Statement of........................................     5
        Question Submitted by........................................    47
    Collins, Keith, Chief Economist, Office of the Secretary,
      Department of Agriculture...................................... 1, 81
        Prepared Statement of........................................    84
        Statement of.................................................    82
    Colorado River Basin Salinity Control Forum, Prepared Statement
      of.............................................................   444
    Consortium of Social Science Associations (COSSA), Prepared
      Statement of...................................................   448
    Council on Food, Agricultural and Resource Economics (C-FARE),
      Prepared Statement of..........................................   448
    Craig, Senator Larry, U.S. Senator from Idaho:
        Prepared Statement of........................................     6
        Questions Submitted by.......................................   206
    Crawford, Lester M., DVM, Ph.D., Acting Commissioner, Food and
      Drug Administration, Department of Health and Human Services,
      Prepared Statement of..........................................   339

    Davidson, Ross J., Jr., Administrator, Risk Management Agency,
      Department of Agriculture, Prepared Statement of...............   156
    Davis, Russell T., Administrator, Rural Housing Service,
      Department of Agriculture, Prepared Statement of...............   105
    Defenders of Wildlife, Prepared Statement of.....................   451
    DeHaven, Dr. W. Ron, Administrator, Animal and Plant Health
      Inspection Service, Department of Agriculture, Prepared
      Statement of...................................................   235
    Dorgan, Senator Byron L., U.S. Senator from North Carolina,
      Questions Submitted by........................................66, 400
    Durbin, Senator Richard J., U.S. Senator from Illinois, Questions
      Submitted by..................................................72, 400

    Easter Seals, Prepared Statement of..............................   454

    Farmer-Rancher/Oklahoma Farmers Union, Ringling, Oklahoma,
      Prepared Statement of..........................................   457
    Florida State University, Prepared Statement of..................   459
    Fong, Phyllis K., Inspector General, Office of the Inspector
      General, Department of Agriculture, Prepared Statement of......   347
    Friends of Agricultural Research--Beltsville, Inc., Prepared
      Statement of...................................................   460

    Gonzalez, Gilbert G., Acting Under Secretary for Rural
      Development, Department of Agriculture.........................    81
        Questions Submitted to.......................................   194
    Great Lakes Indian Fish and Wildlife Commission, Prepared
      Statement of...................................................   462

    Harkin, Senator Tom, U.S. Senator from Iowa, Questions Submitted
      by...................................62, 193, 203, 209, 215, 335, 398
    Hawks, William T., Under Secretary for Marketing and Regulatory
      Programs, Department of Agriculture............................   217
        Prepared Statement of........................................   229
    Hefferan, Dr. Colien, Administrator, Cooperative State Research,
      Education, and Extension Service, Department of Agriculture,
      Prepared Statement of..........................................   124
    Hentges, Eric J., Executive Director, Center for Nutrition Policy
      and Promotion, Food, Nutrition, and Consumer Services,
      Department of Agriculture, Prepared Statement of...............   227
    Humane Society of the United States, Prepared Statement of.......   465

    InterTribal Bison Cooperative, Prepared Statement of.............   468

    Jen, Joseph J., Under Secretary for Research, Education, and
      Economics, Department of Agriculture...........................    81
        Prepared Statement of........................................   115
        Questions Submitted to.......................................   205
    Johanns, Hon. Mike, Secretary, Office of the Secretary,
      Department of Agriculture......................................     1
        Prepared Statement of........................................    11
        Statement of.................................................     7
    Johnson, Senator Tim, U.S. Senator from South Dakota:
        Prepared Statement of........................................     6
        Questions Submitted by.......................................    77

    Kaplan, Dennis, Office of Budget and Program Analysis, Department
      of Agriculture.................................................    81
    Knight, Bruce I., Chief, Natural Resources Conservation Service,
      Department of Agriculture, Prepared Statement of...............    97
    Knipling, Dr. Edward B., Administrator, Agricultural Research
      Service, Department of Agriculture, Prepared Statement of......   121
    Kohl, Senator Herb, U.S. Senator from Wisconsin:
        Questions Submitted by.............49, 191, 195, 207, 213, 325, 375
        Statement of.................................................     2

    Landrieu, Senator Mary L., U.S. Senator from Louisiana, Questions
      Submitted by...................................................   334
    Little, James R., Administrator, Farm Service Agency, Department
      of Agriculture, Prepared Statement of..........................   146

    Masters, Dr. Barbara J., Acting Administrator, Food Safety and
      Inspection Service, Department of Agriculture, Prepared
      Statement of...................................................   262
    Metropolitan Water District of Southern California, Prepared
      Statement of...................................................   470

    National Association of:
        State Energy Officials (NASEO), Prepared Statement of........   472
        State Foresters, Prepared Statement of.......................   473
        University Fisheries and Wildlife Programs, Prepared
          Statement of...............................................   474
    National:
        Coalition for Food and Agricultural Research, Prepared
          Statement of...............................................   476
        Commodity Supplemental Food Program Association, Prepared
          Statement of...............................................   480
        Council of Farmer Cooperatives, Prepared Statement of........   484
        Fish and Wildlife Foundation, Prepared Statement of..........   486
        Organic Coalition, Prepared Statement of.....................   488
        Potato Council, Prepared Statement of........................   492
        Research Center for Coal and Energy, Prepared Statement of...   494
        Rural:
            Housing Coalition, Prepared Statement of.................   496
            Telecom Association, Prepared Statement of...............   500
        Turfgrass Evaluation Program, Prepared Statement of..........   503
    New Mexico Interstate Stream Commission, Prepared Statement of...   447
    Northwest Indian Fisheries Commission, Prepared Statement of.....   507

    Offutt, Susan E., Administrator, Economic Research Service,
      Department of Agriculture, Prepared Statement of...............   128
    Oregon Water Resources Congress, Prepared Statement of...........   510
    Organization for the Promotion and Advancement of Small
      Telecommunications Companies, Prepared Statement of............   510

    Penn, J.B., Under Secretary for Farm and Foreign Agricultural
      Services, Department of Agriculture............................    81
        Prepared Statement of........................................   140
        Questions Submitted to.......................................   210
    Pickle Packers International, Inc., Prepared Statement of........   512
    Pierson, Dr. Merle D., Acting Under Secretary for Food Safety,
      Department of Agriculture......................................   217
        Prepared Statement of........................................   255
        Statement of.................................................   254
    Public Citizen's Energy and Environment Program, Prepared
      Statement of...................................................   518

    Red River Valley Association, Prepared Statement of..............   522
    Rey, Mark, Under Secretary for Natural Resources and Environment,
      Department of Agriculture......................................    81
        Prepared Statement of........................................    95
        Questions Submitted to.......................................   178

    Salazar, Roberto, Administrator, Food and Nutrition Service,
      Department of Agriculture, Prepared Statement of...............   224
    Shipman, David R., Acting Administrator, Grain Inspection,
      Packers and Stockyards Administration, Department of
      Agriculture, Prepared Statement of.............................   244
    Society:
        For Women's Health Research, Prepared Statement of...........   525
        Of American Foresters, Prepared Statement of.................   527
    Stevens, Senator Ted, U.S. Senator from Alaska, Questions
      Submitted by...................................................    47

    Terpstra, A. Ellen, Administrator, Foreign Agricultural Service,
      Department of Agriculture, Prepared Statement of...............   152
    The Nature Conservancy, Prepared Statement of....................   506
    The Wildlife Society, Prepared Statement of......................   544
    Thomas, Peter, Administrator, Rural Business--Coopertive Service,
      Department of Agriculture, Prepared Statement of...............   110

    U.S.:
        Apple Association, Prepared Statement of.....................   529
        Shrimp Farming Consortium, Prepared Statement of.............   532
    United States Telecom Association, Prepared Statement of.........   534
    University of Southern Mississippi and the Mississippi Polymer
      Institute, Prepared Statement of...............................   537
    Upper Mississippi River Basin Association, Prepared Statement of.   541

    Wachs, Lawrence, Acting Budget Officer, Office of the Secretary,
      Department of Agriculture......................................     1
    Western Coalition of Arid States (WESTCAS), Prepared Statement of   543

                                 SUBJECT INDEX

                                  ----------

                           DEPARTMENT OF AGRICULTURE

                                                                       Page
    Additional Committee Questions.................................178, 321
    Administrative:
        Expenses.....................................................   104
        Support......................................................   152
    Advanced Telecommunications in Rural America.....................   114
    Agency Reorganization............................................    97
    Agricultural:
        Economy......................................................   161
        Marketing Service............................................   233
    Agriculture Border Inspections...................................   326
    AMS:
        National Organic Program.....................................   325
        2006 Budget Request..........................................   234
    Animal And:
        Damage Control in Montana....................................   280
        Plant Health Inspection Service..............................   230
    APHIS' 2006 Budget Request.......................................   230
    ARS Terminations.................................................   208
    Basic Scientific Research........................................   205
    Beef Trade.......................................................   212
    Biotechnology....................................................   253
    Bluetongue Restrictions..........................................   325
    Budget...........................................................   128
        Decreases....................................................   174
        Request Summary..............................................   254
        Requests.....................................................   149
    Business Programs................................................   110
    CAFTA............................................................   162
    Child Nutrition Programs.......................................222, 226
    Chronic Wasting Disease..........................................   331
    Classical Plant and Animal Breeding..............................   209
    Clear Title......................................................   277
    Combating the Epidemic Overweight and Obesity....................   220
    Commodity Credit Corporation.....................................   149
    Commodity:
        Programs.....................................................   107
        Supplemental Food Program..................................223, 226
    Conservation:
        Assistance...................................................   163
        Reserve Program..............................................   173
            Switchgrass..............................................   216
        Security Program.............................................   193
    Consumer Data and Information System.............................   128
    Cooperative Programs.............................................   112
    Country of Origin Labeling.....................................253, 323
    Crop Insurance...................................................   213
    CSREES Cuts in Formula Funded Research Programs..................   208
    Decreases........................................................   243
    Dietary Guidelines for Americans Establish Federal Nutrition
      Policy.........................................................   227
    Direct Marketing of Farm Products..............................169, 170
    Discretionary Funding............................................    98
    Distance Learning and Telemedicine...............................   115
    Duties of Agency Staff...........................................   191
    Economic Research Service Reports................................   207
    Effective Partnerships Strengthen Dissemination of Science-based
      Guidance and Educational Tools.................................   228
    EGovernment Solutions............................................   248
    Electric Program.................................................   113
    Enforcement Audit of Mexico's Inspection System..................   283
    Enhancing Program Integrity and Delivery.........................   221
    ERS Contributions to Mission Area Goals..........................   129
    Faith-based and Community Organizations Outreach.................   225
    Farm:
        And Ranch Lands Protection Program...........................   101
        Bill Authorized Programs.....................................   100
        Loan Programs................................................   150
        Product Exports to China.....................................   171
    Farm Service Agency..............................................   141
        Agency Loan Officers.........................................   213
        Beneficial Interest..........................................   216
        State Allocations............................................   215
    Federal Grain Inspection Service.................................   246
    Fiscal Year 2006:
        Budget Request...................................241, 252, 254, 269
        Plans........................................................   139
    Food:
        Emergency Response Network...................................   274
        Guidance System Serves as Premier Teaching Tool..............   227
        Safety Accomplishments During 2004...........................   262
        Stamp:
            Catagorical Eligibility..................................   279
            Error Rate...............................................   271
            Participation............................................   271
            Program................................................221, 225
    Foreign Agricultural Service.....................................   144
        Foreign Office Security......................................   215
        Review.......................................................   210
    Formula Funds....................................................   205
    FSIS:
        Import Inspections...........................................   282
        Priorities for 2005--Holding Ourselves Accountable...........   264
    Funding Sources..................................................   229
    Grain Inspection, Packers and Stockyards Administration..........   231
        Identity Theft...............................................   326
        2005 Budget Request..........................................   232
    Guaranteed Multifamily Housing...................................   194
    Hatch Act/McIntire-Stennis.......................................   206
    High Pathogenic Avian Influenza..................................   328
    Housing Revitalization Budget Request............................   167
    Human Capital Management.........................................   225
    Humane Handling and Slaughter Activities.........................   263
    Increasing Third-Party Technical Assistance......................    98
    Invasive Species.................................................   164
    Johne's Disease..................................................   332
    Livestock:
        Mandatory Price Reporting....................................   252
        Risk Program for Lamb........................................   211
    Low Pathogenic Avian Influenza.................................321, 329
    Major Activities of the National Agricultural Statistics Service
      (NASS).........................................................   137
    Marketing Services...............................................   250
    Milk Prices......................................................   168
    Milwaukee Hunger Task Force......................................   275
    Misconduct Policy................................................   205
    Mission........................................................128, 249
    MRP Initiatives..................................................   229
    Multi-Family Housing Programs....................................   105
    National Animal Identification System...........273, 281, 323, 333, 336
    Nutrient Management Lab in Marshfield, WI........................   175
    Nutrition Programs Administration..............................223, 226
    Organic Cost-Share Funding.......................................   335
    Organization.....................................................   244
    Other Appropriated Programs......................................   151
    Overseas Programs................................................   274
    Packers and Stockyards Program...................................   244
    Partnerships.....................................................   251
    Pathogen Reduction...............................................   254
    Payments to States and Possessions...............................   251
    Performance Under Pressure.......................................    97
    Planning Research Programs.......................................   174
    President's Fiscal Year 2006 Budget Proposal.....................   209
    Privacy Protection of Certain Sellers of Farm Products...........   276
    Program:
        Access.......................................................   220
        Highlights...................................................   108
        Management...................................................   158
    Proposed:
        Funding for Buildings and Facilities.........................   124
        Operating Increases..........................................   124
        Program:
            Decreases................................................   124
            Increases................................................   121
    Protecting the Homeland..........................................   248
    Public Law 480...................................................   211
    RCBS Rural Cooperative Development Grants........................   201
    RD:
        Business Programs............................................   197
        General Reductions in Direct Loans and Grants................   196
        Tax Exempt Financing for Loan Guarantee Programs.............   196
    REE Agency Fiscal Year 2006 Budgets..............................   118
    Renewable Energy of the 2002 Farm Bill...........................   203
    Rental Assistance Program........................................   166
    Research Coordination............................................   164
    Resource Conservation:
        And Development..............................................   193
        Service......................................................    97
    Responsibilities.................................................   102
    RHS:
        Equal Access to Housing......................................   198
        Multi-Family Housing.........................................   199
        New Construction.............................................   197
        Rental Assistance............................................   198
        Single Family Rural Housing..................................   199
    Risk Management Agency...........................................   143
    Rural Business Cooperative:
        Programs.....................................................   104
        Service......................................................   204
    Rural:
        Development:
            Budget Request...........................................   102
            Programs.................................................   195
        Housing:
            Prepayments..............................................   165
            Programs.................................................   103
        Rental Assistance............................................   194
        Utilities Service Broadband Loans............................   203
    RUS Guaranteed Undewriting.......................................   202
    Section 32.......................................................   251
    Sharing Distribution Lists.......................................   278
    Single Family Housing Programs...................................   107
    Soybean Rust.....................................................   335
    Specialty Products...............................................   170
    State Agricultural Experiment Station............................   206
    Sudden Oak Death.................................................   331
    Sugar............................................................   212
    Support for Cooperating States...................................   253
    Technical and Financial Assistance Funds.........................   188
    Telecommunications Budget........................................   114
    Textile Exports and Jobs.........................................   172
    The Challenge of Improper Payments...............................   224
    The Emergency Food Assistance Program (TEFAP)..................223, 226
    Transfer to the Department of Commerce...........................   177
    Transparency.....................................................    98
    Trends Show Need for Revised Nutrition Guidance and Educational
      Tools..........................................................   227
    Twenty-Five Percent Cap of WIC NSA Funds.........................   277
    2006 Budget Request..............................................   249
    USDA:
        And Department of Homeland Security Employees................   322
        Five Star Commitment to Increase Minority Homeownership......   108
        Presence In Iraq.............................................   163
    User Fees........................................................   254
    Value-added Programs...........................................168, 169
    Vision...........................................................   102
    Water and Environmental Programs.................................   115
    Watershed:
        And Flood Prevention Operations..............................   176
        Surveys and Planning Program.................................   178
    Web-based:
        Applications.................................................   211
        Supply Chain Management......................................   322
            System...................................................   253
    WIC............................................................222, 226
        Food Costs...................................................   272
        Participation and Funding....................................   272
    Wildlife Services..............................................333, 334
    WTO Decision on USDA Commodity and Trade Programs................   215

                            Office of the Secretary

    Accredited Veterinarians in Rural Areas..........................    50
    Additional Committee Questions...................................    41
    Agricultural Border Inspections..................................    20
    Alaska Dairy.....................................................    48
    Ames Animal Disease Facility.....................................    62
    Animal Identification............................................    79
    APHIS Blackbird Control..........................................    71
    ARS-APHIS Master Plan for Facility Consolidation and
      Modernization International Review Team Report.................    36
    ARS Research in North Dakota.....................................    70
    Avian Influenza..................................................    21
    Beef Exports to Japan............................................23, 29
    Biobased Products Procurement....................................    63
    Boll Weevil Eradication Program..................................    46
    Bovine Spongiform Encephalopathy (BSE)...........................    12
        Policies.....................................................    72
    Broadband Funding................................................    68
    Budget...........................................................    66
    Canadian:
        Beef Industry................................................    41
        Border Closure...............................................    16
        Cattle.......................................................    27
    Carbon Sequestration.............................................    32
    Central American Free Trade Agreement............................28, 67
    Childhood Obesity................................................    76
    Consequences.....................................................    38
    Conservation.....................................................    14
        Reserve Program..............................................    26
        Security Program.............................................    62
            Sign-up..................................................    39
    Country-of-Orgin Labeling........................................25, 68
    Crop:
        Disaster Payments............................................    24
        Insurance....................................................    13
        Payment Limitation...........................................    29
        Subsidies....................................................    42
    CSP Contracts....................................................39, 40
    CSREES Budget Proposals..........................................    17
    Deficit Reduction................................................    16
    Department Management............................................    15
    Ethanol Production...............................................    46
    Executive Bonuses................................................    49
    Farm:
        Income.......................................................    19
        Program......................................................
            Cuts.....................................................    24
            Spending.................................................    13
        Spending.....................................................    44
    Federal Formula Funds............................................    79
    Food Aid Programs................................................    33
    Food:
        And Agriculture Defense Initiative...........................12, 51
        Assistance...................................................    14
        Safety.......................................................    13
            Personnel................................................    75
            User Fees................................................    74
    GAO Homeland Security Report.....................................    49
    Hatch Act Funding Cut............................................    71
    HMSA Enforcement.................................................    62
    Humane Activity Tracking.........................................    58
    International Food Aid...........................................    77
    Japan Trade......................................................    68
    Livestock:
        And Meat Marketing Study.....................................    64
        Study........................................................    41
    Low Pathogenic Avian Influenza (Bird Flu)........................    44
    Madcow Disease (BSE).............................................    22
    National Animal Disease Center...................................    34
    National:
        Animal:
            Disease Center, Ames, Iowa...............................    35
            Identification...........................................    45
        School Lunch Program.........................................    75
        Veterinary Medical Service Act...............................    69
    Need.............................................................    38
    Nonfat Dry Milk..................................................    19
    Northern Great Plains Regional Authority.........................71, 77
    Packer Concentration.............................................    40
    Points for Consideration.........................................    39
    Raising Farm Income..............................................    30
    Reducing the Federal Deficit.....................................    34
    Research.........................................................    14
    Resource Conservation and Development............................    78
        Councils.....................................................    70
    Rural:
        Business Investment Program..................................    77
        Community Advancement Program................................    47
        Development..................................................    14
            Funding for Rural Empowerment Zones and Other Grant
              Programs...............................................    69
    Safe School Food Act.............................................    75
    Scope............................................................    37
    Single Food Safety Agency........................................    74
    Soybean Rust.....................................................47, 56
    Special Supplemental Program for Women, Infants, and Children
      (WIC)..........................................................    45
    Sun Grant Initiative.............................................    78
    Timeline for Major Steps for Livestock and Meat Market Study.....    64
    Trade............................................................    13
        Deficit......................................................    26
        Status--Japan................................................    46
    USDA Employee Retirements........................................    46
    User Fees........................................................18, 56
    Value-added Agriculture..........................................    31
    Veterinarian Shortages...........................................    21

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