[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\
---------------------------------------------------------------------------
    \26\ http://www.aphis.usda.gov/lpa/issues/bse/US_BSE_Report.pdf.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
                                 ______
                                 

         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: 
[email protected].
                                 ______
                                 

     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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