[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2009

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                ROSA L. DeLAURO, Connecticut, Chairwoman
 MAURICE D. HINCHEY, New York       JACK KINGSTON, Georgia
 SAM FARR, California               TOM LATHAM, Iowa
 ALLEN BOYD, Florida                JO ANN EMERSON, Missouri
 SANFORD D. BISHOP, Jr., Georgia    RAY LaHOOD, Illinois
 MARCY KAPTUR, Ohio                 RODNEY ALEXANDER, Louisiana
 JESSE L. JACKSON, Jr., Illinois
 STEVEN R. ROTHMAN, New Jersey      

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
       Martha Foley, Leslie Barrack, Jason Weller, and Matt Smith,
                            Staff Assistants
                                ________
                                 PART 4
                                                                   Page
 Food and Nutrition Service.......................................    1
 Rural Development................................................  391

    

                                ________

         Printed for the use of the Committee on Appropriations





   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2009
_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                ROSA L. DeLAURO, Connecticut, Chairwoman
 MAURICE D. HINCHEY, New York       JACK KINGSTON, Georgia
 SAM FARR, California               TOM LATHAM, Iowa
 ALLEN BOYD, Florida                JO ANN EMERSON, Missouri
 SANFORD D. BISHOP, Jr., Georgia    RAY LaHOOD, Illinois
 MARCY KAPTUR, Ohio                  RODNEY ALEXANDER, Louisiana
 JESSE L. JACKSON, Jr., Illinois
 STEVEN R. ROTHMAN, New Jersey      

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
       Martha Foley, Leslie Barrack, Jason Weller, and Matt Smith,
                            Staff Assistants
                                ________
                                 PART 4
                                                                   Page
 Food and Nutrition Service.......................................    1
 Rural Development................................................  391

     
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 48-455                     WASHINGTON : 2009





                                  COMMITTEE ON APPROPRIATIONS

                   DAVID R. OBEY, Wisconsin, Chairman

 JOHN P. MURTHA, Pennsylvania           JERRY LEWIS, California
 NORMAN D. DICKS, Washington            C. W. BILL YOUNG, Florida
 ALAN B. MOLLOHAN, West Virginia        RALPH REGULA, Ohio
 MARCY KAPTUR, Ohio                     HAROLD ROGERS, Kentucky
 PETER J. VISCLOSKY, Indiana            FRANK R. WOLF, Virginia
 NITA M. LOWEY, New York                JAMES T. WALSH, New York
 JOSE E. SERRANO, New York              DAVID L. HOBSON, Ohio
 ROSA L. DeLAURO, Connecticut           JOE KNOLLENBERG, Michigan
 JAMES P. MORAN, Virginia               JACK KINGSTON, Georgia
 JOHN W. OLVER, Massachusetts           RODNEY P. FRELINGHUYSEN, New Jersey
 ED PASTOR, Arizona                     TODD TIAHRT, Kansas
 DAVID E. PRICE, North Carolina         ZACH WAMP, Tennessee
 CHET EDWARDS, Texas                    TOM LATHAM, Iowa
 ROBERT E. ``BUD'' CRAMER, Jr., Alabama ROBERT B. ADERHOLT, Alabama
 PATRICK J. KENNEDY, Rhode Island       JO ANN EMERSON, Missouri
 MAURICE D. HINCHEY, New York           KAY GRANGER, Texas
 LUCILLE ROYBAL-ALLARD, California      JOHN E. PETERSON, Pennsylvania
 SAM FARR, California                   VIRGIL H. GOODE, Jr., Virginia
 JESSE L. JACKSON, Jr., Illinois        RAY LaHOOD, Illinois
 CAROLYN C. KILPATRICK, Michigan        DAVE WELDON, Florida
 ALLEN BOYD, Florida                    MICHAEL K. SIMPSON, Idaho
 CHAKA FATTAH, Pennsylvania             JOHN ABNEY CULBERSON, Texas
 STEVEN R. ROTHMAN, New Jersey          MARK STEVEN KIRK, Illinois
 SANFORD D. BISHOP, Jr., Georgia        ANDER CRENSHAW, Florida
 MARION BERRY, Arkansas                 DENNIS R. REHBERG, Montana
 BARBARA LEE, California                JOHN R. CARTER, Texas
 TOM UDALL, New Mexico                  RODNEY ALEXANDER, Louisiana
 ADAM SCHIFF, California                KEN CALVERT, California
 MICHAEL HONDA, California              JO BONNER, Alabama
 BETTY McCOLLUM, Minnesota
 STEVE ISRAEL, New York
 TIM RYAN, Ohio
 C.A. ``DUTCH'' RUPPERSBERGER, Maryland   
 BEN CHANDLER, Kentucky
 DEBBIE WASSERMAN SCHULTZ, Florida
 CIRO RODRIGUEZ, Texas             

                  Rob Nabors, Clerk and Staff Director

                                  (ii)

 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2009

                              ----------                              

                                          Thursday, March 13, 2008.

                      FOOD AND NUTRITION SERVICES

                               WITNESSES

NANCY MONTANEZ JOHNER, UNDER SECRETARY FOR FOOD, NUTRITION, AND 
    CONSUMER SERVICES, USDA
KATE HOUSTON, DEPUTY UNDER SECRETARY FOR FOOD, NUTRITION, AND CONSUMER 
    SERVICES, USDA
ROBERTO SALAZAR, ADMINISTRATOR, FOOD AND NUTRITION SERVICE, USDA
W. SCOTT STEELE, BUDGET OFFICER, USDA
    Ms. DeLauro. The committee is called to order. Thank me 
and--thank you, and let me welcome all of you today, and 
particularly Under Secretary Johner. And I'm really glad to 
have had the opportunity. We met earlier this year to discuss a 
number of priorities. And like you, I always find the meetings 
to be helpful and informative and productive and are being able 
to move forward. Can you hear me?
    And let me just welcome the rest of the panel. I'm going to 
leave all the introductions to you in your opening remarks, 
Under Secretary. This is an important hearing from my 
perspective. Families and children should never be forced to 
choose between securing adequate food for their kids and other 
basics they need. I think one of the government's most critical 
responsibilities is providing children and low-income families 
with access to quality food, a healthy diet, a positive 
education about nutrition, and the Food and Nutrition Service 
does exactly that, serving nearly one in five Americans.
    Perhaps the most important program under the Food and 
Nutrition Service is the school lunch program. That became very 
clear last month with the historic meat recall involving a 
Westland/Hallmark plant in California. Of the more than 140 
million pounds of meat that was recalled, approximately 47 
million were distributed to the school lunch program. There are 
no reports of any children becoming sick from consuming this 
meat, but it is no less alarming to think just how many 
students were put at risk. This should not have been allowed to 
happen, and must not be allowed to happen again.
    I realize that the Food Safety and Inspection Service 
shoulders much of the responsibility for allowing this recalled 
meat to reach the school lunch program. Nevertheless, I do have 
some serious questions about the Food and Nutrition Service's 
role. We have a responsibility to determine what could have 
been done to stop these dangerous practices and subsequent 
recall.
    I also intend to address some questions about this year's 
budget. While you appear to fully fund critical nutrition 
assistance programs such as food stamps and WIC, I remain 
concerned about some recycle proposals that would again limit 
the program participation. For instance, in what has now become 
a tiresome annual ritual, this Administration is once again 
proposing to zero out the commodity supplemental food program 
in fiscal year 2009.
    This is a program in which more than 473,000 seniors, 
women, infants and children rely. When it comes to women, 
infants and children, when it comes to that program, the WIC 
program, the President's budget again proposes to cap grants to 
state agencies for nutrition service and administration 
expenses at the fiscal year 2000 level. This reduces program 
costs by $145 million. However, if the cap is enacted, we will 
have to add that amount back to the appropriation level in the 
budget.
    I also want to express my disappointment at the 
Administration's efforts on WIC last year. While the 
Administration did request a 3.5-percent increase for the WIC 
program in fiscal year 2008, it still failed to acknowledge the 
increased participation and food costs. Worse still, the 
President threatened to veto any bill that increased total 
spending levels above his request. At the time, it was clear to 
everyone except the Administration that increased funding above 
the President's request was essential to carry out the program 
this year.
    As you know, Madam Secretary, I'm also very concerned about 
the Food and Nutrition Service's approval of Indiana's decision 
to contract out virtually the entire administration of its food 
stamp program. We've had a number of conversations about this, 
and I understand earlier this week several groups held a news 
conference pointing to serious flaws in Indiana's privatization 
plan, including a dysfunctional and wasteful eligibility 
system--difficulty in reaching call centers and navigating web 
pages, even the loss of benefits.
    I believe you will, but the Food and Nutrition Service and 
the state of Indiana must take these complaints seriously, and 
they must be investigated. According to initial news reports, 
it sounded like state officials were dismissive of these 
groups' claims. If these allegations are proven true, it would 
seem like we're heading for a repeat of the debacle that 
occurred in Texas. And I don't have to remind anyone of the 
chaos that that experiment in privatization led to, with 
reduced enrollments and decreased services.
    I said this before, but I want to emphasize again, our 
citizens need to know that they will have access to the food 
assistance and health care programs during a time of crisis. 
While private companies serve their shareholders, the American 
people must be able to count on genuine oversight and strict 
accountability.
    We must be able to guarantee our most vulnerable citizens, 
that they get the adequate care they deserve. Our government 
has an obligation to its citizens to check private abuse, to 
set standards in the public interest. That principle must apply 
in all of our efforts, whether it's food stamps or the school 
lunch program when it comes to creating real opportunity and 
protecting the public health. It's our responsibility to get it 
right, and we cannot afford to fail.
    So, as always, we will have much to talk about today, and I 
look forward to discussing the issues with you. I might also 
add, and I've had some conversations with subcommittee members 
about this as well, that there will be--we don't have a date 
yet--a follow-up hearing on nutrition which will then include a 
combination of both government witnesses and outside experts. 
So it's just more broadly to discuss the whole issue of 
nutrition.
    With that, I thank you, and the ranking member, Mr. 
Kingston is here, but I'm going to assume that Ms. Emerson is 
going to sit in for him, and I ask you for opening comments.
    Ms. Emerson. Thank you, Chairwoman. Thank you all so very 
much for being here today. And I do look forward to your 
testimony. I do have also a lot of questions. And, Madam Chair, 
I want to add something to your remarks. I mean, I know how 
disturbed you are about so many issues with regard to food 
security and hunger security and the like.
    I do want to tell you all, we just had a study done, a 
Missouri Hunger Atlas that was done by the University of 
Missouri, the Interdisciplinary Center for Food Security. And 
it's really very frightening. In Missouri, for example, Madam 
Chair, Missouri is one of 17 states with rising rates of food 
insecurity with hunger. And the increase over the first part of 
this decade is among the highest five in the country. And so--
and 15 percent of our state's children, or nearly 200,000 
residents below the age of 18, are food insecure.
    So, obviously, the issues with which you all deal on a 
daily basis are quite important to me and this entire 
subcommittee. But it is worrisome with, you know, higher gas 
prices, higher food prices, higher about everything. This is an 
issue which I think we need to pay special attention to, 
because I think in the short term it might get worse before it 
gets better. And certainly, the government working with all of 
the private--with private industry and charitable foundations 
and what work we can do here in the committee, Madam Chair, I 
think are going to be critical in saving lives.
    So I appreciate you all being here and thank you so much. I 
have lots of questions.
    Ms. DeLauro. I thank the gentlelady and also say I often 
think about the terminology of ``food insecurity.'' It 
essentially means that people are hungry, in my view, and that 
we ought to be able to have the determination, the will and the 
wherewithal to make sure that people in this country are not 
hungry.
    Let me ask you to make your remarks. You know the testimony 
will be put in full into the record, but you're free to 
summarize and make any comments that you care to before we get 
to questions. Thank you.

                            Opening Remarks

    Ms. Johner. Thank you, Madam Chair. And we're very grateful 
to be here too this morning, because we have a lot to share. 
But, Madam Chair and members of the Subcommittee, thank you for 
this opportunity to present the Food, Nutrition and Consumer 
Service budget request for fiscal year 2009.
    By your permission, I would like to introduce three key 
members of my team who are with me here who are with me today. 
Kate Houston. She's our Deputy Under Secretary for Food, 
Nutrition and Consumer Services. And Ms. Houston also 
previously served as our Deputy Administration for Special 
Nutrition Programs. Roberto Salazar, who is our Administrator 
for the Food and Nutrition Service. And in the audience today 
but not at the witness table is Dr. Brian Wansink, who recently 
joined our mission area as Executive Director for the Center 
for Nutrition Policy and Promotion.
    My written testimony has already been submitted for the 
record. So rather than recount what is already before you, I 
would like to share with you key concepts that underlie our 
fiscal year 2009 budget request. In doing so, I hope it will be 
clear to you why we at FNCS and I personally as Under Secretary 
have proposed the budget before you, and as to why we believe 
it is fitting and sufficient for the programs we administer.
    There are three basic themes which are fundamental in the 
design of the budget before you: Good stewardship, improved 
program integrity, and better access to the program benefits. I 
realized that good stewardship is not necessarily the primary 
factor in proposing a budget, yet good stewardship is demanded 
whether we request a budget increase or we propose reduced 
funding levels. Nevertheless, be assured that the budget before 
you represents a thorough, honest assessment of the investment. 
We believe we'll fulfill the requirements of the program we 
administer, no more, no less, and that is good stewardship.
    Likewise, our budget request is based on a dedication to 
program integrity. Our commitment to you is that we will do our 
utmost to ensure that every dollar you entrust to us is used in 
accordance with law and regulations. Waste, fraud and abuse are 
not acceptable, and our budget proposal makes no concession to 
this principle.
    Our ultimate goal at FNCS is ensuring eligible participants 
have every opportunity to receive the benefits Congress 
intended for them to receive. We aspire to provide these 
benefits with dignity and compassion. I can assure you that we 
would not present a budget that we knew to be greatly lacking 
and detrimental to their well being.
    As evidence of this factor, a number of increases are in 
the Administration's budget. For example, the President's 
request includes an increase of $11.2 million, which is aimed 
at the Food Stamp Program. There is also a provision for $6 
billion in reserve for the Food Stamp Program alone. Likewise, 
we have an increase of just over $550 million for the Child 
Nutrition Programs.
    But I do not wish to digress too far into the details. What 
I believe is more appropriate and closer to the business at 
hand is to answer any questions that you may have so that you 
can move quickly to approve our request. We invite an open 
dialogue with the Subcommittee, a dialogue based on mutual 
respect and trust, and it is in this spirit of encouraging 
constructive dialogue that I have shared my thoughts with you 
today.
    We are certain that good stewardship, improved integrity 
and improved program access is as important to you as it is to 
us. These are principles, in which I'm sure we can all agree 
on, principles as I say, that underlie the budget request 
before you. And so it is with all due respect and in mutual 
understanding as public servants we come before the 
Subcommittee today.
    We thank you for your time and attention, and I will be 
happy to answer any questions you may have for me or from my 
honorable and dedicated co-workers, Kate Houston and Roberto 
Salazar. And also we have our Budget Officer, Scott Steele, at 
the desk.
    [The information follows:]

    

    
                     hallmark/westland beef recall


    Ms. DeLauro. Again, welcome to all of you, and I thank you 
for your testimony, Secretary Johner. Let me start--before we 
start to talk about the budget, I want to ask a few questions 
about the recent beef recall. Let's just start there. Of the 
140 million pounds of beef that was recalled by Westland/
Hallmark, over 50.3 million pounds was sold to the USDA feeding 
programs, with 47 million pounds going to the national school 
lunch program. Can you provide this subcommittee with a list of 
the school food authorities, the SFAs, that received beef from 
this recall?
    Ms. Johner. Yes we can. In fact, we do have that list and 
it's in the final process of being cleared, so we--I can assure 
you, as soon as I can give that to you, we will give you a 
copy.
    Ms. DeLauro. Thank you. I appreciate that and I applaud 
that effort. This is the first time that anyone has been 
forthcoming with saying that we could get such a list, so I 
thank you for that. You understand this list of school food 
authorities will be included in the record and made public 
information.
    Ms. Johner. Right.
    [The information follows:]

    The Food and Nutrition Service (FNS) is committed to maintaining 
constant communications with our State, local and industry 
stakeholders. To that end, we will provide a list of affected School 
Food Authorities under separate cover and we intend to make the list 
available on our public Web site at http://www.fns.usda.gov/fns/
newsroom.htm. Of the 143 million pounds of Hallmark/Westrand recalled 
beef, approximately 51 million pounds was distributed to FNS' nutrition 
assistance programs. About 94 percent of the 51 million pounds was 
distributed to schools.

    Ms. DeLauro. This also seems to me that you should put this 
up on your Web site. Will you do that?
    Ms. Johner. Yes, Madam Chair.
    Ms. DeLauro. And when do you anticipate finishing them? I 
believe this ought to go up immediately.
    Ms. Johner. Yes. As soon as we have that through final 
clearance, yes, you have my assurance that it will go up 
immediately.
    Ms. DeLauro. When do anticipate final clearance?
    Ms. Johner. I would hope that we can have that in the next 
few weeks. I mean, probably sooner than that. I can't give you 
a specific time, so I'm kind of giving it a ballpark figure 
here. I would hope by next week.
    Ms. DeLauro. I really want to emphasize the need. I mean, 
we had folks here last week. We were told we would get some 
answers this week. I wrote to the Secretary I think on February 
20th, and to date, I don't believe I have had a response from 
the Secretary. This is about two lists, the retail consignees 
and the schools. But I have had no answer from Secretary 
Schafer. So it would seem to me if the list is together, its 
final clearance, with given the importance of this information 
to our school food authorities, that it ought to be able to be 
done, you know, 48 hours? I don't know what's left except for a 
final clearance, and that shouldn't take very long if it's been 
through the traps here.
    Ms. Johner. Madam Chair, again, we also believe that that's 
important information, and so we just want to make sure that 
the information that's on there is accurate. So, we're just 
making sure that the i's are dotted and the t's are crossed. 
And so, I assure you again, as soon as we can, we will get that 
to you.
    Ms. DeLauro. And we will be--you need to be in touch with 
us, but we will be----
    Ms. Johner. Okay.
    Ms. DeLauro (continuing). You know, just vigilant on when 
that is going to be made available.
    Ms. Johner. Yes.
    Ms. DeLauro. Have you accounted for all of the beef that is 
included in this recall that went to the national school lunch 
program?
    Ms. Johner. Yes. Yes we have.
    Ms. DeLauro. Again, thank you very, very much.
    Ms. Johner. And also if I can add, we have worked very 
closely with the School Nutrition Association. They were here 
in Washington I think last week, and we met with them to do 
some probably, we've learned lessons throughout this whole 
process, and you can always learn from your experiences. And so 
we've met with them, and we are putting some next steps in 
place to tighten up, to improve the process that we currently 
have. And we can provide you a list of those things if you'd 
like a copy of that.
    Ms. DeLauro. Yes. I would, because that's part of, you 
know, what are requests are here today about the lessons that 
you learned and what changes are you implementing based on this 
recall. That is critical. That's critical information for the 
subcommittee.
    Ms. Johner. Yes. We can get you that.
    [The information follows:]

    USDA has a long-standing commitment to school food safety. From our 
pioneering work with the School Nutrition Association to establish a 
food safety credentialing program for school food service employees, to 
our collaborative efforts to establish standard procedures for recall 
actions affecting foods purchased by the Department for school use, we 
have done much to ensure the safety and wholesomeness of school meals. 
The result is that in comparison to other food service alternatives, 
the documented incidence of food-borne illness associated with school 
meals is extremely low. We continue to work with schools to improve on 
this record of success.
    USDA hold and recall processes and procedures have been in place 
for a number of years and have worked efficiently and effectively in 
past recalls that involved school commodities. FNS, in cooperation with 
the National Food Service Management Institute (NFSMI), has provided 
training and technical assistance materials to State agencies and 
school food service managers on these procedures. However, given the 
magnitude of the Hallmark/Westland beef recall, FNS has identified 
several areas where communication can be strengthened and how 
information dissemination about a food recall can be improved to ensure 
parents and students receive accurate and timely information. FNS is 
working more closely with State agencies to provide additional 
technical assistance to effect better implementation of recall 
processes and procedures. We will seek input from our program 
cooperators to help us in this regard. The NFSMI is working to finalize 
guidance for State agencies to better manage future hold/recall 
situations. Once this guidance is complete, there will be an education 
and training campaign tailored to States and school districts. The 
guidance is expected to be ready in July 2008. Furthermore, we are 
exploring various communication options that will allow both FNS and 
our State agency partners to transmit food safety information directly 
to schools so they, in turn, can provide timely and accurate 
information to students, parents, and teachers about food safety 
matters. This was a concern we heard during the Hallmark/Westland 
recall, and we intend to be fully responsive.

    Ms. DeLauro. I will just say that there have been a number 
of complaints about the timeliness of the school food service 
directors in receiving official information about the recall. 
Many of the schools, as you can imagine, as parents, they 
received calls from concerned parents who learned of the recall 
on the news, and they didn't have any information at all, and 
the schools didn't have any information from FNS through their 
state agencies.
    Let me just ask you this question and get your thoughts. 
Should FNS have the capability to communicate directly with the 
school food authorities about any future recalls or other 
potential health threats in the national school lunch program?
    Ms. Johner. I think the current system that's in place is 
where the FNS communicates through the rapid alert system 
through the state agencies, and the state agencies then 
communicate with the school. That's the area where I know our 
conversations with SNA that we're looking in how to improve and 
strengthen that aspect of it.
    Ms. DeLauro. You think that that's the model that we should 
continue to use----
    Ms. Johner. Yes, I do.
    Ms. DeLauro [continuing]. Rather than your direct 
communication with the school food?
    Ms. Johner. Yes, I do. I believe working with the state 
agency, we need to improve and strengthen that piece right 
there.
    Ms. DeLauro. How much is this--how much is the recall of 
the beef that was provided to the national school lunch program 
expected to cost, including the cost of destroying and 
replacing the recalled beef?
    Ms. Johner. Okay. We don't have that information at this 
point.
    Ms. DeLauro. Can you get that information to us?
    Ms. Johner. Yes. And I'm going to turn this over to Kate, 
because she has been working extensively on the recall. So 
she's--and she testified I think earlier on.
    Ms. DeLauro. Okay, Kate. You're on, Kate. [Laughter.]
    Ms. Houston. Now that we have accounted fully for all of 
the beef that went to the school lunch program, schools are in 
the process of sending information on their costs back up to 
the state, at which point that information will get bundled and 
the state will provide us a full accounting of what the local 
costs were, both for the storage during the hold and for any 
transportation and destruction costs.
    So, at the point at which all of that information comes to 
us, we will provide the appropriate reimbursements, and we can 
get you then the information on what the final costs were. But 
it's premature to have that information at this point.
    Ms. DeLauro. What accounts are these expenses--will they be 
paid from?
    Ms. Houston. Again, we work with our partners at the 
Agricultural Marketing Service who will be handling the 
reimbursements. I can tell you that we have provided some 
information about what costs USDA will be able to reimburse, 
and they include transportation of the recalled products to a 
disposal site, up to one month of storage costs, and the direct 
disposal costs.
    Ms. Johner. And Madam Chair, we are also currently 
replacing the product too at this time. They've already begun 
doing that.
    Mr. Steele. Madam Chair, I think that the account probably 
will be Section 32, AMS.
    [The information follows:]

    FNS is committed to working closely with the Agricultural Marketing 
Service and States to account for all costs associated with the 
Hallmark/Westland recall related to FNS' nutrition assistance programs. 
FNS is actively collecting the data necessary to complete a full 
accounting of the funds associated with the recall and will be glad to 
provide the information to the Committee once the accounting is 
complete.
    We will be seeking reimbursement for the expenses from the 
Westland/Hallmark Meat Company as a part of our contractual action 
against the company. However, if Hallmark/Westland is financially 
unable to cover the full cost of expenses incurred by USDA commodity 
programs, the difference will be paid out of Section 32 funds.

    Ms. DeLauro. Okay. Can we receive copies of communications 
provided to the state agencies in regard to the national school 
lunch recall?
    Ms. Johner. Sure.
    Ms. DeLauro. And, again, these communications, they include 
the types of expenses that will be reimbursed? They know what's 
going to be reimbursed? The procedures, the timeline for 
reimbursement? They have all of that information?
    Ms. Johner. That's correct. They should. I think it's 
important to note that some of that information is state 
specific. Our clients obviously in this case were the state 
agencies. State agencies are responsible for providing 
information down to the local level regarding specific 
instructions for the manner in which the foods should be 
destroyed, and some of that varies from state to state, 
depending on what their public health agencies require.
    So there is some general information provided by USDA and 
then some specific, state specific information that goes to the 
school level.
    [Clerk's note.--Because of the length of these documents 
they are not printed in the hearing volume. The Subcommittee 
will maintain a copy in the official files.]

                         BEEF QUALITY STANDARDS

    Ms. DeLauro. I am interested in what standards--what are 
the standards that are set by FNS for the quality of the beef 
that comes into the national school lunch program. Do you set 
the standard that no beef will come from downer cattle, or is 
that AMS's responsibility? And how do you enforce these 
standards?
    Ms. Houston. The specs for the product that is purchased on 
behalf of schools by the Department are established by the 
Agricultural Marketing Service. They are the Departmental 
purchaser of entitlement commodities for schools.
    I can say that they really have very high quality standards 
that are comparable to those in the commercial marketplace. 
They were first adopted over a decade ago in response to 
concerns that were voiced by advocates, parents and Congress 
regarding the quality of the meat and very stringent standards 
and safeguards were put in place at that time to make sure that 
the product really met the highest quality standards.
    Ms. DeLauro. Do you have enforcement standards? How do you 
enforce these standards? Has that become part of your 
responsibility as well as, I mean, AMS or? The standards that 
are laid out in terms of the beef that goes into the school 
lunch program. Do you enforce standards? Do you require--do you 
have requirements with regard to pathogen testing, quality and 
so on? Is that part of your mission?
    Ms. Houston. AMS has contractual agreements with verified 
vendors that are required to meet the specifications laid out, 
and AMS is responsible for regulating those vendors and 
ensuring that they are complying with all aspects of those 
contracts.
    Ms. DeLauro. So you do not have any enforcement authority 
or standards with regard to that process?
    Ms. Houston. Well, my----
    Ms. DeLauro. You are in essence the customer?
    Ms. Houston. We are in essence the customer, but 
microbiological standards, testing requirements are included in 
AMS specifications for ground beef that is purchased for the 
school lunch program.
    Ms. DeLauro. My time----
    Ms. Houston. Every lot is tested, is my understanding.
    Ms. DeLauro. My time has expired. Let me--Ms. Emerson.

                      FOOD STAMP PROGRAM OUTREACH

    Ms. Emerson. Thank you, Madam Chair. I want to start with 
kind of where I left off in just the opening statement. But I 
was being specific to Missouri with regard to the issues of 
hunger. And, you know, we have right now about 35.5 million 
people who have--suffer from one form of hunger or another, at 
least in 2006.
    And, you know, all of the factors that we talked about with 
regard to economic issues do make me very nervous. And I worry 
about increased numbers of people who become either totally 
hungry or food insecure. And I want to know what the agency is 
doing to prepare and to reach out to those individuals.
    Ms. Johner. Yes. That's a great question. I think that we 
have done a lot in our--probably strengthening our partnerships 
with the state, because the states ultimately are responsible 
in administering the program. So one of the things that's 
important for us is to make sure that the people who are 
eligible and wish to participate in the program have access to 
the program.
    So, again, working closely with partners, and not only 
that, but with community and faith-based organizations. I know 
personally I have gone out to different states, and I do 
roundtables, and I bring various people to the table. The local 
leadership, the state leadership, because it also has to be 
sustained. And so what I try to do at our level is try to bring 
that in cooperation to collaborate to say what do we do for the 
folks in your state? And so that's one aspect of it.
    We provide outreach grants to four states to be able to 
come up with some of their own pilot projects. But this is a 
very important issue for us, because we do know that there's 
underserved population, the elderly, the working poor, 
Hispanics that have low numbers. And so, again, if they are 
eligible for the program, we want to make sure that they get 
the program.
    Ms. Emerson. Well, you know, I know in Missouri, for 
example, we have a very high participation rate. We have an 
excellent food stamp outreach program, and I'm very grateful 
because since my Congressional district happens to bear the 
largest number of people below the poverty line as well as 
those who are food insecure, if you look at this map here, 
Madam Chair and Secretary Johner, you'll see all this dark 
blue. And this is where--this is my district. That shows the 
highest participation rate with regard to food stamps.
    And so we're doing a good job in Missouri, but my worry is 
that you all may not have adequate resources necessary to 
respond and process and even approve new applications for food 
stamp or WIC or school meals. Do you feel like--do the state 
agencies with whom you work, do you feel that they have--and I 
meant to say state agencies--do you feel that they have the 
adequate resources to be doing this?
    Ms. Johner. And again, I think that's part of the--again, 
it varies. Each state has its own individual strengths and 
challenges in their state. But I think working together again 
with--what we try to really encourage is again the local 
collaboration that's there, because I do believe that there's a 
lot of--the states have more resources than they realize, but 
they need to bring them together. And so if we can be part of 
that, that would be great. But as far as working with the 
states, and, yes, coming up with innovative ways, I think the 
modernization piece is one component that I think states are 
looking to incorporate, to be able to handle the number of 
people that are coming in, to be able to better meet their 
needs.

                    FOOD STAMP PROGRAM PARTICIPATION

    Ms. Emerson. Okay. You mention in your testimony a slight 
increase in the participation of, what, about 200,000 
recipients per month.
    Ms. Johner. Right.
    Ms. Emerson. Is that still your all's expectation?
    Ms. Johner. Yes.
    Ms. Emerson. It is? Even in spite of, you know, more tough 
economic times?
    Ms. Johner. And given, I mean, again, given--that's our 
numbers, given the data that we've had. And so we continue to 
look at this very closely, and the numbers change as we get the 
data in, so at this point, I have to say yes.

                     FOOD STAMP PROGRAM ERROR RATE

    Ms. Emerson. Okay. You also cited in your testimony an 
error rate of--in the food stamp program of less than 6 
percent. You know, when we discuss farm and conservation 
programs, we discuss improper payments where, you know, a 
simple mistake on a form can classify a payment as improper. 
What qualifies as an error with regard to food stamps?
    Ms. Johner. Well, I guess the food stamp error rate is 
actually dollars lost and not the procedure errors. And I can 
tell you that we do have a strong indication for this coming 
year that our numbers are even better than they were last year, 
and they continue to truly work on trying to improve that.

               FOOD STAMP PROGRAM CATEGORICAL ELIGIBILITY

    Ms. Emerson. Madam Chair, can I ask one more question? Just 
because I have to run to Energy and Water. Ms. Secretary, in 
past years, we've seen a proposal to end the categorical 
eligibility--sorry. That's a very hard word for me to 
pronounce--eligibility of TANF noncash recipients for food 
stamps, and I don't think there's a proposal like that before 
us this year, but it was in the President's farm bill 
recommendations. Do you know if this is still the 
Administration's position?
    Ms. Johner. Yes.
    Ms. Emerson. Well, that's unfortunate, Madam Chair, 
because, you know, I think the GAO has stated that an analysis 
shows the vast majority of TANF noncash households may remain 
eligible for food stamp even after this change. So I know that 
the states are concerned about those administrative costs, 
particularly given the potential for increased applications. 
Well, I don't--it was a GAO report from last--that GAO report 
identified several states which did allow the categorical 
eligibility. But has FNS--and maybe I should ask the 
Administrator, have you acted to correct that inconsistency?
    Mr. Salazar. We do provide technical clarifications, of 
course, to GAO reports. We have asked to wait until after Farm 
Bill implementation to see what recommendations at this time--
--
    Ms. Emerson. Do either of the farm bills--because I haven't 
obviously seen either of the drafts--do they actually contain 
the President's requested language on categorical eligibility?
    Mr. Salazar. Madam Chair and Congresswoman, they do not.
    Ms. Emerson. They do not? Okay. Well, with that, I have 
exceeded my time, Madam Chair. Sorry. Thank you all very much.
    Ms. DeLauro. Thank you. Ms. Kaptur.

                 LEADERSHIP AND RESOURCE COLLABORATION

    Ms. Kaptur. Thank you, Madam Chair. Welcome back to the 
subcommittee, Secretary Johner and all of your colleagues, 
thank you. And thank you for making the effort to come to Ohio. 
It is truly appreciated. And to watch your engagement with our 
food banks and our religious community and all of those who are 
trying to feed the hungry, I can't thank you enough for that.
    I wanted to ask you, I know you had a chance to view some 
of our shellshocked food pantry operators, and you may have had 
a chance to reflect a little bit on the visit, and I know you 
are considering coming out again, which we would deeply 
welcome. I'm wondering if you have thoughts based on your visit 
you would want to share at this point?
    Ms. Johner. Yes, I do. And I think part of that I mentioned 
earlier. Again, I think after visiting Ohio, and again, putting 
my old hat on as a State Director and, you know, working in the 
field, it's important and I think sometimes we lose sight of 
that, that the local leadership and our statement leadership as 
well as the Federal leadership all need to come together to be 
able to address in a collaborative manner be able to meet the 
needs of our population that is out there.
    And I know in Ohio there was, I've seen a tremendous amount 
of resources, and it was actually pretty exciting to see that 
many resources, but we need--there needs to be some 
coordination of that and how do we work on that. And I think it 
needs to be at all levels. And I think when I come back out 
there, we were going to have certain people at the table so 
that we can have those planning and then the next session, 
because, again, it needs to be sustainable.
    I think everyone has competing priorities and limited 
resources, so we need to figure out how do we still help those 
most in need with the resources we have out there.

                          COMMODITY PURCHASES

    Ms. Kaptur. Well, I'm hoping that as you consider that, we 
can think together about how the Agricultural Marketing Service 
and extension might be more fully engaged in an effort like 
this where we have so many hungry people and programs not 
reaching those who are eligible. Could we get electronic 
benefits transfer machines to all of our farmer's markets so 
people could take food stamps there if they are eligible for 
food stamps? And are there any legal or structural hurdles we 
need to overcome in order to do that?
    And the connection to local production agriculture, how we 
connect the nutrition program eligibility to local production. 
The food stamp EBT connection is one, how one engages the local 
community, farmers in producing, or let's say extra food that's 
needed by the food banks. I'm not quite sure how to do that, 
but if there's a way that you might talk to some of your 
colleagues over there at USDA on the production side.
    We really need some new visions of how to meet the needs in 
these urban areas. And when you have food pantries that have a 
rise in need of over 30 percent and donations are down by 75 
percent, because the economy is so bad, there have to be some 
other mechanisms. And we're hoping that you will consider 
those.
    Yes, I agree the state needs to be involved, because, for 
instance, in our school lunch and breakfast programs, we're 
losing money because the state can't make the match, because 
the state of Ohio is nearly a billion dollars out of balance. 
So how can the state meet the match when it doesn't have any 
money? And yet we have agriculture programs that on the 
production side that we might be able to link to our nutrition 
programs.
    That's where I'm asking you to look, assuming the state 
will have nothing to put on the table. Maybe they will. If they 
don't, we're still stuck with empty shelves in our food 
pantries and in our ministries and so forth that are trying to 
feed the hungry.
    Do you anticipate USDA will have any other announcements to 
make about additional commodity purchases that can go to these 
food pantries for emergency purposes, where you've got very 
high levels of unemployment?
    Ms. Johner. Well, we are--the stocks for food. Are you 
aware of that?
    Ms. Kaptur. Well, there was one announcement, what was it, 
$63 million purchase?
    Ms. Johner. Yes. That was the second shipment that will be 
going out starting, I believe, in May or June. If I'm correct 
on that, we'll start having shipments that actually will be 
hitting the food banks.
    Ms. Kaptur. All right. And are those--that isn't Commodity 
Supplemental Food Program. That's areas like milk or protein-
based foods, or what form will that take?
    Ms. Johner. That takes, actually it's canned meats, and I 
have a list of those that I can definitely get to you. 
Actually, they're very, it's a more substance. It isn't just 
milk and stuff. It is actually canned meat and chicken and 
turkey and, I want to say beans, beef stew, things like that.
    Ms. Kaptur. All right. Okay. I would be very interested if 
your department----
    Ms. Johner. Yes.
    Ms. Kaptur [continuing].--Could provide us with a 
projection of what will that mean in a state like Ohio----
    Ms. Johner. Yes.
    Ms. Kaptur [continuing].--Which is going through very 
difficult times.
    Ms. Johner. We can get you that information.
    [The information follows:]

    FNS is pleased to report that the innovative Stocks-for-Food barter 
has benefited The Emergency Food Assistance Program (TEFAP) nationwide. 
Commodities that will be made available to States under the second 
Stocks-for-Food Barter include canned and frozen chicken, pork and 
turkey hams, canned tuna and salmon, peanut butter, and pinto beans.
    Under TEFAP, each State's fair share of commodities is calculated 
based upon a weighted formula that takes into account each State's 
poverty and unemployment statistics. Ohio is expected to receive about 
$2 million of the roughly $50 million worth of commodities that will be 
obtained under the second barter.
    FNS supports multiple options that allow farmers' markets to accept 
food stamp EBT benefits efficiently and securely. Between 2006 and 
2007, the number of farmers' markets participating in the Food Stamp 
Program increased by 22 percent from 436 to 532. Farmers markets 
redeemed more than $1.6 million in food stamp benefits in 2007. 
Promising practices related to the use of food stamp EBT are available 
at http://www.fns.usda.gov/fsp/ebt/ebt_farmers_markstatus.htm.
    There are no legal hurdles associated with placing EBT machines 
into farmers markets; however, there may be logistical hurdles. 
Specifically, many farmers' markets do not have electricity and/or 
phone lines necessary to support regular EBT Point-of-Sale (POS) 
devices.
    To help farmers' markets adapt to the EBT environment, alternative 
redemption systems were developed. FNS approves demonstration projects 
that use alternative forms of food stamp benefit issuance, including 
scrip, tokens, and receipts, in conjunction with EBT. Recipients 
exchange EBT food stamp benefits for scrip or tokens to purchase 
produce and other eligible food products at individual farmer stalls in 
a farmers' market.
    Additonally, as wireless technology has improved, more markets are 
taking advantage of it. The major hurdles to using wireless technology 
are equipment and maintenance costs and transaction fees. Often, these 
costs are born by the markets themselves or by the organizations that 
sponsor the markets. Markets leverage grants (such as Agricultural 
Marketing Service grants or those from private foundations such as the 
Kellogg Foundation) and their affiliations with organizations such as 
the State Farm Bureau to reduce costs. The added advantage of wireless 
POS for farmers is that they run commercial debit and credit as well as 
EBT transactions. Commercial transactions help justify and off-set the 
cost of equipment and processing.

                TOLEDO SCHOOL LUNCH AND SCHOOL BREAKFAST

    Ms. Kaptur. All right. All right, very good. And also, 
Madam Secretary, as you look at coming out again, if you could 
give us--if you could take a look at the Toledo school system 
and their school lunch and breakfast program and tell us why 
they forego millions and millions of dollars of federal money 
because of lack of subscription to the programs. There's 
another area where--is it the state's fault that they're not 
providing the match? If you could help us understand what's 
going on there, I would greatly appreciate it.
    Ms. Johner. We can look into that.
    [The information follows:]

    FNS is committed to ensuring all eligible children have the 
opportunity to participate in the school meals programs. FNS is aware 
of Toledo's desire for assistance in developing strategies to increase 
participation in the school meals programs. Consistent with the 
commitment made to you in our recent meeting, FNS will soon contact 
school district officials to begin the discussion. FNS will work with 
Toledo officials to identify ways to strengthen program quality, 
including lessons learned from other districts with similar 
characteristics. FNS will work with the district to build a program 
that attracts greater student participation and helps put Toledo's 
school nutrition programs on solid financial ground.

    Ms. Kaptur. Thank you, Madam Chair.
    Ms. DeLauro. Mr. Kingston.

             FOOD STAMP PROGRAM ENROLLMENT AND UNEMPLOYMENT

    Mr. Kingston. Thank you, Madam Chair. Madam Secretary, do 
you have a chart that you could give me later on that would 
show from a better understanding the link between food stamp 
enrollment and unemployment?
    Ms. Johner. Yes, we could do that.
    Mr. Kingston. In a local area.
    Ms. Johner. In a local area? It's a little more difficult. 
Is it like state specific, or?
    Mr. Kingston. Well, I think it would be----
    Ms. Johner. Or a region?
    Mr. Kingston [continuing]. Public interest for any town or, 
you know, any political subdivision, either a county, a city, 
an MSA. I can't believe you don't know this off the top of your 
head. [Laughter.]
    Mr. Kingston. But just something so that by the smaller 
subdivision is possible, hopefully something below the state 
level, but something that would show, okay, for example, in 
Ohio, it has been unusually maybe even the hardest hit by the 
current economy, I think you have wasn't it a 21 percent job 
reduction or something in the last couple of years? I just--but 
it would be interesting to see, you know, how the employment 
rate went up and food stamp eligibility enrollment up and went 
down, to make sure also that that line is consistent. Because 
if it--in some areas if you have an aberration, that would be 
interesting to know also.
    Ms. Johner. Okay. I tell you--I'll commit to with working 
with you and your office and then we'll see what we can do and 
then we'll get some type of table out. How's that?
    Mr. Kingston. You know--well, let me ask you. Let me just 
comment on that. I don't know why you wouldn't have it already.
    Ms. Johner. At this point, do we have this information at 
all? We have a table--a chart that shows at a national level, 
but not at the county level.
    Mr. Kingston. Well, my fondness for you notwithstanding----
    Ms. Johner. Do you want the national----

               FOOD STAMP PROGRAM EMPLOYMENT AND TRAINING

    Mr. Kingston [continuing]. I'm going to have to pick on 
you, because this wasn't a set up question, but you're asking 
for $362 million for unemployment training. Why? If you don't 
know the stat, the correlation between food stamp eligibility 
and your need to come up with $362 million, how can you ask for 
that much money if you don't have that here's why we need it?
    Ms. Johner. We do know, sir, that there is lower 
participation in the food stamp program by the working poor, 
and there's a number of reasons for that, but we've asked for 
some specific targeted funding as part of our proposal to help 
improve participation among specific underserved populations, 
the working poor being one of them.
    Sometimes there are some myths, thinking that if you have a 
job you are not eligible for food stamps, when in fact the 
eligibility is determined based on the income level of the 
household. And even if there is a household that's working, 
they may have an income that would enable them to receive some 
supplementation of their food budget through food stamps.
    Mr. Kingston. Well, on your $362 million number for job 
training, how did you arrive at that?
    Mr. Salazar. Madam Chair, Congressman Kingston, our 
projections for employment and training are based in large 
measure on food stamp participants calculated in our program. 
Participation in the Employment and Training Program is part of 
the Food Stamp Program, is a requirement for many participants, 
and based on those participation projections, we project 
funding needs for that program.
    Our ability to project and forecast food stamp 
participation is reliable on a number of economic factors, 
inclusive of unemployment rates, but recognizing that there are 
respective lag times in which that data is tracked with food 
stamp participation. It is somewhat of a science but also a 
complicated projection.
    Mr. Kingston. What is the Department of Labor asking for?
    Mr. Salazar. With respect to?
    Mr. Kingston. Job training.
    Mr. Salazar. I regret that I don't have specifics on----
    Mr. Kingston. Do you know if went up or down? I mean, how 
much is the overlap between what the Department of Labor job 
training programs do and what you're doing?
    Mr. Salazar. Madam Chair, Congressman Kingston, the 
services provided by the Department of Labor are distinct and 
unique to those individuals seeking unemployment compensation 
benefits and the requirements of them for seeking those 
benefits. There may be a potential of overlap of those 
individuals seeking those benefits also applying for Food Stamp 
Program benefits. The requirements of the Food Stamp Program 
are to ensure for those who are required to participate in the 
employment and/or training programs that we can provide them 
adequate services through the State agency.
    Mr. Kingston. A person could have dual enrollment though, 
right?
    Mr. Salazar. Madam Chair, Congressman Kingston, that is 
correct. Likewise, their children may also be participating in 
the National School Lunch Program and receiving other services 
as well from a multitude of various local programs.
    Mr. Kingston. But if you're taking one job training program 
from one federal agency, why would that not, you know, be a 
sufficient voucher for both agencies and therefore for 
eligibility?
    Mr. Salazar. Madam Chair, Congressman Kingston, again, 
recognizing that the populations served by Food Stamp 
Employment and Training Program is that population defined by 
statute as what we call the ABAWDS population, the adult 
population who is able to work, we rely heavily on states to 
coordinate the delivery of their services. Having been a former 
state director of social services, I know for a fact that as 
that state director, I worked very closely with my State 
Department of Labor to ensure the coordination of our services 
because of limited resources.
    Mr. Kingston. But if they are in your job training program 
in order to complete their eligibility, it still seems like a 
waste of time if they already have job training from another 
agency. And I don't see why your job training isn't--one can't 
be as good as the other. I don't understand why if you're 
taking a Department of Labor job training program you couldn't 
get a voucher that would suffice your eligibility.
    Ms. Salazar. Madam Chair, Congressman Kingston, in many 
cases, that's exactly what does occur with the coordination by 
the state agencies to avoid the duplication of provision of 
services, precisely that.
    Ms. Kingston. And if I'm enrolled in one of those job 
training programs, am I going to learn one set of skills from 
your program and another set of skills from labor? Or, you 
know, is it if I don't have a voucher?
    Mr. Salazar. Madam Chair, Congressman Kingston, the 
provision of services may in fact only be one program in the 
state. It's the sources of funding that come from both 
Department of Labor and USDA's Food Stamp Program that may 
provide the resources to administer the program. It's not to 
say that there are two distinct training programs, but whether 
there are two distinct Federal programs that have the 
requirement for employment and training. The actual delivery of 
the services may in fact be one program which is in most 
instances the case.
    Mr. Kingston. So there's not a duplication?
    Mr. Salazar. Not a duplication of services by any means. 
And you know, what we're doing is making sure that we're 
picking up the population, if not through the Department of 
Labor, we're certainly capturing them through the Food Stamp 
Program.
    Ms. DeLauro. What is regulation with regard to food stamps 
in able-bodied adults? Aren't they just eligible for a very 
restricted period of time, over a three-year period in which 
they're eligible for food stamps? Is that accurate?
    Ms. Johner. Yes. Three months.
    Ms. DeLauro. So they're only eligible to able-bodied 
adults----
    Mr. Salazar. Without dependents.
    Ms. DeLauro. Without dependents--and this comes out of the 
welfare bill, I think, that was passed in 1996--are only 
allowed to receive food stamps for a three-month period of a 
period of three years. Quite frankly, it's one of the areas 
which we're trying to take a look at to see if there's anything 
that can be done about that----

                     HALLMARK/WESTLAND BEEF RECALL

    Let me if I can finish up with one or two more questions on 
the beef recall and I will then move on to some other areas. 
I'm interested in your views on liability, on the liability of 
Hallmark Westland in the recent beef recall. We face the 
possibility the Federal Government may have to make substantial 
expenditures to reimburse schools for expenses they incur 
related to the recall. The company was the entity that provided 
meat from downers to the Federal Government for the school 
lunch program. I understand that the company says that it is 
bankrupt, and I think yesterday in a hearing yesterday with the 
Energy and Commerce Center, the CEO of the company indicated 
that in fact downers did get into the food supply. They say 
that they're bankrupt, that it may not have the funds to 
reimburse the government.
    But setting that aside, what is your view of the company's 
liability to the Federal Government?
    Ms. Johner. Well, Madam Chair, I with all due respect I do 
think that that's out of my scope on that, because what we 
focus on is again to school lunch, make sure that they are safe 
and they're nutritious for our children and that they're 
getting the school lunches. So I guess I just feel it's out of 
my scope.
    Ms. DeLauro. Mm-hmm. Well, in terms of the job description, 
do you have a personal view as to what the company's liability 
in this regard, since the responsibility, actually it may be 
out of your scope, but the costs are going to be added to or 
come out of your budget, and ultimately it's going to come from 
the--you know, where do we go with regard to appropriations? I 
don't know if this budget request includes funding for 
reimbursement, for all of this effort, and so forth. You know, 
so where do we view the company has any liability here? Kate.
    Ms. Houston. Madam Chairwoman, I think not only is it out 
of the scope of the Food and Nutrition Service to comment on 
the issue of the liabilities, but I think it's also important 
for us all to remember that there is ongoing investigations 
underway and we need to wait for those investigations to 
conclude until we have all of the information to be able to 
make a full and accurate assessment.
    We are working closely with our sister agency, the 
Agricultural Marketing Service, to address the reimbursement 
issues, and I know that AMS will be pursuing all available 
avenues and legal options that are available to them in terms 
of seeking funds to cover their costs.
    Ms. DeLauro. This is what my hope is, is that when we do 
have some conclusion of a legal investigation about which you 
don't want to comment, that we might have a perspective from 
the agency and maybe from the Congress on what the liability of 
the company ought to be in this regard, or any company that is 
engaged in this effort. And after we find out what the 
investigation is----
    Speaking of AMS, I want a quick question with regard to 
services, both from AMS and FSIS--from the commentary already, 
well let me put the question this way: How satisfied are you 
with the services you receive from AMS? And what could they 
have done to prevent this recall from happening?
    Ms. Johner. Madame Chair, I'll just give you my comments 
and then turn it over to Kate, since she was much more involved 
in that. I know from where I sat, we worked very closely 
together with AMS and FSIS. We had daily meetings. I mean there 
was true collaboration and I know at several levels there was 
a, you know, a strong working partnership.
    Ms. DeLauro. That was after the fact. That was after the 
fact.
    Ms. Johner. Right. As soon as we----
    Ms. DeLauro. What's your view with regard to before, in 
terms of this happened under AMS's watch, it happened under 
FSIS's watch? You know, obviously it should not have. Was FNS 
served well by either FSIS or AMS in this regard?
    Ms. Houston. I think we have had a long-term positive 
working relationship with our sister agency, the Agricultural 
Marketing Service, and we've worked collaboratively with them, 
both before this incident occurred, and even closer afterwards. 
Obviously, as Under Secretary Johner has previously said, we 
will be taking a close look at all aspects of this recall to 
identify ways in which we can improve upon what we----
    Ms. DeLauro. Do you have a process in place to check 
whether AMS is meeting your specifications for purchases again 
on such as testing requirement?
    Ms. Houston. We look to the Agricultural Marketing Service 
and rely upon them.
    Ms. DeLauro. Oh, you don't. And I don't know whether or not 
that's going to be part of your consideration in terms of what 
you have learned from this effort. It ought to be that both 
with regard to FSIS and AMS in this sisterly relationship, or 
brotherly relationship, whatever the characterization of the 
relationship is, that quite frankly that--what are they doing 
and how could this have been avoided both by AMS and FSIS? I 
think that that is crucial to what you need to know and what 
your oversight of these efforts has to be in order to carry out 
your mission.
    Ms. Johner. Thank you.

                          WIC BUDGET REQUESTS

    Ms. DeLauro. I want to move on to WIC, if I can, and the 
2008 request. I'll make a couple of comments and then a 
question. In 2008 the Department requested $5.4 billion for the 
WIC program. Participation food costs saw dramatic increases 
between the time the President's budget was submitted and the 
bill was enacted. Congress provided over $6 billion for WIC, 
which was about $633 million more the Department requested for 
the program. The Administration failed to acknowledge the 
increased participation in food costs for the WIC program. The 
President threatened to veto any bill that increased total 
spending levels above the ones set in the budget. Long and the 
short of it, the Administration was probably--everyone but the 
Administration really acknowledged that--of money that was 
there was not adequate to deal with 2008. Why did the 
Department not submit a revised budget request for 2008 when it 
became apparent that the request was not adequate to maintain 
participation in the program?
    Ms. Johner. Madam Chairwoman, our process is that we work 
off the projections, and at the time the projections and 
numbers that we had we believe is sufficient for WIC to be able 
to meet the need in WIC.
    Ms. DeLauro. In 2008 it was pointed to an increase. I 
understand the projections. My question is why when we had the 
facts before us that this was not going to be enough, 
satisfactory, then in fact what we would--any reason why you 
didn't ask for a revised budget request?
    Ms. Johner. Because we believed that the funding that----
    Ms. DeLauro. You thought it was going to be adequate.
    Ms. Johner. It was going to be adequate.
    Ms. DeLauro. Well, then let me get to the 2009 request. The 
2009 request again proposes to cap the amount available for 
grants and state agencies, nutrition service and administration 
expenses--are to the 2007 level. That's $145 million. The 
request also proposes to use the contingency reserve of $150 
million to cover estimated participation and--costs program. 
Your testimony states $150 million is requested to replenish 
the contingency reserve to ensure that the essential food, 
nutrition education and health service remained available to 
all eligible women, infants, and children who need them.
    It's hard for me to understand--you're saying that you are 
replenishing the contingency reserve, if you anticipating using 
it in fiscal year 2009 to meet expected participation in food 
costs. You say, ``Should our estimates of program participation 
or costs prove too low, we have continued to protect program 
access for all eligible persons, a key objective of the 
President's contingency reserves.'' And ``this flexibility is 
essential to our ability to deal quickly and effectively with 
unexpected increases in food costs or participation as were 
experienced in fiscal year 2007.''
    Yet you are proposing to use the contingency reserve to 
deal with expected participation and food costs. If you were 
going to deal with unexpected costs, that would be another $150 
million. So I don't understand how you can say that we're going 
to be able to meet unexpected costs.
    Ms. Johner. We're going to have Kate give you a little bit 
more details on that.
    Ms. Houston. One of the advantages in this budget cycle to 
having use of the $150 million and the contingency fund up 
front is that it provides us some additional flexibility in 
getting targeted money to those who need it, in particular 
states, more quickly than we could otherwise if we had to go 
back and seek permission to use the contingency fund. The 
contingency is not subject to the standard allocation formula 
if we have it up front. So if we can identify specific needs in 
specific areas of the country, we can get money quickly to 
those state agencies. We see that as an advantage in a time 
when we know that there are pressing needs in terms of 
increased participation in the program and some fluctuations in 
food costs.
    Ms. DeLauro. But you're not providing any administrative 
costs, as well. So I mean the states are in a real fix here. So 
you got $145 million and no administrative costs occurring.
    Ms. Houston. We do have funding for administrative costs, 
Madam Chair.
    Ms. DeLauro. But contingency you don't pay administrative 
costs with your contingency. Is that correct? Or is that wrong? 
I mean I don't know, is that correct?
    Ms. Houston. Those funds can be used both to cover caseload 
and to the NSA cost, that's correct.
    Ms. DeLauro. What is your view of the word ``can''? They 
can. So it could just for food costs? It could be for both--it 
just seems that once again we're looking at how----
    Ms. Houston. There's flexibility in the use of those 
contingency funds. So based on the specific circumstances of 
the State agency, whether they need to have additional funding 
support, either on the NSA side, or on the participant, the 
caseload side, that money can be used for either area of 
providing services.

                           WIC PARTICIPATION

    Ms. DeLauro. I will say this. It sounds a bit like--I'm 
hoping that you won't be offended by this, but it sounds like 
it's a bit of a shell game here, you know, we're just moving 
the pieces. Ultimately we're coming down to the potential of a 
real short fall--if the costs go up, the participation rates go 
up.
    And also with regard to participation, I don't know how you 
explain the participation in WIC program will decrease in 
fiscal year 2009 from the October 2007 participation data. 
We're not looking--we had an increased rate from 2006 to 2007--
2.4 percent, 2.8 percent projected, averaging 2.9 percent for 
2009. We've got information or at least looking at the 
expectation of a rise here, but--it doesn't seem to make sense 
that we don't have some sort of a contingency fund available 
for 2009, if participation--as you currently--you expect 
participation to decrease. I don't see any----
    Ms. Houston. I don't believe we expect participation to 
decrease. I think that our budget projects there to be a slight 
increase in participation in WIC, and the budget that we've 
submitted would cover all projected participants based on our 
current estimates.
    Ms. DeLauro. For October 2007 actual--and I'm just--was 8. 
2009, it's 8.
    Ms. Houston. I think it's also important to recognize that 
there are fluctuations in participation levels across various 
months and quarters.
    Ms. DeLauro. And I understand that. And you know, it goes 
down, then it spikes, it goes down, and then it spikes again. 
We're in the down side and it would appear that the next 
tranche here is a spike, if you're looking at current patterns, 
or as I look at the chart.
    Ms. Houston. And our projected planning in terms of 
expected participation and funding requests does account for 
that.
    Ms. DeLauro. Will you provide a revised budget request if 
you find that your submitted request will not be adequate to 
cover participation, food costs for FY 2009? You did not do 
that in 2008.
    Ms. Johner. Madam Chair, we will continue to work closely 
with Congress and will continue, I assure you, to monitor this 
closely and when we find something, we will be working closely 
with----
    Ms. DeLauro. Will you provide a revised budget request for 
us?
    Ms. Johner. At this point I can't tell you that.
    Ms. DeLauro. You can't say whether or not you're going to 
provide me with a revised budget request if the--what you don't 
have is adequate to deal with the increase of participation in 
food costs?
    Ms. Johner. We'll continue to work with you and we will 
continue to monitor this very closely, and we----
    Mr. Steele. Well, Madam Chair, that we will have to work 
closely with OMB. We unilaterally cannot send up a budget 
amendment on our own.
    Ms. DeLauro. So it's an OMB problem here?
    Mr. Steele. Well, it's a combination of us sharing our 
estimates with OMB and OMB deciding. The President submits a 
budget amendment, not the Department of Agriculture.
    Ms. DeLauro. Right.
    Mr. Steele. So we will----
    Ms. DeLauro. So it's OMB and the reason why we didn't get 
an increase, you know, we didn't get another budget request the 
last go-round in 2008 was OMB said no.
    Mr. Steele. Well, we will communicate our feelings to OMB.
    Ms. DeLauro. Communicate our feelings, as well, Scott.
    Mr. Steele. Okay.
    Ms. DeLauro. Communicate our feelings as well.
    Mr. Steele. I got the message.
    Ms. DeLauro. Well. Mr. Farr.

    FRESH FRUITS AND VEGETABLES IN THE NUTRITION ASSISTANCE PROGRAMS

    Mr. Farr. Thank you, Madam Chair, thank you for having this 
hearing. Food, Nutrition, and Consumer Services ought to be at 
the top of the triangle, the pyramid of the Department of 
Agriculture because it is what it's all about. And I think this 
committee has expressed over the years the real concern we have 
with obesity occurring particularly in children in America, and 
then this kind of warped concept of creating a distribution 
system for our commodity programs, but not for our specialty 
programs. And I'm pleased to see that in the newly updated WIC 
food packages, you'll soon provide vouchers for fruits and 
vegetables. Madam Chair, we're going to put some vouchers for 
food and vegetables, this is for the WIC program--for the past 
30 years only carrots and fruit juice were included in WIC food 
packages. Now they're going to give an $8 voucher per month for 
women and $6 voucher per month for children to provide WIC 
recipients for any fruits and vegetables of their choice.
    What percentage of the entire voucher is then allowed to be 
spent on fruits and vegetables? One--question. Let me get an 
answer to that one first.
    Ms. Johner. That would be the entire, the voucher that's to 
be used for fruits or vegetables. And it's $10 for breast-
feeding mothers.
    Mr. Farr. And when will that all be implemented?
    Ms. Johner. We're hoping, in, I think, in 2009? August 5 of 
2009. And it's the latest date that they've given us. We just 
met with, or we kicked off a meeting with the WIC Association 
that were here this week, and they're working very hard 
together in partnerships at all levels to try and make sure 
that they can implement this.
    Mr. Farr. Do you have any incentives--here because she'd be 
asking this question--some of our farmers' markets are 
receiving, using WIC vouchers at the market, but there has to 
be a distribution of the vouchers on site. So if you show up in 
my area in Watsonville, California, you show up at the farmer's 
market and there's a little card table there with the people 
that give out the vouchers, and they--if your name's there, you 
get your voucher and you can use it in the farmer's market. I 
don't know whether the Department has done any active outreach 
to try to encourage that kind of process.
    Ms. Johner. Well, we do want to encourage our participants 
to----
    Mr. Farr. Have you done anything like that with farmers' 
markets?
    Ms. Johner. Farmers' markets--but we are working on 
improving that, and we can probably get you something as to 
what we are doing.
    Mr. Farr. Yeah. I'd like----
    Ms. Johner. Because that's an important component for us.
    Mr. Farr. Would you also include how you could receive food 
stamps at farmers' markets?
    Ms. Johner. They can use their EBT----
    Mr. Farr. That seems to be an issue, so how we could----
    Ms. Johner. We could also add that in there too of what 
we're doing.
    [The information follows:]

    FNS supports multiple options that allow farmers' markets to accept 
food stamp EBT benefits efficiently and securely. Between 2006 and 
2007, the number of farmers' markets participating in the Food Stamp 
Program increased by 22 percent from 436 to 532. Farmers markets 
redeemed more than $1.6 million in food stamp benefits in 2007. 
Promising practices related to the use of food stamp EBT are available 
at http://www/fns/usda.gov/fsp/ebt/ebt_farmers_markstatus.htm.
    There are no legal hurdles associated with placing EBT machines 
into farmers markets; however, there may be logistical hurdles. 
Specifically, many farmers' markets do not have electricity and/or 
phone lines necessary to support regular EBT Point-of-Sale (POS) 
devices.
    To help farmers' markets adapt to the EBT environment, alternative 
redemption systems were developed. FNS approves demonstration projects 
that use alternative forms of food stamp benefit issuance, including 
scrip, tokens, and receipts, in conjunction with EBT. Recipients 
exchange EBT food stamp benefits for scrip or tokens to purchase 
produce and other eligible food products at individual farmer stalls in 
a farmers' market.
    Additionally, as wireless technology has improved, more markets are 
taking advantage of it. The major hurdles to using wireless technology 
are equipment and maintenance costs and transaction fees. Often, these 
costs are born by the markets themselves or by the organizations that 
sponsor the markets. Markets leverage grants (such as Agricultural 
Marketing Service grants or those from private foundations such as the 
Kellogg Foundation) and their affiliations with organizations such as 
the State Farm Bureau to reduce costs. The added advantage of wireless 
POS for farmers is that they run commercial debit and credit as well as 
EBT transactions. Commercial transactions help justify and off-set the 
cost of equipment and processing.

    Mr. Farr. Okay.
    Part of the food stamp nutrition education program 
encourages education about fruits and vegetables, but I 
understand that this focuses only on the underserved 
population. In fresh fruits and vegetables--in some schools 
offer free produce to students so that they can be exposed to 
fresh fruits and vegetables. The Farm Bill is going to 
determine how many schools in the future--the schools are now 
requiring--in California they required each school district to 
come up with a nutritional program for feeding their schools. 
It's sort of getting rid of all the coke machines and trying to 
get other kinds of vending machines--fruits and vegetables, 
fresh fruits and vegetables can be now sold in vending 
machines.
    But these wellness policies receive some USDA lunch 
reimbursements. I just wondered what progress has been made on 
the fronts at the local level, given the important role of 
fruits and vegetables can play in reducing the risk of obesity 
and other chronic diseases. Do you have any outreach or 
education program at the entire population level through 
expanded work with the media and health professionals?
    Ms. Johner. Actually we're doing, Congressman, we're doing 
quite a bit out there with Center for Nutrition Promotion and 
Policy. We have a national, well, pyramid--we have Dr. Brian 
Wansink who has just joined us a few months ago and he is 
working very hard in promoting the My Pyramid, and coming up 
with other Federal tools that the schools and others can use. I 
do know in the school nutrition programs, they have many things 
that they use to help train the menu planners, the nutrition 
directors on how to use more fruits, vegetables, and whole 
grain.
    Mr. Farr. Would you share that outreach program with us?
    Ms. Johner. Sure.
    [The information follows:]

    

    
    Mr. Farr. And is it done bilingually?
    Ms. Johner. Yes. They do have--I'm sure they have something 
that's done in some Spanish, especially for the instructors.
    Mr. Farr. What--I mean what I'm really curious the bottom 
line here is what is the Department doing to take--I mean 
we've--this obviously the nation knows we need to have a diet 
of more fresh fruits and vegetables, and as the leading 
advocate for the United States Government Food and Nutrition 
program, you're the lead advocacy agency, and I'm very 
interested in what is the agency doing? What is the Department 
doing to really encourage consumptions of fruits and vegetables 
in all populations? Not just WIC and mothers----
    Ms. Johner. Congressman, we have in our proposal for our--
in our Farm Bill we have $500 million over ten years for 
increasing fruits and vegetables through the school lunch 
programs because we serve 31 million school children a day. So 
we thought that that infrastructure was already in place to be 
able to get that out there.
    Mr. Farr. $500 million and what do you use that money for?
    Ms. Johner. For fruits and vegetables--in the school----
    Mr. Farr. To buy them?
    Ms. Johner. Through the domestic nutrition assistance 
programs. But we would have 2.7--I'm sorry let me just go 
back--$2.75 billion through the nutrition assistance programs, 
and that would go through TEFAP and food banks and others. And 
then the $500 million was separate, that would go through the 
schools. And that would be money that they would be able to buy 
fruits and vegetables to be able to serve that in the school 
breakfast and the school lunch program.
    Mr. Farr. That's not a lot of money for all the schools in 
the United States.
    Ms. Johner. Well, it was in addition to what we already 
have in place.
    Mr. Farr. Well, could you pull out those budgets they're 
used for?
    Ms. Houston. Mm-hmm. Mr. Farr, we have obviously fruit and 
vegetable increasing fruit and vegetable consumption is a key 
priority of the nutrition and consumer services, particularly 
given that the 2005 dietary guidelines recommended increased 
fruit and vegetable consumption. We have a comprehensive 
strategy that combines work both in the Food and Nutrition 
Service working through our nutrition assistance programs, 
where we have an opportunity to target information, nutrition 
education, as well as benefits to millions of Americans every 
day, as well as information and nutrition education that is 
targeted to the general population through the Center for 
Nutrition Policy and Promotion. And we'd be happy to provide 
you a list of the full range of efforts that are ongoing within 
FNCS to develop plans for promotion of fruits and vegetables.
    Mr. Farr. The Committee would like that very much.
    Ms. Houston. It's an extensive list and we'd happy to 
provide it.
    Mr. Farr. Who buys the food? We have a--as I understand it, 
the food that is provided for school lunch--breakfast is all 
bought through a military depot in Philadelphia. Because the 
military buys the most food and we piggyback on those 
resources. Who in the Department of Agriculture is responsible 
for deciding to be involved in that acquisition program? Is it 
your department?
    Ms. Houston. About 15-20 percent of the food that's 
provided for the school lunch program is acquired through the 
Department of Agriculture in the form of commodity 
entitlements. Of our commodity entitlements, we are required by 
law to spend not less than $50 million for the purchase of 
fresh fruits and vegetables, and not less than $50 million per 
year. What FNS has done is contracted with Department of 
Defense through the procurement division in Philadelphia. They 
are then responsible. We give them the $50 million----
    Mr. Farr. So it's your services, your agency that does 
that?
    Ms. Houston. Correct. We contract with the Department of 
Defense who then procures fresh fruits and vegetables and 
provides delivery to state agencies, who have chosen to receive 
a portion of their commodity entitlement in the form of fresh 
fruits and vegetables.
    Mr. Farr. Could you give the percentage of breakdown 
compared to the commodities of how much of that fresh fruits 
and vegetables is the percentage of the total acquisition?
    Ms. Houston. We'd happy to get you that information.
    Mr. Farr. Because I believe it's going to be very, very 
small.
    Ms. Houston. It is a relatively small amount of the total 
of commodity purchases. It is not--however I will also make the 
comment that we're just talking about the fresh fruits and 
vegetables in terms of the DOD procurement angle, not all 
fruits and vegetables. Eighty percent of food is procured at 
the local level directly by schools, and there are additional 
fruits and vegetables that are also secured in that manner.
    [The information follows:]

    Based on 2007 levels, we estimate the USDA will make over $350 
million in direct purchases of fruits and vegetables for distribution 
in the nutrition assistance programs under the President's 2009 budget 
request, including over $50 million purchased through the DoD Fresh 
program. This represents 40 percent of the funds budgeted for commodity 
purchases in FY 2009.
    In addition, we anticipate that program providers will use over $3 
billion to purchase fruits and vegetables for the Child Nutrition 
Programs, and that nearly $8.5 billion in funding for Food Stamps, WIC, 
and the Farmers' Market Nutrition Programs will support participant 
purchases of fruits and vegetables in the marketplace. All told, we 
project that under the President's budget, FNS programs will provide 
over $11.5 billion in 2009 in support of fruit and vegetable 
consumption.
    But we are taking additional action to maximize the results of this 
investment in increasing consumption for children and others, such as:
           Updating the WIC food packages to better reflect the 
        needs of current participants--including the addition of 
        fruits, vegetables and whole grains;
           Offering free fresh and dried fruits and vegetables 
        to students in 8 States and in 3 Indian tribes as part of the 
        Fresh Fruit and Vegetable Program;
           Publishing Fruit and Vegetables Galore, a Team 
        Nutrition guide that helps schools offer and encourage 
        consumption of a variety of fruits and vegetables through the 
        school meals programs;
           Conducting national nutrition campaigns such as 
        USDA's Team Nutrition and Eat Smart. Play Hard. that promote 
        fruits and vegetables as part of a healthy lifestyle through 
        motivational and behavior-oriented messages and materials, 
        including the new MyPyramid for Kids; and
           Expanding the HealthierUS Schools Initiative, which 
        supports and recognizes schools that seek to improve their 
        nutrition environment with better school meals, nutrition 
        education in the classroom, and more healthful eating and 
        physical activity choices throughout the school day. To date, 
        about 200 schools have been recognized.
    Proposals offered by USDA in the Farm Bill reauthorization process 
to further strengthen the nutrition assistance programs in delivering 
and promoting consumption of fruits and vegetables:
           $100 million, 5-year competitive grant program to 
        address obesity through the Food Stamp Program, including a 
        test of the impact of food stamp incentives to encourage fruit 
        and vegetable purchases;
           An increase of $50 million annually for the purchase 
        of fruits and vegetables for school meals; and
           An increase in the overall Section 32 fruit and 
        vegetable purchase minimum to $2.75 billion over 10 years.

    Mr. Farr. And schools can't get food from the food banks, I 
understand.
    Ms. Houston. That is correct.
    Ms. DeLauro. Mr. Farr, just an addendum, and I won't--but 
to let you know that the President's budget does not request 
funding for the state management information systems. That has 
to do with how we do implement the new food package changes. My 
understanding is that is where the states are going to get 
those funds to deal with those changes--packages, especially if 
the cap is enacted as requested in the budget. And again, those 
MIS funds in my view, are needed.
    Mr. Kingston.

                           FOOD STAMP PROGRAM

    Mr. Kingston. Thank you, Madam Chair. Madam Secretary, are 
food stamps intended to be the difference between what a 
recipient household can afford for food out of their own pocket 
and what they need?
    Ms. Johner. It's supplemental.
    Mr. Kingston. It is a supplemental?
    Ms. Johner. It's a supplemental.
    Mr. Kingston. Now, we've had a number of people take the 
food stamp challenge, and it's a little bit misleading when 
they say this lasts for 2\1/2\ weeks out of the month. What are 
you doing to educate people that the intent is a supplemental? 
And I know that, you know, like social security is supposed to 
be a supplemental, but it is not a supplement for all people. 
So I mean you know somewhere between the real world of--some 
people are using it for their higher budget of food, and yet 
the intention is different. So what are you doing to engage in 
that discussion?
    Ms. Johner. Well, Madam Chair and Congressman, one of the 
things that again we try to look at what is out there. When I 
talk about the community and the state partnerships, I know 
people get tired of hearing me say this, but it truly is again 
going back into their backyard. We work with--we ran into this 
organization that's really great, it's called Angel Food 
Ministry. And again, that's partnering with this, is a non-
government entity, 501(c)(3). They serve over 550,000 a month, 
and they have a food box like you wouldn't believe. And they 
focus a lot on protein because they know like food banks and 
sometimes families can't afford meats, cuts of meats. And for 
$30, you can buy this box that can last up to a month for an 
elderly person, or up to a week for a family of four. And they 
also take food stamps. And that's one of the things we're 
working very closely with them, and how do we partner with 
other folks like that, to be able to help with the needs of the 
community.
    Mr. Kingston. But when people take the food stamp challenge 
and they go, you know, telling folks that it's not enough, I 
don't know that the USDA is saying, ``You're correct, it is not 
enough, because that's not the intention of it.'' Are you doing 
that?
    Ms. Johner. Supplemental.
    Mr. Kingston. Are you doing that?
    Ms. Johner. Yes. We try to do that. It doesn't get out as 
much as we would like for it to get out, but we do have 
different programs. We have--like in the food stamp program, 
the nutrition education, loving your family and feeding their 
future. It's to help people learn how to cook and to stretch 
that dollar, and still make nutritious meals, and . . .
    Mr. Kingston. Okay.
    Ms. Johner. So we try to get the word out as much as we 
can.

               FOOD STAMP PROGRAM CATEGORICAL ELIGIBILITY

    Mr. Kingston. All right. And something else that you can 
answer for the record, but in terms of the automatic 
eligibility on food stamps, some people receive TANF and yet 
there really are different eligibility requirements. But often 
some states if you're on TANF you can be on food stamps, where 
there's really a different threshold. What are you doing to 
address that? And you may want to answer that for the record 
if--because you have some questions, right? Okay. That would be 
one of--that's a question that I'd like you to examine for the 
record. And then--I don't want to deny you; I can answer that.
    Ms. Houston. Well, we can provide you more information for 
the record, certainly. But under current rules, individuals who 
are participating in the TANF program are categorically 
eligible to receive food stamps. We have proposed to the 
Administration to say that those participating in TANF must be 
receiving cash benefits in order to be categorically eligible 
for food stamps. Other TANF participants who are not receiving 
cash benefits would of course be able to apply for the benefit, 
that's for the food stamp program----
    Mr. Kingston. Yes.
    Ms. Houston. And if they were eligible for the benefits, 
they would be able to participate.
    Mr. Kingston. How much money do you think you're losing 
because of that automatic eligibility? Do you have any idea? 
You can answer that----
    Ms. Houston. I don't have the estimate in front of me, but 
we'd be happy to provide that projection.
    [The information follows:]

    The cost of allowing participation in a non-cash TANF funded 
program to confer categorical eligibility for the Food Stamp Program is 
estimated to be $1.3 billion over 10 years.

                    HEALTHIER U.S. SCHOOLS CHALLENGE

    Mr. Kingston. That's fine. But let me ask you, Ms. Johner, 
Mr. Farr's question about school nutrition and fruits and 
vegetables, as you may know, Ms. DeLauro and I on a really 
bipartisan basis put in some report language last year about 
USDA school nutrition programs and the Department of Education, 
physical education program, better tracking and better 
communication and tying into exercise with the proper dieting. 
Do you have something to report to us on that?
    Ms. Johner. And that's what I think we're talking about the 
HealthierUS School Challenge and things. So again, Kate was 
over that program and I know she'll have more details for you 
on that.
    Mr. Kingston. Do you want to answer that for the record, 
because we would love to hear some good progress.
    Ms. Houston. Sure, I'd be happy to provide information for 
the record, but I will tell you that we have reached out to 
other departments with some jurisdiction over education and 
physical activity. We have been in the process of updating our 
standards for the HealthierU.S., which is a voluntary school 
challenge for improving both the nutrition environment and 
physical activity in schools. We've been working closely with 
the Centers for Disease Control and Prevention on those revised 
standards.
    [The information follows:]

    FNS supports efforts to improve the health and fitness of our 
program participants consistent with the Dietary Guidelines for 
Americans. While the agency's education and promotion efforts focus 
primarily on healthy eating in alignment with its nutrition mission, 
FNS's policy is to integrate physical activity into nutrition education 
materials and initiatives for the nutrition assistance programs at both 
the national and State levels. As a result, FNS program-based nutrition 
education efforts also encourage physical activity for program 
participants from preschoolers to older adults as part of an overall 
``healthy lifestyle''.
    FNS supports and encourages its program partners to integrate 
physical activity into program operations and settings. For example, 
through the HealthierUS School Challenge and technical support for 
school wellness policies, FNS encourages schools to voluntarily 
implement policies and programs that promote both healthy eating and 
physical activity. In the same vein, competitive grant awards have been 
used to develop and support replicable strategies to better promote 
healthy behaviors in WIC.
    FNS also works in partnership with other Federal and non-
governmental groups to address barriers to physical activity including 
program, policy and environmental issues. For example the agency is a 
part of the Centers for Disease Control and Prevention's Nutrition and 
Physical Activity Work Group, a team of national, State, and local 
public health and education partners that seek to advance 
implementation of comprehensive nutrition and physical activity 
programs. FNS has also collaborated with other Federal agencies to 
formulate a Memorandum of Understanding to Promote Public Health and 
Recreation such as Kids in the Woods and outdoor activities in the 
Nation's parks. FNS also participates in activities coordinated by the 
Department of Health and Human Services in support of development of 
the Physical Activity Guidelines for Americans.

    Mr. Kingston. Yeah. Tell us some good stuff, and I think we 
would like to put that language back in the bill this year, and 
we're going to continue to push that. I don't want to speak for 
the committee, but I think that would probably be their 
consensus.
    Ms. DeLauro. I think we would.
    I'll make a quick comment, and I'm going to try to do one 
or two very short questions because we have to vote.

                           FOOD STAMP PROGRAM

    On the food stamp program, the eligibility, as I understand 
it, is 130--poverty. That's people probably making about 
$12,500-something, around that amount of money. The average 
first-quarter benefit per person per month is $101. If you just 
take days or months, meals per day, meals per month, we're 
talking about the average benefit per person per meal is about 
$1.13. Warren Buffet is not getting the benefit of the food 
stamp program. These are people that are 130 percent--poverty, 
and the benefit and my hope is that in the Farm bill, if we 
ever get a Farm bill--and I don't know where you think we are 
on that, but that in fact what we can do is to raise that 
standard benefit, and also to be able to index that food stamp 
benefit to inflation, which ended in 1996--and Jack, in terms 
of being bipartisan under a democratic Administration, I might 
add, to cut out the indexing to inflation with regard to the 
food stamp benefit. $1.13 per person per meal. The Farm bill, 
the nutrition title--the House and Senate had passed a Farms 
bill. Where do you think we're going to end up on this?
    Ms. Johner. Well, I think we got word yesterday that there 
was an extension on that, and so we're still hoping that----
    Ms. DeLauro. Well, my hope on that----
    Mr. Kingston [continuing]. Only until April 15th.
    Ms. DeLauro. Yeah.
    Mr. Steele. No, it's a 33-day extension.
    Ms. Johner. Thirty-three days.
    Ms. DeLauro. Well--my hope on that. I'll be very clear. And 
Jack I hope you--this as well, is that we asked for over the 
ten-year period $11.4 billion. That would include this fruits 
and vegetables snack program. It includes TEFAP, it includes 
the food stamp program, it increases the benefit, and it also 
starts to talk about the indexing and the asset levels. In 
comparison with everything else in that Farm bill, this is 
probably one of the smallest areas.
    I'm asking you to advocate, to really advocate for that 
money not to be dropped as we move through this process of a 
conference. The House put it there, the Senate has been less 
generous on nutrition, but I'm hoping that the Administration, 
as they are requiring and demanding some other efforts, will 
demand that the nutrition levels stay where they are. And I'd 
like your commitment on helping us to do that, Madame 
Secretary.
    Ms. Johner. Well, this nutrition title is an important 
program. Obviously it's the safety net for the Americans who 
are hungry. So this is an important for us. An important piece 
of legislation that . . .
    Ms. DeLauro. Aggressive advocacy is what we need at this 
time.
    Mr. Kingston. I have to say this to my good friend, Rose, 
and my good friend----
    Ms. DeLauro. We have four minutes.
    Mr. Kingston. I think she's far more in your camp than mine 
on some of these issues. So let me just say----
    Ms. DeLauro. Amen, brother. [Laughter.]
    Mr. Kingston [continuing]. With affectionate suspicion----
    Ms. Johner. Hey, I'm coming to see you after this. Thank 
you so much.
    Ms. DeLauro. Can't run off. We're going just to recess here 
for the moment.
    [Recess.]
    Ms. DeLauro. I'm waiting to have another member. We had Mr. 
Kingston--had to just step out earlier, which was what allowed 
me to move forward without there being enough members, but we 
left. Can you hear me now? Oh. Okay. Thank you, my friend. We 
make you crazy!
    We will reconvene the hearing. And I want to say a thank 
you to the Madam Secretary and to our other guests for your 
patience. As Mr. Farr just pointed out to me, the same thing is 
going on pretty much in committees all over, just trying to get 
through a number of these hearings at the same time. Let me 
yield to you, Mr. Farr.

                   FRESH FRUIT AND VEGETABLE PROGRAM

    Mr. Farr. Thank you. I apologize. Across the hall the same 
thing is happening. Only two people are there, and you can't 
have a hearing without at least three people. In 2008 we 
provided authority for the funding to expand the fresh fruit 
and vegetable growth program to all states, and many of those 
states were not already served by the authorized prior. I 
wonder if you could tell the committee what is the timeline for 
implementation of the national fresh fruit and vegetable 
program?
    Ms. Johner. Yes. We can provide that.
    [The information follows:]

    FNS is committed to implementing the expansion of the Fruit and 
Vegetable Program (FFVP) authorized under the fiscal year (FY) 2008 
Consolidated Appropriations Act (P.L. 110-161). FFVP was first 
authorized as a permanent program under the Child Nutrition and WIC 
Reauthorization Act of 2004 (P.L. 108-265) with annual funding of $9 
million for 8 States and 3 Indian Tribal Organizations. The FY 2006 
Appropriations Act (P.L. 109-97) appropriated $6 million to expand the 
program to 6 additional States. The FY 2008 Consolidated Appropriations 
Act provided $9.9 million to expand the program to all remaining 
States, and also allocated $3.4 million of recovered FFVP funds to 
allow the non-permanent States to continue their FFVP operations.
    Funds for operation of the FFVP will be made available to new 
States on July 1, 2008, and will be available through September 30, 
2009. This will allow all States to begin operation of the program in 
School Year 2008-09. Beginning in early February 2008, USDA conducted 
regional conference calls with State agencies to provide information on 
FFVP procedures, operations, and oversight responsibilities and 
provided a question and answer session during the calls.
    Each new State received a written summary of the information 
provided through the FFVP calls, including guidance materials and 
sample forms. In addition, all FFVP general information, guidance 
materials, sample forms, and resources for participants are available 
on the Child Nutrition Programs Website at: http://www.fns.usda.gov/
cnd/FFVP/FFVPdefault.htm.

    Mr. Farr. And getting it implemented in all states?
    Ms. Houston. We have already begun our implementation 
efforts to make the program nationwide. We've held a series of 
conference calls with the state agencies who have not currently 
participated, who have not previously participated in the 
program. We are also working to establish some technical 
assistance between states that have previously participated in 
the program and new states, so that we can do some information 
exchange on best practices.
    Mr. Farr. I mean what is your priority here? I mean just, 
personally, in the committee this is the thing I think that 
frustrates us all. That we read the title of being nutrition, 
and then we find that we're really essentially have a way of 
dispensing commodity products, which are not fresh fruits and 
vegetables. They're the products that distort them, or put in 
silos. Grains, beans, corn. Commodity program--also rice. For 
instance cotton. We don't eat cotton. But then we have these 
other support programs for peanuts that are in sugar.
    And so it seems to me that what we unload in our feeding 
programs is all those things, because we're involved with 
supporting those commodities. We package them; we store them; 
we own these things, and we have to get rid of them. We have 
never provided any kind of subsidy for fruits and vegetables, 
so it's just market-driven. And yet all the advice we get here 
in this committee is that we need to shift the dietary eating 
habits. I mean it's very hard for people to change their ways, 
but with all the dietary programs and concentration on the 
healthy person is changing the diet of America.
    And people are demanding these things. And fresh fruits and 
vegetables have learned how to package their goods; they should 
keep lettuce in a bag for considerable amount of time; you can 
put carrots and things like that, and they serve them as 
packages on airlines. And the fast food chains are now putting 
all in salad bars, because that's what the customers want.
    What seems to be lacking here is a voice in the Department 
of Agriculture, because you don't really deal with the politics 
of fresh fruits and vegetables. It's just outside the system. 
And yet the one area that claims to be responsible for them is 
the department that has the title nutrition on it. And I think 
that this frustration is that there's no advocacy out there, 
strong advocacy to say that we ought to equalize the 
consumption of the whole gamut of fresh fruits and vegetables 
with what we've done initially with the commodity program. 
We're going to have to do it. It's what has to be in the diets 
of other persons.
    Why can't the government be this advocate and be more of a 
promoter of getting--rather than having it mandated by Congress 
on a piecemeal basis award? I mean you got to point out as part 
of your nutrition evaluation of what's happening. And we're the 
program. We spend a lot of money determining on what is 
nutritious to eat, and then we don't buy what we tell people 
they should eat. And that's the frustration that I have with 
this committee. And you're the agency that comes here every 
year with the responsibility to get nutritional into all the 
public places.
    Ms. Houston. I think we are working extremely hard to 
increase consumption of fruits and vegetables in our programs. 
We're currently spending over $10 billion a year in our 
nutrition assistance programs on fruits and vegetables.
    Mr. Farr. Out of 52 billion, about?
    Ms. Houston. In addition, we have some aggressive farm bill 
proposals to increase fruit and vegetable 2.7 billion over 10 
years. We're proposing to increase spending in Section 32 for 
distribution of fruits and vegetables to our nutrition 
assistance programs. Additionally, we are proposing to spend an 
increase in $50 million a year on fruits and vegetables for 
distribution through the National School Lunch and Breakfast 
Programs.

                    COMMODITY ENTITLEMENT PURCHASES

    Mr. Farr. Can you explain why last year you spent $70 
million on mozzarella cheese and about $6 million on lettuce 
and tomatoes?
    Ms. Houston. There are about 180 different commodity 
entitlement foods that are available for schools, and it is the 
school that makes the decision as to what commodity entitlement 
they select to purchase from the department. So while we make a 
variety of foods available that include fruits and vegetables, 
we are working with schools to try to encourage them to select 
some of those more healthful options that are available to 
them. But I think it is important to recognize that the 
decision in terms of what commodity entitlements are selected 
are done at the school level, not at the department level.
    Mr. Farr. But there are advantages to selecting the 
commodities, because they are--we have them. Right? I mean when 
it's cheaper, and it's traditional, and the delivery service is 
there it's easier to serve pizza then it is to serve fresh 
fruits and vegetables or salad.
    Ms. Houston. We have nutrition standards for school meals 
that are required to be met at the local level, so whether--
depending on whatever the meal that's served is and the 
composition of the foods that make up that meal, combined they 
must meet those nutrition requirements. So it is incumbent upon 
schools at the local level to be selecting a wide range of 
foods, including fruits and vegetables that would make up a 
nutritional meal pattern.
    Mr. Farr. Right. But my point, and you'll see it when you 
start putting the data together, that the percentages of fresh 
fruits and vegetables compared to everything is really low and 
paltry. And so the voice is loud; the action in buying and 
implementing and distributing is very weak. Thank you, Madam 
Chairwoman.

               DIETARY GUIDELINES FOR AMERICANS/MYPYRAMID

    Ms. DeLauro. Thank you, Mr. Farr. Ms. Johner, if you don't 
mind, let me just follow that up on that, because I think--the 
budget request includes $2 million for data collection and 
analysis of the fourth nutrition and dietary assessment. Now 
the third assessment was released in November of 2007 and found 
that many schools are still not serving lunches that meet 
current USDA standards. Our USDA began working with the 
Institute of Medicine, IOM, last November on recommendations 
for updating the meal pattern based on the 2005 dietary 
guidelines.
    Let me just--if you can answer--let me lay out these three 
or four questions. Why did it take the USDA two years to begin 
working with the IOM on updating meal pattern based on the 2005 
dietary guidelines? When do you think the IOM will issue a 
recommendation for the child nutrition program? What guidance 
are you providing the schools that need time for updating meal 
patterns based on the 2005 dietary guideline? What percentages 
of schools are currently serving meals based on the 2005 
dietary guidelines? And to get to Mr. Farr's comment, what 
enforcement does FNCS have to make sure schools serve meals 
based on those 2005 dietary guidelines. If we can, why did it 
take two years? When do we think we're going to get their 
recommendation?
    Ms. Johner. Given the complexity of what we needed to 
produce--we wanted to make sure that we had it at the end. We 
had started with it, and yes, it did take two years because of, 
again, I have to go back that it was very, very--it's a balance 
that we have to find, that we want to make sure that we have 
the best product, but at the same time we want to know that 
it's going to impact the children and the school system. So 
that's when we decided that we probably needed to have IOM come 
in and give us recommendations, because they did such a great 
job with the WIC we packaged. We probably should have done that 
sooner, but, you know, we didn't. And so, but we decided that 
this--I don't think we knew how complex it was going to be when 
we first began.
    Ms. DeLauro. When will they issue their recommendation?
    Ms. Johner. Well, we're looking at 18 to 24 months from the 
time we contracted with them in November. That's the timeframe, 
so about 2010. And the guidance--I know that we're doing some 
guidance on that, and I will let Kate give you a little bit 
more detail on that.
    Ms. DeLauro. Kate, with the guidance, what guidance are you 
giving folks at the moment? What percentage of schools are 
currently serving meals based on the 2005 dietary guide?
    Ms. Houston. Recognizing that there is going to be some 
time delay until we can issue the new meal pattern requirements 
we did think it was incumbent upon the agency to provide as 
much guidance and technical assistance as we could to school 
districts so that they could do the best that they could to 
meet the new 2005 dietary guidelines. What we have initiated, 
and the first of these pieces of guidance went out I believe 
last week, is to do a series of facts sheets for school food 
service authorities at the local level on how they can 
incorporate the dietary guidelines into their existing meal 
patterns.
    Ms. DeLauro. Can we get copies of that?
    Ms. Houston. We can send those out in short order. The 
first one that I just released is on low fat milk. We plan to 
follow up with fact sheets on a host of issues, including 
incorporating more whole grains, reducing sodium, reducing fat 
levels, et cetera.
    [The information follows:]

    

    
    Ms. DeLauro. Do you have any sense of what schools are 
currently serving meals based on the 2005 guidelines?
    Ms. Houston. I don't have the information, but we can get 
you that, unless--Phillip, pass that up to me, please. 
According to our SNDA study we do have some work to do to make 
sure that all schools are meeting the existing meal pattern 
requirements.
    Ms. DeLauro. Do you have any data there that tells you what 
the percentages are at the moment? And if you can't, please get 
it us?
    Ms. Houston. Sure. Why don't we send you a comprehensive 
report of our SNDA results.
    [The information follows:]

    Based on information from the 2004-2005 school years, most schools 
(over 70 percent) served meals in the National School Lunch Program 
(NSLP) that met standards for many nutrients that contribute to healthy 
diets, including protein, iron, calcium, and vitamins A and C. NSLP 
participants consume more of 6 key nutrients at lunch than 
nonparticipants. But very few schools (6-7 percent) met all nutrition 
standards. This is primarily because most meals served contained too 
much fat, too much saturated fat, or too few calories.
    Significantly, most schools offered the opportunity to select 
balanced meals, but few students made the healthful choice. In 9 of 10 
schools, a knowledgeable and motivated student could select items for a 
low-fat lunch, but most students took such lunches in only 2 of 10 
schools.
    A summary of the School Nutrition Dietary Assessment-III is 
available on the FNS Web site at http://www.fns.usda.gov/oane/MENU/
Published/CNP/FILES/SNDAIII-SummaryofFindings.pdf.

    Ms. DeLauro. Okay. What enforcement do you have to make 
that schools are serving meals that meet guidelines?
    Ms. Houston. Certainly we work with our state agencies on 
doing random reviews.
    Ms. DeLauro. What's the enforcement mechanism?
    Ms. Houston. Well, the first thing that we do is we provide 
technical assistance. If we have persistent problems and 
schools are not working with us, obviously those meals are not 
eligible for reimbursement. But before we would go down that 
route we would----
    Ms. DeLauro. Have you ever done that?
    Ms. Houston. Yes. We have.
    Ms. DeLauro. And you were saying before you go down that 
route you will?
    Ms. Houston. We provide technical assistance working 
through our regional offices, and also in coordination with the 
state agencies, so that we can help school food service to 
improve the nutritional quality of meals. And of course there 
are the standards that they are required to meet by law.
    Ms. DeLauro. How many times have you denied reimbursement?
    Ms. Houston. A handful.
    Ms. DeLauro. One hand?
    Ms. Houston. We can get you follow up information of the 
specific circumstances.
    [The information follows:]

    FNS is committed to administering the nutrition assistance programs 
at the highest standards for program integrity. State agencies are 
responsible for evaluating compliance with National School Lunch 
Program (NSLP) meal element requirements (food items/components, menu 
items or other items, as applicable) during Coordinated Review Effort 
(CRE) administrative reviews, and, potentially, for recovering any 
improper reimbursements. NSLP regulations require State agencies to 
review every School Food Authority (SFA) at least once during a five 
year review cycle. State agencies observe meals being served on the day 
of the review to determine if meals are complete, and review menu and 
production records for a prior review month to determine if meals 
claimed for that month contained all required meal elements. State 
agencies must establish a claim for recovery of reimbursement paid for 
any incomplete meals served on the day of review or during the review 
month.
    During School Year 2005-2006 (the most recent data available) 1.2 
percent of meals observed on the day of a CRE review and 0.15 percent 
of meals served in a CRE review month were found to be incomplete. The 
total reimbursement associated with these incomplete meals was 
approximately $211,000 resulting from reviews conducted in 6,170 
schools (an average of about $34 per school). The actual amount 
recovered by States was likely less than this, as State agencies are 
allowed to waive recovery when the total claim from a CRE review for 
all non-reimbursable meals identified in an individual SFA totals less 
than $600.

    Ms. DeLauro. That would be great. Mr. Hinchey.

                 SIMPLIFIED SUMMER FOOD SERVICE PROGRAM

    Mr. Hinchey. Thank you very much, Madam Chairwoman. I 
appreciate all the attention that you bring to this issue. And 
I thank you very much for being here and giving us the 
opportunity to work with you and find out a little bit more 
about what's going on with some of these important issues.
    The Simplified Summer Food program is something that we 
were able to incorporate in the OMNIBUS appropriations bill 
last year, to provide additional funding for a program that is 
very much needed. And just to give an indication of what it is 
and how much is needed, this food program has been around since 
2001, and in those states where it has been operating 
effectively the number of people participating in it, children 
participating in this summer food program, has grown by almost 
45 percent.
    And the several states that were not included the number 
that are participating in it has been reduced, cut back by 
almost 15 percent. So you have approximately 17 million 
students who are served by free and reduced lunch during the 
school year. That's how many get it during the school year. But 
when the school year ends that number is cut back to 3 million. 
So the reason the simplified summer food program is so 
important is because you have 14 million kids who are not 
getting the breakfast, and particularly the lunches, at least, 
that they normally would get during the course of the school 
year.
    Now this is something that we need to focus our attention 
on. One of the things that we know is the amount of people who 
are living in poverty in this country is growing. It's up now 
around 27 million. And the number of young people who are 
suffering as a result of malnutrition, even the loss of life in 
this country as a result of malnutrition among young people--
and I'm starting to get so excited about it as I mention it, 
but I just can't help it. You know, it's just something that is 
very serious. So I'm wondering what we're doing, what is the 
USDA doing through regions or through the national office, 
locally or nationally, to educate about the program and to 
attract sponsors into it. How many people have been notified?
    Ms. Johner. That's an excellent question. And I know that 
the summer food service program is also an area of emphasis of 
mine. One of the things that I have done last year is we tried 
to get top level officials to go out and kickoff the summer 
food program to get more attention to, more media attention. 
But our regional folks are starting to work on this, usually in 
the December/January months, because you have to have these 
people sign these sites, ready to go, so when school's out it's 
ready to go. But I know on the simplified piece, we've issued 
notification and guidance to all states' agencies regarding the 
process. That was done in January, January 2nd of this year. 
All seven regional conference calls we've had with our seven 
region offices. We've had conference calls with the state 
agencies making sure we're explaining the process or the 
change. We want to answer any question, and again working in 
partnership and collaboration with them. And then we also want 
to share best practices, because I think some areas are a lot 
stronger than others.
    Mr. Hinchey. Okay.
    Ms. Johner. And so we've also updated our handbooks and our 
Web site. And this is a big area of concern of ours too, 
because that is a stark--it's a difference between when the 
school year is going on and the summer needs, so we know that 
those kids are not getting----
    Mr. Hinchey. Well, I appreciate that very much. And I 
appreciate your background and history this. You know, the 
Health and Human Services back in Nebraska, you had a lot of 
good work to do. So I don't doubt that you're really focused on 
this. But we're just facing a situation now where the President 
has recommended dramatic cuts in his budget on this program. So 
I'm wondering--you probably can't give us the number now, but 
I'd like to know how many people have been notified. How many 
people have been notified? How effective is this outreach 
program that you just talked about? And when we know how many 
have been notified then we'd like to know who remains to be 
notified. Who is it out there that hasn't been notified who 
needs to be paid attention to? And what can we do to do a 
better job to get this word out? This is something that I'm 
sure that our Chairwoman is going to paying attention to, as 
she always does on these critical issues. But we'd like to have 
your advice on this too, because you're directly involved in it 
on a daily basis. Has the web site--you said the web site has 
been updated?
    Ms. Johner. Yes. We've updated handbooks and the web site.
    Mr. Hinchey. And has that update been done in way to 
reflect the change in the program, notify people about the 
change in the program? And to what extent has that been done, 
and how has it been done to draw attention to the change in the 
program?
    Ms. Johner. Yes. It has been updated, and we can add that 
to the report that we'll be sending to you on the other 
information.
    Mr. Hinchey. Do you know?
    Mr. Salazar. We take a number of best practices, 
Congressman Hinchey, to ensure that both potential participants 
are aware of summer sites, and well as potential sponsors. 
Obviously we go through a process of recruiting both sponsors 
and sites early in the year before summer starts so that those 
sites can be established and identified, so that we can promote 
them. We encourage the states to continue the best practice of 
notifying parents and children in school before school is out 
where those summer sites will be through the summer months, 
because that's our best opportunity to capture that audience, 
while they are still in school, before they leave.
    One of the remaining challenges of feeding children in the 
summer is that they are not captured everyday in one site as 
they are during the school year, and so our ability to reach 
them becomes a challenge in terms of congregate feeding. We 
continue to see a steady increase in the number of meals served 
and children served every summer because of our continued 
outreach efforts.
    Mr. Hinchey. Okay. All right. So I'd just thank you very 
much, and I'd like to just follow up with this. If you could 
provide us with that information--I'd just like to know how 
this program is working. It's obviously because of the negative 
results that we're receiving this is something that's very 
important. Whatever you can tell us about it will be very 
helpful. Thank you very much. Thank you, Madame Chairwoman.
    [The information from USDA follows:]

    FNS is committed to expanding the Simplified Summer provisions of 
the Summer Food Service Program (SFSP) authorized through the 2008 
Consolidated Appropriations Act (PL 110-161). The Act made the 
Simplified Summer provisions nationwide effective January 1, 2008, by 
adding the 24 States not previously authorized. The Simplified Summer 
procedures enable SFSP sponsors to receive reimbursement based on the 
number of meals served times the maximum combined administrative and 
operations reimbursement rate. Previously, sponsors were required to 
submit cost documentation used by States to determine reimbursement. 
Additionally, reimbursements can now be used to pay for any allowable 
operational or administrative expense, whereas previously the 
reimbursements could not be intermingled.
    FNS has updated the SFSP Web site and online materials, and has 
asked State agencies to do the same. We have also encouraged States to 
incorporate the new program flexibility into outreach efforts. Both 
community sponsors and school systems see the development as a 
significant reduction to administrative burden, by allowing more time 
to be spent on support and outreach activities for families and 
children.
    The Child Nutrition and WIC Reauthorization Act of 2004 required 
FNS to evaluate the Simplified Summer provisions. The evaluation, 
published in April 2007, found an increase in sponsors and meals served 
during 2001-2006 for the 26 States and the Commonwealth of Puerto Rico 
that were then authorized to operate under Simplified Summer 
procedures. States not authorized to operate under the Simplified 
Summer provisions showed a decline.
    In addition to the Simplified Summer provisions, the FNS has been 
promoting the Seamless Summer option, which allows schools to provide 
SFSP-like benefits through the National School Lunch Program and School 
Breakfast Program. Although the reimbursement for a lunch is about $.50 
less than under the SFSP, some schools find the convenience of 
operating under the normal school program procedures meets schools' 
specific summer needs and is worth the rate difference. While Seamless 
Summer sponsors and meals are not reported as part of the SFSP, the 
schools make an important contribution to our goal of increasing meal 
service to low-income children during summer months.
    FNS believes that taken together, the two different approaches 
provide the flexibility schools and communities need to provide 
nutrition benefits to children in a wide variety of situations during 
the summer months.

    Ms. DeLauro. Mr. Farr.

                    COMMODITY ENTITLEMENT PURCHASES

    Mr. Farr. Thank you. I wanted to follow up again on this. 
The way that food is purchased--it seems to me what you have is 
a two-tiered system here. You have a system that says to 
schools, ``You have to provide a healthy meal. And you have to 
met those guidelines.'' But when it comes to what kinds of 
foods you help them acquire, that the government buys and 
distributes, you leave out the fresh fruits and vegetables.
    Ms. Johner. No, I'll just briefly say something, then I 
will let Kate answer, give you more details on that. I know 
that 20 percent of the purchase, as you know, commodities come 
from USDA, 80 percent of the items are purchased by the local 
school districts. And I can tell you though, I just wanted to 
make this comment: I visited many schools across the country as 
I traveled, because I think the best way to get a pulse of how 
things work is actually going to the field and talking to 
people and seeing for yourself.
    I have seen so many more salad bars in the schools, the 
cafeterias; that has been very impressive. In fact, Arizona 
just got a gold score award. And there was this beautiful salad 
bar that had all this great, nice lettuce. And this was all 
free, they didn't even charge it through the school program. 
But there is such a--there is much more of a push for schools 
to be served the fresh fruits and vegetables in their diets.
    Mr. Farr. Sure, but they are having to buy that locally, 
whereas you supplement. And here it is, your total commodity 
entitlement last year is $1.1 billion. And those are things 
like, that's just cheese, different kinds of cheese and corn, 
and corn mill flower. Soy bean oil, vegetable oil, peanut 
butter, rice, shortening, spaghetti--you know, I am not sure 
that those are all in what we are talking about is high 
nutritional values.
    Ms. Johner. You know, commodities are, they are, they have 
been improved, lower in fat, lower in sugar. But I am going to 
let Kate give you a little more information on the commodities 
aspect of that.
    Mr. Farr. But do you see my point, because you have got an 
entitlement program for commodities and that's what it's 
called, it's called the Commodity Entitlement Program. And you 
go out and the government, we buy that and then we distribute 
it to school. But the makeup of the difference, which is all 
those effort that we have talked about the last year is getting 
other types of food in the menu. And we don't--you just say you 
have to do that with the money that you have. You are not 
entitled to it, so you don't get these entitlements.
    And that is where the unequal playing field is. We are 
distributing things that are causing the obesity, and we are 
making people buy the things that prevent obesity. And that is 
just a proportion unfair and unrealistic, and not defendable in 
your nutritional program.
    Ms. Houston. Congressman Farr, we have about 180 foods 
through our Commodity Entitlement Program that are available as 
a shopping list to schools. It is a demand-driven system. This 
list includes fruits and vegetables.
    Mr. Farr. Show me on that list, I have it right here.
    Ms. Houston. Sure, right at the top of the list: apple 
slices, applesauce, apricots. Going down, blueberries, carrots, 
cherries, corn, peaches----
    Mr. Farr. Yeah, apples, the $871,000.
    Ms. Houston [continuing]. Pears, potatoes, raisins. And 
this is just on the first page.
    Mr. Farr. Where is the vegetables and where is the lettuce?
    Ms. Houston. We have, you know we have a variety of 
primarily shelf stable through our commodity entitlement list. 
And then of course, the additional fresh----
    Mr. Farr. Shelf-stable? The other things you are saying are 
not shelf-stable?
    Ms. Houston. And then we have fresh fruits and vegetables 
that are available also as commodity entitlement through our 
DOD program.
    Mr. Farr. But the point is that your list, I have it, the 
thin, green page you are looking at, both pages, because I have 
the other one too. And it also shows the distribution by state. 
Is that I can't find any of the things that I have been told 
are necessary to be healthy to eat, particularly salads. There 
is not any salads on here.
    Ms. Houston. We continue to work with schools to put on our 
commodity list the items for which they are requesting. And I 
think it is again, important to emphasize that only about 15 to 
20 percent of the foods that are part of the meals come from 
the USDA commodity entitlement list, the rest we provide cash-
free ``reimbursements''. And schools at the local level are 
purchasing the other foods for meals. And we have statistics 
that show about 21 percent of the foods that are purchased in 
total for the school lunch program are fruits and vegetables.
    Mr. Farr. I mean, let's finish with this list. The two 
highest items on here, the highest amount you spend was beef 
bulk-coarse, $123 million. The second highest is mozzarella 
cheese, $90 million.
    Ms. Houston. Again, these are school-selected.
    Mr. Farr. Schools want cheese, not----
    Ms. Houston. These are items that are--it's a demand-driven 
system. We would be happy to work with you. We have an 
initiative underway to continually improve the nutritional 
quality of the foods available through the commodity program. 
And we would be happy to share with you our technical 
assistance efforts. But I think you were correct, that we need 
to get schools to be selecting the most nutritious items 
available, and----
    Mr. Farr. With all due respect, California has required, 
and I think you ought to award states too that required, but 
each school district has to come up with a nutritional plan. 
This is new. Parents are starting to ask, you know they used to 
want to know what is going to be teaching in the classroom, now 
they want to know what you are feeding them in the lunchroom.
    And what happens, you go to these school administrators and 
they say yes, but we can't get those items because those aren't 
part of the program. They are not given to, they are not on 
this list.
    Ms. Houston. Well again, we would be happy to work with you 
to make sure that the foods----
    Mr. Farr. Work with us?
    Ms. Houston [continuing]. That schools want are on the 
commodity list. We also do have a nationwide requirement for a 
wellness policy, so every school district in the country, those 
in California and around the country----
    Mr. Farr. You put a mandate on them but you don't give them 
the supplies to fulfill that mandate. That is not a way to 
operate a nutritional program.

                        TEXAS FOOD STAMP PROGRAM

    Ms. DeLauro. Let me--we are going to have to vote and I 
promise you, you will not have to stay, we will--let me just 
see if I can wrap up with a couple of questions here. And then 
I want to do two things. I have some questions for immediate 
answer and then a question--but let me just get to the program, 
and we know the background. We, I want to know what has 
happened,--stamps over there and what is--to get the problem 
corrected.
    In terms of the problem back in March 2006, the system had 
a backlog of 6,000 unprocessed applications. The problem then 
is the state implemented the new system and there were not 
enough people trained in handling the program under the 
policy--determine eligibility for 2007, experiencing backlogs 
of applications and the explanation is for the workload issue. 
An Austin mother of two said she has been waiting for food 
stamps after applying to renew in June. I want an answer to 
Texas, but I also have a question with regard to Indiana.
    Ms. Johner. Chairwoman, we have been working closely with 
Texas, and I know yes, there has been some concern with the 
timeliness piece. And so I know our administrator was just out 
there I think a few weeks ago. And we are going to be doing 
even, we are going to aggressively increase our oversight in 
Texas, because we have again, identified some problems. So we 
have been doing regular conference calls with them, review of 
state reports, the multiple site reviews, which is going to 
increase.
    And then I myself will be going out and meeting with the 
state commissioner and their management team. We did get a 
corrective action plan from them, because we did send them a 
letter and so we did get one last week. So again, I agree with 
you, Texas is----
    Ms. DeLauro. Just in general, because I want to get on to 
Indiana.
    Ms. Johner. Okay.
    Ms. DeLauro. When is it apparent that this is failed, I 
mean, what is the tipping point? We continue with corrective 
action, you know. I mean, in 2007 they canceled--I am just 
saying what is it that you think that we can't go on any 
longer, this is a failed process here? Do you have a construct?
    Ms. Johner. Do we have something in place to be able to 
measure----
    Ms. DeLauro. No. I mean to say when you are the agency you 
are looking at this, you are seeing what's happened, you are 
seeing the progression, you see where we are now. When do you 
say to yourself this is a failure, it can't work this way, 
let's go back to what we were doing?
    Ms. Johner. And they have, they have moved the 
responsibility back to the state workers. But they are 
identifying some of that lapse in Texas.
    Ms. DeLauro. How much more time are we giving Texas to make 
this work or not work?
    Ms. Johner. Well, I think that is something I will continue 
to monitor. And at this point--I understand your question in 
regard that----
    Ms. DeLauro. This is like when do we say enough--a never-
ending tale. Well, I mean we have got to have sense with some 
banality here that this is a go, and it hasn't succeeded. Lots 
of good ideas don't succeed. But did they tell us all the time 
end programs that don't work. And Congress has you know has to 
do that as well. Sometimes we have even been less successful 
with that. But I am hoping the philosophy here is to end this 
if it doesn't work.
    Ms. Johner. If this is acceptable to you, I know I will be 
in Texas the first week of April. When I go down there, can I 
come back with----
    Ms. DeLauro. Yes, absolutely.
    Ms. Johner. I mean, we can get together or something.

                       INDIANA FOOD STAMP PROGRAM

    Ms. DeLauro. But let's get an update, let's see what we 
think it can go. Indiana, I know you are monitoring it, et 
cetera. But look, yesterday, Indiana, a local news reported a 
state house conference where leaders of three senior groups 
presented their concerns. ``The situation was dire for senior 
citizens, people with disabilities, other low-income clients 
both had difficulty phoning in to centralized call center, 
navigating web pages that were put in place to expedite the 
application.''
    ``People being denied benefits. Wheelchair-bound mother of 
two children lost food stamps. Surveys of food pantries, 
nursing homes, hospitals, minister's groups, United Way and 
other social service providers found demand for those private 
services shot up because people have been bumped off the food 
stamp rolls.'' ``. . . services, a chief who was in charge of 
the . . . said that the roll-out is due to expand from its 
original 12 counties to 27 or more on March 24, in about a 
week's time.''
    Are we going to an expanded rollout before we have 
corrective action and are we going the Texas route again? Have 
you seen in your oversight the issues that the senior citizen 
folks are talking about?
    Ms. Johner. No, I have not and I was just out there last 
week to make a visit. And I can tell that it's changed from the 
time I was out there last fall and then again, last week. And 
what I saw when I was there was a streamlined function of the 
workers. I talked to some of the family members that were in 
the waiting room. They liked the new setup. I didn't see--I 
guess--I walked through the process myself as coming in as 
someone who needed food stamps.
    We would take anywhere from six to eight days for them to 
process my applications. We have two-tier systems. Our first 
tier is that the call centers to be able to answer questions 
that are more generic. And then when they got more specific on 
the policy and programs, then you have the second tier. We were 
going to ask them----
    Ms. DeLauro. Did these folks just congregate and make these 
claims? What is the investigative progress on these senior 
citizen groups? Are you going to--are the people who are being, 
do we know how many people are being denied benefits? And do we 
think unless these issues are fixed, do we answer these or 
investigate these efforts that we ought to move to a rollout on 
the 24?
    Ms. Johner. Definitely, Madam Chairwoman, we will be 
looking into that. I have not read this article that you are 
referencing to. The thing is that they have delayed already 
once because we weren't comfortable with them moving forward on 
this.
    Ms. DeLauro. But do I have your word, and we would be 
talking in the next several days that these issues that have 
been laid out: not enough case workers to help Medicaid clients 
and applicants, new eligibility system dysfunctional, wasteful, 
out of sync. This is a person who manages the domestic violence 
shelter for Alternatives, Inc., that she had two clients, one a 
teenager in high school, another--who had lost food stamps, 
other benefits.
    I mean, the list goes on. What I am just saying is that you 
are monitoring it, it seems to me that these questions have got 
to be answered and addressed before we move to any roll-out.
    Ms. Johner. You have my word that I will look into this.
    [The information follows:]

    

    
                          NUTRITION EDUCATION

    Ms. DeLauro. Okay, this is what I going to do unless there 
is--there are three or four areas that I have that I really 
would like immediate answers on. One is this report that is a 
requirement that was laid out in a conference report directing 
the department to provide monthly reports on program 
performance and estimated funding requirements. I have a great 
deal of respect for you Miss Secretary, but I was disappointed 
with the letter that came in.
    And I actually do have a list, and I won't go through it, 
and we will get it to you, of what we believe these letters 
ought to include. And so that we will get to you. In addition 
to that, the--programs that exist within schools and what our 
opportunities are to look at inspection requirements, what 
enforcement authority, those kinds of issues. But we will get 
that to you right away. There is also nutrition education. 
There is $788 million being spent on nutrition education 
promotion.
    Now, we had research and education, and economics people in 
here the other day. They answered that there was no correlation 
between the--and obesity. But on nutrition education, when we 
asked them about this, so I don't know what is happening with 
$788 million----
    Ms. Johner. We can give that to you.
    [The information follows:]

    Of the $788 million in nutrition-related expenditures reflected in 
the President's 2009 budget request for USDA's Food, Nutrition, and 
Consumer Services, $777 million are used for nutrition education 
through the nutrition assistance programs.
     Over 95 percent of this funding is provided as payments to 
State agencies, including a projected $305 million to Food Stamp 
Program agencies, and about $445 million to WIC agencies.
     Another $19 million is used to support nutrition and food 
safety education and technical assistance to schools through USDA's 
Team Nutrition and the National Food Service Management Institute.
     $1 million has been requested to support nutrition 
education in the Food Distribution Program on Indian Reservations.
     The remaining $7 million supports FNS activity to develop 
nutrition education interventions and technical assistance materials.
    Of the remaining $11 million in the request, about $7 million is 
designated to support the Center for Nutrition Policy and Promotion in 
developing nutrition guidance for all consumers, including those served 
by Federal nutrition assistance programs. The other $4 million is to 
support 2 nutrition-related studies--the next in our series of 
assessments of the nutrient content of school meals, and an assessment 
of promising practices in food stamp nutrition education.

    Ms. DeLauro [continuing]. And that information. But there 
may be one or two more in terms of immediate answers. The rest 
we will ask for the record. We have I think five minutes, 
Maurice, go ahead.

                     NUTRITION ASSISTANCE PROGRAMS

    Mr. Hinchey. Very briefly. One of the problems that we are 
facing nationally is the fact that we are in an economic 
recession. And one of the most uncomforting aspects of this 
economic recession that we are experiencing is the dramatic 
increase in the cost of living for middle- and lower-middle 
income people and people below that.
    It is a very, very significant issue. And one of the most 
dramatic aspects is the increase in cost of living of course, 
is the increase in energy and the increase of the cost of food. 
Cost of food has risen up dramatically because of the increase 
in the price of energy. And that is causing a lot of problems 
for a lot of low-income people.
    And I am just wondering how your activities are impeded. 
And I know that you are focused on this in the right way based 
upon your experience and understanding. But the things that you 
are dealing with are making it difficult for you. For example, 
for the third year in a row, the President has proposed 
eliminating funding for the Commodity Supplemental Food 
Program. How has that attitude from the Administration impeded 
your ability to deal with issues, because this is an issue that 
on an average month provides nutrition to something in the 
neighborhood of excess of 473,000 low-income mothers and 
children under the age of six and senior citizens. The largest 
part of that number is senior citizens.
    And we also have the fact that the President now for the 
last four years in a row has proposed changes that would 
eliminate food stamps for more than 300,000 people. Increase in 
the availability of food stamps is one of the things that some 
of us tried to get in this so-called stimulus package, which 
was passed here and signed. The President said no way, he 
wasn't going to sign the stimulus package that provided more 
nutrition to low-income people.
    So I am just wondering about your ability to deal with this 
issue? The issue is dramatic increase in the cost of living, 
particularly the cost of food for more and more are low-income 
people across the country, mothers and their young children, 
senior citizens, others who are suffering from these----
    Ms. Johner. Thank you for that question. One of the things 
that I look at with competing priorities and again, limited 
resources as we all have, is I try to look at what our largest 
programs are. And they are the food stamp program, the WIC 
program, the school breakfast and lunch program. And so I have 
to look at is it's a very challenging job, because the CSFP 
program is a good program, but it is also one of my smaller 
programs.
    And so what I need to do is I need to look at how do I 
invest in my bigger programs that could maybe impact more 
people. And so, and the other side of that is I also look at my 
local community because I come from the grassroots. But I know 
the power and influence of your local leadership, of your state 
leadership. I am always looking at our community-based or 
faith-based, and so Angel Food Ministry has been one area. And 
I know I talked about that earlier, but this is a 501(c)3, 
it's--they deliver food packages.
    And in 35 states, they served 550,000 people a month and we 
would like to help, we want to partner with them to help them 
expand. And they serve a box of groceries that would last an 
elderly person for up to 30 days, and a family of four for up 
to a week. And they really focus on the protein piece. So it is 
partnership and collaborations like that we need to continue to 
work with.
    Ms. DeLauro. Thank you, secretary. We probably have a 
minute left in order for us to go to vote. We appreciate your 
time and your patience with the delays.
    Ms. Johner. Thank you.
    Ms. DeLauro. And I look forward to the response of the 
questions and I look forward to sitting down with you again. 
Thank you all very much.
    Ms. Johner. Thank you very much.
    Ms. DeLauro. The hearing is adjourned. 

    

    
                                            Tuesday, April 1, 2008.

                           RURAL DEVELOPMENT

                               WITNESSES

THOMAS C. DORR, UNDER SECRETARY, USDA RURAL DEVELOPMENT
BEN ANDERSON, ADMINISTRATOR, BUSINESS AND COOPERATIVE PROGRAMS
RUSSELL T. DAVIS, ADMINISTRATOR, RURAL HOUSING SERVICE
JAMES M. ANDREW, ADMINISTRATOR, RURAL UTILITIES SERVICE
W. SCOTT STEELE, BUDGET OFFICE, DEPARTMENT OF AGRICULTURE
    Ms. DeLauro. Good morning. The hearing will come to order.
    And I want to welcome you, Mr. Under Secretary and the rest 
of your team here, Mr. Anderson, administrator for rural 
business--cooperative service; Mr. Davis, administrator for 
rural housing services; Mr. Andrew, administrator for rural 
utilities service, and our perennial and favorite here, W. 
Scott Steele, budget officer.
    Thank you all very, very much, and Mr. Secretary, I'm 
really delighted that I had the opportunity to meet with you 
yesterday before today's hearing to discuss this year's Rural 
Development budget request.
    Thank you for coming today with the team to discuss the 
budget with the subcommittee.
    Federal efforts to strengthen rural America and to preserve 
the strength that it provides our entire nation are really 
critical to facilitate growth, and soften the impact of 
population loss.
    Indeed, Rural Development is one of the most important 
areas in USDA's broad portfolio. It touches almost every aspect 
of people's lives in rural America, and I believe you share 
this view, that we have an obligation to get it right.
    To be sure, not all rural areas are alike culturally or 
economically, and each has its own unique challenges. What is 
clear, however, is that the challenges are growing.
    Under Secretary Dorr, your mission could not be more 
important. Our goals are straightforward. We seek not only to 
sustain our rural communities, but also to create new 
possibilities for growth and development in their small town 
economies.
    I look forward to your comments in today's discussion as we 
consider how the budget should strive to meet those goals.
    As the current economic downturn continues to weigh very 
heavily on families in every region of our nation, I believe we 
have a particular responsibility to ensure our rural 
communities have the tools to survive. I believe government has 
a duty to help provide the same quality of life opportunities 
to rural America that are shared by other parts of this 
country.
    I have some concerns about the USDA's ability to meet that 
task. I outlined some of those concerns I have about the 
administration's rural development budget with you already. But 
let me just address a few of them in a little greater depth.
    Overall Rural Development funding is about $805 million 
below the amount provided in 2008, excluding the increase in 
the rental assistance account.
    In particular, the budget request provides $24 million for 
the rural community facilities program. That's a $45 million or 
65 percent cut below the amount provided in 2008.
    The budget request provides $30 million for the Rural 
Business program, $57 million, or 65 percent below the amount 
provided in 2008, and $269 million for the Rural Water and 
Waste Disposal program, or $290 million, 52 percent below 2008.
    It eliminates funding for Community Facility Grants and the 
Rural Business and Enterprise Opportunity programs. It does the 
same when it comes to housing, eliminating funding for the 
direct single family housing loan program, zeroing out the 
Section 515, multi-family housing direct loan program.
    These programs offer interest assistance and focus 
primarily on the very low and low-income borrower. At the same 
time, the budget again proposes to increase fees for the 
guaranteed program from 2 to 3 percent, making it even more 
expensive to the borrower, while reducing the budget for its 
program costs.
    Ultimately, between the fee proposal and eliminating the 
direct housing program, the budget request provides $21 
million, or $207 million, 91 percent below the amount provided 
in 2008.
    These cuts to rural housing are particularly troubling in 
the context of today's sub-prime mortgage crisis. Programs like 
these are supposed to offer a safe alternative to sub-prime 
mortgages for creditworthy low and moderate-income rural home 
buyers. Now is not the time to undermine.
    In addition to serious questions about the budget, I also 
believe we must take a hard look at the announcement last week 
that Open Range has been approved to receive a $267 million 
loan to provide broadband service to 518 rural communities in 
17 states.
    This loan represents 90 percent of the funds provided in 
fiscal 2008 for the broadband program, and I think we should 
discuss the Rural Development office's ability to manage a 
project of this size.
    There are no easy solutions to the big challenges facing 
rural America. Indeed, building a healthy rural economy 
requires more than simple supports for farm products.
    It means investing in entrepreneurship in rural areas, 
early childhood centers, rehabilitation, medical centers, 
providing infrastructure for electricity, clean water, water 
treatment, and yes, Internet, broadband that connects rural 
communities to the global community and the global economy.
    It means harnessing innovation, pursuing energy 
independence, making a bold new commitment to renewable energy. 
And the list goes on.
    But if we are going to make rural America as productive and 
sustainable in the 21st century as it was in the last, we are 
going to have to step up and use federal policy as a valuable 
tool to put middle and working class rural families center 
stage.
    Today's hearing is about examining this budget through that 
lens. Does it soften the impact of population loss and take 
deliberate steps to foster new growth? Does it reflect our 
priorities as a nation? And does it meet our obligation to 
rural America?
    I thank you again, Under Secretary Dorr, for being here, 
and I now would like to recognize our ranking member, Mr. 
Kingston.
    Mr. Kingston. Thank you, Madam Chair.
    I don't have any real opening statement, but I do want to 
underscore that on the farm bill, there's a proposed increase 
on mandatory rural health care facilities, and frankly, I don't 
see how we're ever going to balance the budget with all the new 
mandatory spending that the president has proposed on the farm 
bill.
    The farm bill, as you know, is 63 percent food and 
nutrition, and there's a big expansion of mandatory eligibility 
under that, and then you have this mandatory spending.
    And I don't quite follow how the administration can spend 
so much time on the commodity program of the farm bill, which I 
think is 17 percent, and act like payment limitation is the 
biggest problem that's out there, when, with a sleight of hand, 
the remaining balance of the farm bill is getting dedicated 
more and more, year after year, to mandatory spending, and, as 
you know, that's just one bill of lots and lots of bills that 
we have to fund.
    And I think if we're going to have more flexibility, we 
can't lock ourselves into all this mandatory spending.
    And I just wanted to make that point.
    Ms. DeLauro. Thank you, Mr. Kingston.
    And Under Secretary Dorr, we await your testimony, and 
obviously, everyone's testimony will be part of the record, the 
official record, so I'll ask you to commence and to summarize 
your remarks in any way that you so choose.
    Thank you.

                           Opening Statement

    Mr. Dorr. Thank you, Madam Chairwoman and Ranking Member 
Kingston, members of the subcommittee. I do appreciate the 
opportunity to again appear before you to discuss USDA Rural 
Development's budget for fiscal year 2009.
    Before beginning, I would like to once again pay tribute to 
the 6,100 men and women across the country who together are 
USDA Rural Development.
    We are an agency in transition. That is both a challenge, 
but I believe an opportunity. And I am proud to report that our 
associates have risen to both, all across the country.
    We are now implementing new business plans in every state. 
We have already reached our new FTE, full-time equivalent 
target of 6,100. We are completing our office realignments, 
which will bring our field structure to 448 offices. These are 
reductions of 13 percent and 44 percent, respectively, since 
2001.
    At the same time, we are investing in training and 
technology to support a leaner staff in a restructured 
technologically intensive environment. We are reaching out to 
new partners and seeking to engage untraditional lenders. We 
are simplifying and streamlining program delivery to accelerate 
this process.
    We continue to shift our emphasis from grants to loans and 
loan guarantees in order to leverage our resources and serve 
more people, and at the same time, we are developing new tools, 
such as SEBAS, the Socio-Economic Benefits Assessment System, 
which enables us to improve program evaluation as well as help 
us do a better job of targeting our investments in the future.
    These things ultimately will make us a leaner, more 
efficient, more responsive partner for rural businesses, rural 
families, and rural communities.
    So as I come before you for the last time to present the 
budget on behalf of the Bush administration, I would like to 
say simply that I am immensely proud of the way our employees 
have met these challenges.
    Change is hard. It takes good people to get it done. We 
have good people, and they are in fact getting it done.
    The President's fiscal year 2009 budget proposes $2.1 
billion in budget authority to support a program level of $14.9 
billion for USDA Rural Development.
    As was the case last year, this budget request does not 
include significant additional funding contained in the 
President's separate Farm Bill proposal.
    Mandatory funding for rural health care facilities, 
renewable energy loans and grants, rural water and waste water 
disposal systems, broadband access loans, distance learning, 
and telemedicine grants are all in the Farm Bill, and 
obviously, those we'll not be discussing today.
    The fiscal year 2009 budget is not, though, a status quo 
proposal. It accommodates the institutional and programmatic 
transformation which I've just noted. It recognizes the 
opportunities inherent in distributed computing and broadband, 
and renewable energy, and in an ever more diversified rural 
economy.
    It recognizes the need to engage rural America's wealth in 
a transparent, responsible, and fiduciarily sound manner, to 
not just create wealth, but to actually capture and leverage it 
for sustainable growth in rural communities.
    And it recognizes that we cannot remain a static provider 
of traditional programs via traditional methods and hope to 
remain relevant in this new, dynamic, and ultimately 
increasingly competitive environment.
    The budget protects the most vulnerable rural residents by 
fully funding multi-family housing rental assistance, while 
allocating $100 million for a new pilot program of rental 
assistance vouchers, and at the same time, it shifts funding 
for both single and multi-family housing construction to 
guarantee platforms to serve more people more efficiently.
    The budget funds critical infrastructure priorities, while 
focusing electric program lending on transmission, 
distribution, and system improvements along with environmental 
improvements rather than solely on baseload generation, and it 
seeks a $49 million budget authority to support $738 million in 
direct and guaranteed loans and grants for Rural Business and 
Cooperative programs.
    Without question, the budget does make hard choices. It 
recognizes and accepts the challenges of this budget cycle and 
focuses resources on new challenges and opportunities.
    I appreciate the support of the subcommittee for rural 
America. We look forward to working with you to carry on this 
important work. And I thank you for the opportunity to work 
with you.
    [The information follows:]

    

    
    Ms. DeLauro. Thank you very, very much, Mr. Under 
Secretary.
    Let me just begin the questioning with something that I 
said in my opening remarks.
    And the budget request proposes--it's also something you 
said in your testimony, that this is, it's a budget that is 
very, very similar to what we saw last year, so maybe I would 
characterize it as ``deja vu all over again'' plus more, and in 
this context.

                        ELIMINATION OF PROGRAMS

    The budget request proposes to eliminate the following 
programs: community facility grants, rural business opportunity 
grants, rural business enterprise grants, Section 502 direct 
single family housing loans, Section 515 direct multi-family 
housing loans.
    New to be eliminated are the multi-family housing 
revitalization loans, mutual self-help housing grants, farm 
labor housing loans, farm labor housing grants, rural economic 
development loans, rural economic development grants, value 
added agricultural product marketing development grants--that's 
new, rural empowerment zones and enterprise communities--that 
was there last year, new renewable energy loans, renewable 
energy grants--same as last year, broadband telecommunication 
grants.
    Also, the budget request proposes to significantly cut the 
following programs: Section 504 direct housing repair loans, 
rural electric loans, distance learning and telemedicine 
grants, and water and waste grants.
    This year, you're proposing to rescind prior new year funds 
for multi-family housing revitalization and broadband loans.
    The list grows every year on the direct loan and grant 
programs you are proposing to eliminate or significantly cut in 
your evolution from grants and direct loans to loan guarantees.
    It will take almost $670 million to restore these programs 
to the 2008 levels.
    Now, last year, most of the increase that we had in the 
bipartisan bill that this subcommittee produced put back much 
of this money.
    And let me just ask you about the program elimination.
    Aren't the eliminations, cuts, are they more about the fact 
that you were not given the dollars from the OMB sufficient to 
fund these programs rather than, in my view, an indefensible 
policy decision to shift from grants to loans; and how will the 
farm bill offset all of these loan and grant program 
eliminations; and what are your contingency plans if--I don't 
know any piece of legislation in this institution that gets all 
that it asks for, what you will not get from the farm bill, if 
we produce a farm bill at all.
    Mr. Secretary.
    Mr. Dorr. Well, I appreciate your concerns, and I realize 
that this is a budget that is in transition.
    Number one, resources are tight. When you look at the 
aggregate amount of grants that are directed in this budget, as 
opposed to a year ago, we're at nearly the same amount of 
money.
    We have worked very hard to make sure that, in the multi-
family housing portfolio, that we aggressively work to protect 
those who need the greatest protection, and that is the tenants 
of our multi-family portfolio.
    As a result, we've put several hundred million dollars of 
assistance back into rental assistance, as well as added 
another $100 million to the voucher program.
    Obviously, we had to take it from somewhere. We had to look 
at what was working and what wasn't.
    We, I believe, in our housing efforts, have done a 
marvelous job, our staff has done a marvelous job of fixing a 
multi-family portfolio that had a lot of challenges, and so 
that when we're done, ultimately, we will have a portfolio that 
has been restructured, that will have nearly maintained upwards 
of 90 percent of all the available units, and that will have 
maintained housing for those who need it the most in rural 
America.
    Probably 55 to 60 percent of our tenants are single, 
elderly, female and single parents.
    And in so doing, if we continue on this path that we are 
on, I believe we will get it done.
    We will have also restructured the portfolio so that we 
will have rehabilitated the majority of these properties so 
they have another 20-year life span at a cost of something in 
the neighborhood of $26,000 to $30,000 a unit, as opposed to 
rebuilding them at a cost of in excess of $100,000 to $125,000. 
That obviously required making changes.
    In the process of doing that, we looked at our other 
programs, and you alluded to the value added producer grant 
program, which I believe we put into the Farm Bill proposal as 
a discretionary funding item, not a mandatory funding item. We 
did not attach funding to it.
    We also have substantive grants added in the Farm Bill 
proposal. We obviously don't know where the Farm Bill is going 
to be at at this point.
    But in that context, we have also recognized that once we 
begin to effectively engage the equity that is in rural 
America, and I believe I've stated this in my testimony 
submitted earlier, over the last five years, farmer and 
rancher-enforced private properties have increased an aggregate 
of about $1 trillion in value. There is an inordinate amount of 
investment capital in rural America.
    And we think that one of the most effective things that we 
can do is engage the owners, the private property owners, the 
community bankers, the farm credit systems, to essentially put 
skin in the game, and if we can provide loan guarantees, 
whether it is in housing, whether it's in multi-family housing, 
whether it is in energy or other developmental projects, the 
likelihood of success, extraordinary success, is much greater.
    So yes, we've made some decisions. We've made some choices.
    We may have some philosophical differences on the choices 
that we made. But we do believe that, long-term, this is a good 
direction and an appropriate direction to go.
    Ms. DeLauro. Thank you.
    My time is up.
    Mr. Kingston.

                             RURAL ECONOMY

    Mr. Kingston. Thank you, Madam Chair.
    Mr. Dorr, in terms of the rural situation in America right 
now, the rural economic situation, commodities are going up, 
and I guess let me ask you this, in terms--we all know corn has 
gone up.
    Haven't other commodities, as well, as evidenced by the 
fact that I think you're not paying that many counter-cyclical 
payments?
    Mr. Dorr. I believe in general commodities have gone up, 
yes.
    Mr. Kingston. And in general, land is going up?
    Mr. Dorr. That's correct.
    Mr. Kingston. How does that--is that benefitting the 
farmers?
    Do you have statistical data to show that the economic 
picture in rural America is perhaps better than it's been in 10 
years or whatever?
    Mr. Dorr. Well, probably the two easiest numbers, our net 
farm income was a record last year, is projected to be another 
record this year. Net farm exports were a record.
    I believe that net farm equity, as I just alluded to, is an 
all-time high, and the debt to equity ratios are I believe 8 or 
9 percent debt to the equity.
    So I believe those, as two basic figures, would indicate 
the rural economy, from an agricultural standpoint, is in 
pretty good shape.
    Mr. Kingston. Can you get me those specifics?
    Mr. Dorr. Certainly.
    We can--we will work with our Office of Chief Economist, 
who pulled together the latest numbers.
    Mr. Kingston. And since those are statistics, it's a fact, 
then, that the rural economy is strong?
    Mr. Dorr. Well, I mean, there are obviously always 
particular situations where you might challenge that, but 
generally speaking, yes, I think the rural economy is very 
strong.
    Mr. Kingston. The reason why I'm asking that is, the 
Federal Government is always quick to find something that's 
broken and say, ``We need a new program, we need new money,'' 
and I say the Federal Government, meaning each branch, the 
executive and the legislative branch.
    Do you agree with that?
    Mr. Dorr. Well, I would agree that appears to be the 
tendency.
    I don't know that I agree with that approach.
    Mr. Kingston. Well, that being the case, though, is there 
something if the economy is strong that you can back off from?
    And I know you're backing off on the labor program, but are 
there things that maybe we don't need to be doing in this 
economy that we've done in other economies?
    Mr. Dorr. I guess I'm not--I mean, are you talking about 
agriculturally, rural, in the general sense?
    Mr. Kingston. No, on rural development.
    Mr. Dorr. In rural development?
    I mean, I think we have--if you look at our numbers, when 
we started, when this Administration came to town in 2001, 
Rural Development was investing about $9 billion annually in 
rural America at a budget cost of around $2.1 or $2.2 billion.
    This year, we are in a position to invest in fiscal year 
2008 about $17.5 billion at a budget cost of about exactly the 
same as it was in 2001.
    The thing that we have done more than anything else is 
taken an approach that it is appropriate for the Federal 
Government to provide loan guarantees, if that's what's 
necessary to facilitate the startup of these new economic 
opportunities in rural America.
    Consequently, I think that's been a reasonable shift. I 
think it's appropriate.
    I believe I've said this in the past, but I'll repeat it.
    For 75 years, we in the Federal Government have literally 
financed most everything in rural America, and consequently--
and for good reason. I'm not being critical of that.
    I mean, everything from beginning to wire rural America 
with electricity to running the telephone lines, to digging the 
ponds, to tiling it, to building the terraces, subsidizing 
agribusiness through Title I.
    As a result, I think what we ultimately have done is 
stifled the innovativeness and the entrepreneurial activity in 
rural America in ways that we didn't anticipate. We didn't do 
any of this maliciously.
    Loan guarantees actually facilitate your traditional 
lenders, your farm credit system and others, to really step up.
    And you have bright, entrepreneurial, innovative people who 
say, ``We want to start an ethanol plant, we want to start a 
wind farm, we want to start some sort of a food processing 
system.''
    Historically, there was not really many places to go to get 
some additional assistance to assure these lenders, who 
typically weren't used to working in this environment, to 
engage, and that is now happening on a more regular basis, and 
I think that is an appropriate policy approach in the direction 
that we're going.
    Mr. Kingston. I just want to give you a chance to make that 
point, because I think it is important for these people to 
hear.
    $2 billion used to leverage out to 9, and now it leverages 
out to 17, perhaps because of the strong economy, but in 
recognition of the programs that you've initiated.
    Mr. Dorr. You know, I appreciate that, and one of the 
comments that I frequently make is that our budget is roughly 
$2 billion in Rural Development, net farm equity is over $2 
trillion. That essentially tells you who is the dog and who is 
the tail.
    Mr. Kingston. Okay. Well, I'll yield back.
    But I really do want to get those numbers on net export and 
equity----
    Mr. Dorr. We will certainly get those numbers to you.
    [The information follows:]

    

    
    Mr. Kingston. Thanks.
    Ms. DeLauro. Mr. Jackson.
    Mr. Jackson. Thank you, Madam Chair, and thank you, Mr. 
Secretary.

             ASSISTANCE FOR LOW-INCOME SUBURBAN COMMUNITIES

    The second congressional district of Illinois that I 
represent is very unique.
    I represent both Chicago, the urban metropolis, and 
suburban communities with populations ranging from 4,000 to 
40,000.
    One of the suburban communities I represent is Fort 
Heights.
    In 2001, Fort Heights was in desperate need of new drinking 
water. Their system was producing unsafe water that was 
literally brown.
    And because of the small population of Fort Heights, USDA 
Rural Development was able to come into the community through 
loans and grants and installed a new water system for the 
community, including a new water tower.
    At the completion of the project, I toasted, alongside with 
Illinois Rural Development staff, clear, cool, drinking water.
    This was a great day for the residents of Fort Heights. I 
appreciated the help of the Illinois Rural Development 
department, and I look forward to working with them, as well.
    But there are many other communities that need the same 
help.
    With that said, what programs exist to help other low-
income suburban communities like Fort Heights that are caught 
between large municipalities, not quite rural areas, but just 
beyond their borders, enormous and vast pockets, if you will, 
or parts of our country that are rural?
    The suburbs I represent are obviously eligible for help 
from Rural Development because their population is under 
50,000, but does their proximity to big cities sometimes 
prevent them from getting help?
    And I want to close with just a small anecdote.
    When I first got here, and I was trying to get fresh water 
for Fort Heights, many of my colleagues, even my colleagues on 
the Democratic side of the aisle, kept referring to me as the 
congressman from Chicago, the congressman from Chicago.
    And in their minds, whenever they were helping Mayor Daley 
or helping Chicago, they were helping members of the Illinois 
Chicago delegation.
    But between Chicago and the congressional district that I 
specifically represent, Chicago at one level of another has 
much representation here in the Congress, but it's these small 
rural communities that fit your definition, that fit the other 
elements of my congressional district's definition, that have 
absolutely nothing to do with the municipality of Chicago.
    And so when I would make arguments for these small 
municipalities that fit the definition of rural and therefore 
qualified for Rural Development activities, I might as well 
have been talking to a wall, because many Members of Congress 
could not recognize or did not see me as representing a rural 
area. They see me as urban is what it is.
    Your thoughts, please, about what these communities can do, 
what Rural Development can do, and does their proximity to big 
cities prevent them from getting necessary help?
    Mr. Dorr. Well, let me say at the outset that when the 
Washington Post was writing their series of articles on Rural 
Development, I wish they would have discussed this with you, 
because you've clearly identified one of the significant 
challenges that we're engaged in, the population definitions of 
rural, and what happens to those small communities that somehow 
find themselves positioned adjacent to or too close to a large 
metropolitan area to qualify for a variety of Rural Development 
programs.
    Mr. Jackson. I'm sure the Washington Post saw me as 
representing Chicago, and not rural areas, but thank you, Mr. 
Secretary.
    Mr. Dorr. Well, nevertheless, there was a great deal of 
discussion about that very issue.
    And quite honestly, it's been my experience, for the short 
term that I've been here, that defining rural is becoming a, 
and has always been, a significant challenge.
    All I would suggest is that we are in the process of 
working through the Farm Bill to try to streamline to make a 
more effective definition of rural, one that would allow us to 
then have the authority to prioritize certain components of 
this, particularly when it gets to the things like water and 
environmental programs and other things that are very 
essentially to these small communities.
    I don't know that that's a good answer. It is a difficult 
issue, one that we deal with all the time, and we're fully 
aware of it.
    We're continually trying to do what we can to not only 
streamline and better define, but to shoehorn, where we have 
to, communities in to fit programs when there are these defined 
needs.
    Mr. Jackson. Thank you, Mr. Secretary.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you.

                 FARM COMMUNITY VERSUS RURAL COMMUNITY

    I just would take a second to say, and hopefully we can get 
into it later, that there really is a difference in the farm 
economy versus the rural economy, and often those two things 
get elided as to what is happening, and I think there is a real 
distinction there which we ought to probe in terms of the 
statistics, if you will, in terms of the wealth of rural 
America versus the wealth of a farm economy.
    Mr. Latham.
    Mr. Latham. Thank you, Madam Chairman, and you just took 
the words out of my mouth.
    But first of all, I want to--this is your last hearing 
before the subcommittee.
    I want to thank you for your service, and as a fellow 
Iowan, I really do appreciate what you've done in thinking 
outside the box, and made rural development something that is 
really developing rural America, and it's a big change from 
what it used to be.
    And I appreciate the activity, the being visible, being 
available, that the department has been.
    And the chairwoman really hit on what was my point. At 
Alexander, Iowa today, when land was three, four years ago, 
$2,500 maybe, an acre, today $6, 7, 8,000 an acre, you've got 
commodity prices, corn is well over $5 a bushel, soybeans 
probably $12, 13 a bushel, cash.
    But Alexander, my, you know, home town, is--you can't buy a 
gallon of gasoline, you can't buy a gallon of milk there.
    So there is all of this new-found wealth in rural Iowa, and 
rural America, but for a lot of people, the communities are 
dying, yet.
    We've had a real change with the energy production, 
ethanol, wind energy, like you mentioned before, biofuels. 
There's some real problems on the horizon, I think.
    We've got in my district today a $60 million new biodiesel 
plant that they did a test run and they have never started it 
up because of the cost of soybean oil today.
    I think we've got some real challenges.
    I just, not really a specific question, but what do you see 
as far as the opportunities and challenges that are out there?
    Because there is this division, like the chairwoman said, 
between, well, how the farmers are doing and how the 
communities are doing.
    Mr. Dorr. Well, I don't think there's any question that 
that's the brain drain, the out-migration in rural areas, 
disassociated with the aggregating increase in size of farms. 
There's always been a challenge.
    I do believe that there are some fundamental things that 
are changing, and they're not going to be perhaps self-evident 
overnight.
    But, for example, when the highways, when the interstates 
and the railroads bypassed the community, it was effectively 
redlined, and that precipitated its demise.
    We are, in many respects, doing a better job, but I would 
be the first to admit we're still struggling with trying to 
figure out how to use government to effectively deploy 
broadband access to rural communities.
    But if we do that, you essentially give these rural 
communities the opportunity to engage in a global economy in 
ways that they've never had prior to this time.
    That being the case, broadband, in and of itself, in my 
view, mitigates a lot of the traditional redline issues.
    Secondly, alternative energy, renewable energy, and I know 
you collectively are aware that I have focussed a lot on that, 
but I read an interesting article just a couple of days ago 
where T. Boone Pickens made the observation that he had 
historically not supported renewable biofuels and now thought 
it made a significant amount of sense, given where the industry 
has migrated to.
    And the real simple fact is that right now today we're 
exporting well over $500 billion, maybe $600 billion annually 
to import oil.
    Most of that money ultimately could slosh around right back 
in rural America in ways that I don't think we've ever thought 
about in the past and would not require a quid pro quo in a 
foreign policy arena. We could just keep it here.
    If we get to the president's 20 and 10 initiative by 2022 
of 36 billion, that's almost a billion barrels of oil 
equivalent. That's the same as greater than net farm income.
    When you do that, all at once a number of other things 
happen. These create high-value jobs, but it's not just the 
jobs at the plant.
    They create a whole host of changes in regard to how do you 
integrate legacy, or how do you integrate distributed energy 
systems into these legacy systems?
    The bottom line is that all of these things that are going 
on in rural America are largely a function of distributed 
computing.
    You can put up a price competitive 100 million gallon 
ethanol plant as opposed to a 400,000 barrel a day refinery, 
and you can make them cost effective in rural America.
    That's going to require policy change, it's going to 
require state public utility commission change, it's going to 
require a whole host of distribution and logistics management 
issues.
    These are all going to be dependent upon jobs that are very 
intellectual in nature. They're going to give young people an 
opportunity to return to these rural areas if they so choose.
    And I think that, in the front end of this, it's probably 
difficult to try to ascertain what exactly they're going to be.
    But in the long run, I just look at it in the context of a 
half a trillion dollars.
    A half a trillion dollars that we could perhaps keep in 
rural America over a long period of time is obviously going to 
create a lot of opportunity, and I think that probably is the 
sum and substance of it.
    Mr. Latham. Does that filter down, though, I mean, outside 
of the landowners and the farmers themselves? That, to me, is--
--
    Mr. Dorr. Well, I think it can.
    Mr. Latham. Okay. Thanks.
    Obviously, our timer is not working very well.
    Mr. Jackson. It told me to stop.
    Ms. DeLauro. Interesting that median income is 25 percent 
lower and the poverty rate is 28 percent higher than in the 
metro areas, so your point is well taken.
    Mr. Bishop.

                       HELPING SMALL COMMUNITIES

    Mr. Bishop. Thank you, Madam Chairman, and welcome to you 
and I thank you for your service.
    Mr. Dorr, you may know my district has some of the poorest 
counties in the entire state of Georgia on a per capita basis, 
including Chatahoochie, Baker, Calhoun, Clay, Randolph, 
Stewart, Carroll, Clipman, and Webster Counties.
    Over the past several years, my staff has attempted to work 
with your agency to provide much-needed assistance in these 
communities, particularly in the areas of housing, 
infrastructure development, including water and sewer 
improvements, as well as economic development and job creation.
    And this is particularly true in Chatahoochie City County, 
which is now a consolidated city county, which has a base 
population of approximately 3,000 or 4,000 if you exclude the 
military population that is stationed at Fort Benning, and this 
community is in desperate need of a water tank as well as sewer 
improvements.
    Last year, the subcommittee report directed the department 
to take a closer look at this and other needs in the district, 
including the Zion City housing project and America Sumter 
County, Georgia, and we haven't seen very much movement on it. 
We haven't seen much cooperation or assistance in this regard.
    Tell me, where can some of our poorest rural communities 
turn if they can't get help from USDA, can't navigate the 
bureaucratic maze that USDA has, and they can't afford the 
matching requirements for grants, and most of the other 
challenges?
    I was struck by the movement, particularly in your 
appropriations, to guaranteed loans as opposed to direct loans, 
and of course small and disadvantaged communities, particularly 
those communities that have minority populations, they're not 
going to have the relationships with those financial 
institutions that will give them the guaranteed loans, and 
historically, they've always had to come directly to USDA.
    You're abandoning a program which is the last and the only 
hope of small, disadvantaged communities and farmers, for that 
matter, to this guaranteed program, which is really shifting 
responsibility, which I would think that rural development 
would want to assume and to discharge very, very zealously, 
because historically, it has not been done by the private 
sector otherwise, and it's still not being done, even with the 
guaranteed program, because you don't get the participation, 
particularly from the people who need the help.
    Mr. Dorr. We will certainly follow up on this particular 
issue.
    I appreciate the concerns that you've outlined and the 
challenges.
    We are and have worked with a group called the Southern 
Foundation, I believe it is, out of Helena, Arkansas, that has 
established a series of banks that are largely being developed 
to work with minority communities to effectively provide these 
kinds of assistance and services with, I think, some very, 
very, the leader of that organization, a fellow by the name of 
Joe Black, I would suggest that perhaps we could work out 
something with Mr. Black to have an opportunity to work with 
some of the folks in these communities.
    I do believe that, longer term, to the extent that--and our 
state directors do have the flexibility to shift some of these 
grants around and to leverage them more or less as certain 
circumstances warrant.
    But I do believe, in the long run, that direct loans and 
grants from the Federal Government tend to stifle 
entrepreneurial activity and innovative activity in these 
communities.
    I realize that some of them have greater challenges, and I 
think we need to try to do what we can in a straightforward and 
honest way to work with them, and I'd be more than willing to 
do it.
    But again, as I indicated at the very outset, one of the 
big challenges that we----
    Mr. Bishop. Mr. Dorr, I don't mean to interrupt you, but it 
seems to me that you're just adding another layer of 
bureaucracy when you do the guarantee.
    That does more to stifle entrepreneurship, except for the 
banking end of it.
    The entrepreneur that wants to do something in a rural 
community, that can go directly to USDA and get a loan and go 
to work with his investment of capital directly from USDA, that 
cuts out a whole lot of that bureaucratic red tape.
    And I don't know about the entrepreneurial creation, but it 
seems to me like it's just creating activity for financiers, as 
opposed to the people who really are going to be doing the 
nitty gritty, where the rubber meets the road, work.
    Mr. Dorr. In our B&I program, the direct loan had a, the 
direct loan program in 2001 had a default rate of 47 percent.
    Our guaranteed portfolio has a default rate of about 5\3/4\ 
percent today.
    Mr. Bishop. That's because they don't make the loans to the 
people who need them. That's exactly, that underscores the 
point.
    Ms. DeLauro. Mr. LaHood.

                       BROADBAND IN RURAL AMERICA

    Mr. LaHood. Mr. Dorr, thank you for your service.
    I want to be one of those who also thanks the staff that 
you have in Illinois. They've done an extraordinary job.
    Doug Wilson heads up the operation there, and he and his 
staff have done a terrific job.
    We've taken advantage of about every program that rural 
development has offered.
    I hope you'll convey to Doug our sentiments, that at least 
in the 20 counties that I represent, almost all rural, we are 
involved with new water supplies, new sewers, and lots of 
opportunities for different alternatives. So we appreciate the 
work that you all do.
    I agree with you 1,000 percent on the way to make rural 
communities relevant is through broadband.
    I would have hoped that, and I know it's something that 
you're interested in, I would have hoped it would have been the 
priority of this administration, I hope it's the priority of 
the next administration, if we're going to keep people in rural 
communities, we have to connect them to the world. The only way 
to do that is through broadband.
    I mean, many of these communities, as you've said, were 
redlined, either by the elimination of a road or a railroad or 
whatever, and that's where rural areas are losing, because 
there's a disconnect between them and the world.
    And, you know, some of them have computers, many of them 
don't, but I'd like to know, you know, your feeling in this 
budget on where we're going with broadband and if it--what kind 
of a priority it is for the remainder of your term and the term 
of this administration.
    Mr. Dorr. Well, I think we can state unequivocally that the 
administration and those of us involved in rural development 
are very, very supportive of deployment of broadband 
accessibility wherever we can possibly get it.
    I would also, as I have in the past, be less than 
forthright if I didn't say that it has been a distinct 
challenge.
    I think when policymakers in general envisioned deploying 
broadband to rural America, it was envisioned in the context of 
how we were able to do it with rural electrification or 
deployment of rural telecom, and had it been that way, I think 
it would have been far less complicated.
    The problem that we've run into is that we have a number of 
competitors, and where we have absolutely no service or maybe a 
very underserved environment, we have difficulty developing a 
business model or a business plan for those that come in and 
desire to provide service that will ultimately fly.
    And so consequently, trying to build this out in that kind 
of a competitive or semi-competitive environment has been a 
much more challenging issue than we had anticipated.
    As I know that you're probably all aware, we just recently, 
as a matter of fact last week, announced an award of a 
broadband loan to a company called Open Range. It was a $266 
million loan.
    The company put up $109 million of their own equity. It is 
using WiFi or Wimax technology in conjunction with low Earth 
orbit satellites, so that there will be a terrestrial 
component, as well as a satellite component. They're going to 
deploy broadband in 17 states.
    Their original five-year plan addresses nearly 500 
communities, potentially a half a million recipients.
    It's an interesting one, because I think in the long run 
we're going to get questions from anyone, regardless of how we 
do it, but the fascinating part of it, as far as I'm concerned, 
is that, for the first time, we have people bringing a 
scaleable model to something that looks like it has a very good 
chance of working.
    Our people started working on this loan two years ago. It 
is much different than when it started out.
    That loan process wasn't static. It's very definitive, and 
I think it's a good business plan.
    We're going to closely monitor it, and hopefully it works, 
and if it does, I think it will give us some good indicators of 
how we can better deliver these broadband services down the 
road.
    Mr. LaHood. Thank you.
    Ms. DeLauro. Mr. LaHood, I'm going to get you a copy of an 
article that was in the International Herald Tribune, which 
talks about the European Union taking the lead in broadband 
growth, and where the various countries are, because I think I 
know that this is an area that is very, very important for you, 
and it makes some description of the kinds of things that they 
are doing.
    Mr. Farr.
    Mr. Farr. Thank you, Madam Chair.

                   COMMUNITY FACILITIES IN CALIFORNIA

    I have three questions, one about a loan guarantee and the 
other about farmworker housing, and I'll try to get to them, 
because I can't stay for a second round.
    I represent a very rural area of California, the central 
part of California.
    We have a hospital in the southern end of my county called 
Memorial in King City, and it's about 70 miles from any other 
hospital.
    It serves a rural population, a lot of farmworkers, and 
from time to time, the large military training base there, that 
has no medical facilities, other than just a check-in clinic.
    And this hospital has gotten into some financial problems 
and has applied for a loan guarantee, and the guarantee that 
they've applied for has worked out a waiver of a tangible 
balance sheet equity requirement for $8.5 million in the 
business and industry loan guarantee.
    The USDA's California rural development office has 
apparently approved all of this, has submitted it to 
Washington, and here is where it's got stuck in the 
bureaucracy.
    I wrote a letter to Mr. Anderson last month asking him to 
get it unstuck, and I understand that the national office 
executive loan committee convened on March 17th to consider 
this request.
    It was determined by them that the OGC, the Office of 
Attorney General, or of General Counsel was necessary to 
further consider the request, and it was promised that the OGC 
approval would be sought in very short order.
    Well, it seems that nobody can find the papers, OGC has not 
received any request, it remains unclear, after multiple 
conference calls from the folks in the district and in Region 
9, and e-mails and dialogues, that the rural business 
cooperative services has not even made the determination of 
whether to present this to OGC.
    Can you get unstuck for me and get it done? The office, you 
know, is very good, they put out about $100 million worth of 
loan guarantees, they're solidly behind this, and this 
hospital, without this loan guarantee, will go bankrupt.
    Mr. Dorr. I am aware of the situation, and I will assure 
you that we'll look into it.
    I understand that there has been a new management team 
recently brought into this hospital, and my understanding was 
that there was some revisiting of some of these plans and the 
numbers.
    Mr. Anderson, do you have any other comments?
    Mr. Farr. Just whatever it is.
    Mr. Dorr. Right.
    Mr. Farr. Can we get it done, so we can get some 
information back to them?
    Mr. Dorr. We will certainly take a look at it. We will get 
back to you, and we will get back to them.
    [The information follows:]

    Rural Development National Office staff met with Congressman Farr 
in person to discuss the Hospital's application on April 17, 2008. The 
agency provided details on its analysis of the Hospital's financial 
status and discussed various prospects for improving that status. Rural 
Development indicated it was receptive to participating in a meeting 
with the hospital, hospital financial advisors, and potential lenders 
to discuss the application further and explore options for further 
consideration of the proposal.

    Mr. Farr. Thank you. I mean, hopefully, in a very timely 
fashion.

                           FARM LABOR HOUSING

    The second issue I have is the followup on this discussion 
of rural development.
    An example, the city of Salinas. We have city centered 
growth, because we want to have people live in the cities, not 
on top of ag lands. You know, protect the ag lands, have people 
commute out to the fields.
    And so we get down to a couple of questions.
    One is, what is a farmworker community? We've had to have 
waivers, and those have happened before to get farmworker 
housing.
    But the other problem is really one of just a definition of 
what is a farmworker. California has a different definition 
than USDA.
    And what we would like to do, and I don't know how we're 
going to solve this, but I'll have to meet with you to get a 
waiver or to work out some new language.
    We have people that are in the processing sheds, and 
they're known as processors, but they're not like--you know, 
they're not really processing.
    The food doesn't change its status. It's essentially still 
raw food when it comes in and raw food when it goes out. It's 
just packaged.
    Lettuce is put in a bag, a lot of that--that's the 
processing of kind of the shipping and preservation of it, and 
these, mostly women, in these processing places, don't qualify 
as farmworkers, although they are. They're under the same wages 
and contracts and are working for the same ag growers.
    So I'd like to see if we could get a waiver using the 
state's definition of farmworker or language change that 
includes the processing of raw vegetables, and I want to meet 
with you to see if we can work that out, as soon as possible.
    Mr. Dorr. We'll be delighted to sit down with you.
    Mr. Farr. And maybe to bring to us what your difficulties 
are with that kind of change.
    And lastly, I don't think there's anybody in the Congress 
that's more interested in affordable housing. We're in the 
coast of California.
    The future is that if we--we're in, you know, what I call 
the in and out economy.
    I live in an area where you got to get fresh produce out. 
We sell $3 billion worth of crops. We harvest 85 crops.
    They're all fresh crops. They got to get on trucks. Pick 
today, out--and they're out tonight, and in the stores tomorrow 
or the next day.
    Our roads are all rural, they're two lane, they're going to 
get clogged with everybody now commuting to work, and so what 
happens is that what we need to do is what I call inclusionary 
housing. We got to build the jobs' housing balance.
    If you provide a job, and we're making companies do that 
now, you move in as a corporation to our area, which we love to 
have you, but you have to provide the housing close to where 
you work. So we include affordable housing.
    The difficulty is that that is usually all done through 
HUD, the HUD stuff, not with farmworkers, because that's your 
jurisdiction.
    So what I really want to do is to get a greater outreach in 
the rural communities as to what you can do to help for 
farmworker housing.
    And what we ask here is essentially to find out exactly 
what you're doing to promote the farmworker housing, whether 
the state rural development offices are promoting it through 
community meetings, encouraging applications to industry 
groups, and asking if there are any plans to do a portfolio 
assessment similar to the assessment done for multi-family 
housing loan portfolio to find out what population and housing 
needs are for the rural labor housing program.
    I can tell you it's keen in California, and we'd like to 
have you, the department, being as aggressive in this field as 
HUD is working with the county housing authority.
    Mr. Dorr. We will certainly look into that.
    Russ, do you have any----
    Mr. Davis. Sure.
    If I could just say that farm labor housing new 
construction is something actually where we no longer have a 
monopoly.
    The largest builder is the low-income housing tax credit 
program, and in fact, the developers have found it to be, being 
a younger, newer program, it is more flexible and is very 
attractive to the developers.
    Our program has just become too expensive. We're spending 
$150,000 per unit on average to build one apartment unit, 
essentially, plus we're adding rental assistance to it.
    We could help far more people with the same amount of 
money.
    We're finding it's much more efficient to leave that 
construction to market rate housing, the tax credit use of 
vouchers, which is one thing we are proposing----
    Mr. Farr. But I tell you, the combination works best of 
all, and I put together the first time that we'd ever worked 
with a housing authority and HUD on property owned by you in 
Soledad, California where we brought and dedicated for 
farmworker housing.
    Because we brought the whole gamut of loan portfolios and 
incentives together, we were able to build twice as much 
housing----
    Mr. Davis. Oh, it is very nice for the people who get the 
funding, because there is a lot of concentrated grant money, 
essentially.
    The problem is that it doesn't go very far. We only built 
17 properties last year in the whole country.
    Mr. Farr. Well, let's get together and figure out how to 
make this work.
    Mr. Davis. We'd be happy to talk about updating it.
    Mr. Farr. Thank you.
    Ms. DeLauro. Mrs. Emerson.
    Mrs. Emerson. Thank you, Chairwoman.
    Thanks for being here, Mr. Dorr.

                          HOUSING LOAN CRISIS

    I think it was in your testimony that you referred to rural 
development as an investment bank for rural America. And given 
the state of the nation's investment banks, that comparison 
alone may be cause for some concern.
    Tell us a little bit about what rural development's risk 
exposure, in your home loan programs, might be, and what steps 
you all take to protect homeowners as well as taxpayers from 
the lending crisis.
    Mr. Dorr. Actually, our risk exposure is really quite good, 
and I think maybe it would be best to turn it over to Mr. Davis 
and let him explain this.
    But the bottom line is that, in our single family housing 
programs, we essentially have never offered ARMs, we have not 
offered teaser rates.
    We have made it very clear at the get-go, whether they were 
direct or whether they were guaranteed loans, exactly what 
would be the homeowner's payment, and in the environment when 
interest rates were dropping and home values were escalating 
and homeowners had considerable equity, we actually urged folks 
to get out of our program, to go to private financing, to lock 
in the lower rates, to mitigate the fact that if they had a 
direct loan, in which case if they stuck with it, or wanted to 
get out on their own, a lot of that appreciated equity would go 
back to the government, and we felt it was important to try to 
get them to end up with as much of that equity as possible.
    Russ, do you have anything else?
    Mr. Davis. If I can just say that 100 percent of our loans 
are not sub-prime, 100 percent loan-to-value. We've never had a 
lower delinquency rate in our history.
    And a large part of that is because we didn't have the 
automatic ARM resets, but also because rural America really 
never got the bubble.
    There's a lot of outmigration, there's a lot of economies 
hurt by manufacturing pullback and so forth.
    And so we really are providing what the private sector has 
pulled out of.
    Our volume has almost doubled in the past year. Private 
sector lenders are leaving, we're coming in. We'll go up about 
25,000 loans in volume this year.
    And one thing that is really important, and that is how 
careful we are to try to get the low credit borrowers into the 
program.
    Twenty-three percent of our borrowers have a FICO score of 
under 619, or no FICO score at all, so a quarter of our 
borrowers are locked out of the private sector, anyway.
    So we're doing our job as lender of last resort in a big 
way, and that's why we're really focusing on the guarantees.
    Mrs. Emerson. That's good news.
    Fortunately, in my very rural area, people just don't 
have--we don't have that housing crisis that St. Louis or even 
Kansas City might have.

                      PERSISTENT POVERTY COUNTIES

    Last year at this hearing, Mr. Dorr, we discussed what 
rural development was doing for persistent poverty counties, 
and I'm very sad and distressed to say that so many of mine 
happen to fall into that category.
    And I had mentioned at that time that there was a need for 
an increased focus on the roughly 340 non-metro persistent 
poverty counties, and we did hear what rural development does 
to target these counties.
    However, about a month after this conversation, I read in 
the Washington Post this article that I know you all are aware 
of, that quotes, since 2001, quote, ``more than three times as 
much money went to metropolitan areas with populations of 
50,000 or more, $30.3 billion, as to poor or shrinking rural 
counties, $8.6 billion. Recreational or retirement communities 
alone got $8.8 billion.'' So I have a few questions.
    Number one, is this a reasonable ratio?
    Two, does rural development need new or different tools to 
reach into these communities?
    According to your testimony, since 1999, rural 
development's budget authority has increased by $100 million, 
and the program level has nearly doubled to $18.5 million.
    Is there any relationship between this increase in the 
program level and the apparent lack of investment in persistent 
poverty counties?
    So I'd like you to answer those questions, but with the 
caveat that believe me, I understand that you all are only a 
partner with local communities, and I need you to help us with 
the answers to those questions, but also help us figure out 
what I and my colleagues and other local leaders could be doing 
to help these communities who are persistent poverty 
communities capitalize on USDA rural development resources.
    Sorry, that's a long question with some----
    Mr. Dorr. No, it is, and it's a tough question, and I 
frankly would be disingenuous if I told you I had an answer for 
it.
    I do believe that our approach, one of the things, for 
example, that we're doing in our B&I program is making a very, 
and that's the business and industry loan guarantee program in 
conjunction with a number of our renewable energy, or the value 
added program or other things, is we are taking I believe 20 or 
22 states in which we historically have not had aggressive 
relationships and B&I development relationships with the local 
lenders, and we are actually going out and making an effort to 
contact every rural lender in those 20 states.
    Giving you one example, we had one state that, about two-
and-a-half years ago, made about $20 million in annual loan 
guarantees to the B&I program.
    This year, through a very aggressive outreach effort, they 
will, presently six months into the year, have $120 million of 
loan guarantees on the books.
    I believe that the only way we ultimately get through this 
persistent poverty issue is that we have to generate economic 
activity in those communities based on whatever the structural 
strengths of them are.
    The long-term infrastructure issues will be addressed if 
you have strong economic activity, and whether or not we can 
address it in every one of these counties, whether or not, as 
the Post articles point out, we can redirect how that occurs, 
is an ongoing challenge.
    Rural definitional issues, there are a number of challenges 
that we have historically dealt with, and we're trying to 
redefine our rural definition to give us greater flexibility in 
identifying those priority areas.
    If we're successful at getting that done, we can, and 
better define those priority areas, perhaps we can do a better 
job of targeting the resources that we have in some of these 
areas.
    But a lot of it has to do with the way in which we 
historically have been structured.
    Historically, we were structured such that we waited for 
people to come into our offices. We're not doing that any more.
    What we have done through our restructuring process is 
specifically designed to get our people cross-trained to be 
able to deliver more than one program, and we have great 
expectation that they will spend a great deal of their time out 
looking for business, working with constituents, exploring 
opportunities with local lenders, local developers, local 
councilmen, whatever the case might be.
    And to the extent that we're able to carry through on that, 
I believe we'll begin to generate a lot more interest and 
activity in these areas that you're talking about.
    Mrs. Emerson. Thank you.
    Ms. DeLauro. Ms. Kaptur.
    Ms. Kaptur. Thank you, Madam Chair.
    Welcome, Mr. Secretary, and your associates. Glad to have 
you here today. And thank you for the special effort you made 
to stop by and see members prior to your testimony today.
    Thank you. We deeply appreciate it.

                OPEN RANGE COMMUNICATIONS BROADBAND LOAN

    Just for the record, the Open Range communications proposal 
that you've been heavily involved in includes 17 states.
    I take it Ohio is not one of those states. Am I correct in 
that understanding?
    Mr. Dorr. I believe it is.
    Ms. Kaptur. It is one of the states? So any part of Ohio 
that's rural would qualify?
    Mr. Dorr. There are--the loan application and the approval 
process specifically designated certain counties and certain 
communities.
    Ultimately, as this plan is built out and they attain the 
build-out designated in their plan, my expectation is that they 
will wish to expand to other areas that are underserved 
adjacent to the areas that they're presently serving.
    Ms. Kaptur. If there's any information about Ohio, I would 
greatly appreciate that as part of the record.
    Mr. Dorr. Sure.
    Mr. Andrew indicates that we are--they are going to be 
building out in 50 communities in Ohio, they'll be investing 
about $24 million of this project in Ohio.
    Ms. Kaptur. Do we know--Ohio has 88 counties. Do you know 
how many counties that may touch?
    Mr. Dorr. I don't, but we can get that information to you.
    Ms. Kaptur. All right.
    Mr. Dorr. We would be delighted to.
    [The information follows:]

    

    
    Ms. Kaptur. Thank you for your leadership on that.

                            RENEWABLE ENERGY

    I agree with the statement that you made not so long ago. 
Renewable energy is the biggest opportunity for economic growth 
and wealth creation in our country. I totally agree with that.
    The facts are that since this president has assumed office, 
America is importing a billion more barrels of oil per year 
than at the beginning of this decade.
    Whereas in the past, we had about a third of our trade 
deficit was comprised of petroleum imports, today it is 51 
percent. So it's getting worse.
    So all of us have an enormous role to play in that. I'm 
glad you see the Department of Agriculture's in that, Mr. 
Secretary.
    And I'm very interested in the fact that in the budget 
submission, and I realize we have a farm bill out there, but in 
the budget submission, the administration, in terms of energy, 
zeroed out rural economic development loans, value added 
grants, renewable energy efficiency grants, renewable energy 
efficient loans.
    I know your interest and your deep commitment to energy 
independence. Could you sketch for this committee how you view 
your role in that, as a result of this budget submission.
    And also in answering that question, in last year's 
appropriation bill, we had specifically identified wind 
production as a priority area for the utilities program. Could 
you address that, as well, as you respond to this question?
    And I thank you so much.
    Mr. Dorr. Well, certainly.
    Yes, you're correct, in terms of what is in the 2009 budget 
submission.
    I also, however, wish to point out that the Farm Bill 
proposal that was presented by the president and Secretary 
Johanns now well over a year ago clearly had a large component 
committed in what we call a new platform structure for energy 
programs.
    I believe the request was for a budget authority that would 
support a $2.1 billion loan guarantee program for biofuels, 
particularly in cellulosic refining, enviro-refineries.
    We had submitted a budget request for $500 million for the 
research title.
    We had included another, I believe, $500 million for what 
was the old energy efficiency and renewable energy portfolio, 
and I believe there was another $150 million submitted in that 
for research in the old 9008 biomass research and development 
portfolio.
    Clearly, we don't know where the farm bill is at this 
point. I sincerely hope we have a bill that will support what 
the president has laid out in this.
    The thing that I think is also important to point out, and 
obviously we're on different sides of the aisle, but I believe 
the President has had an extraordinarily strong commitment to 
renewable energy, and in that vein, early on, we got very 
engaged at USDA working collaboratively with the Department of 
Energy, and I believe that the relationship that we have 
developed with the Department of Energy using their technical 
and research assistance in the implementation of our energy 
efficiency and renewable energy program, or the 9008 biomass 
R&D program, has been extraordinarily beneficial. We're not 
duplicating things that they do and vice versa.
    So that collaboration has actually evolved now to a greater 
extent through the biomass R&D board in which we have co-
chairs, and the Secretary of Agriculture and the Secretary of 
Energy co-chair that committee.
    I'm the designee from Agriculture. Alexander Karsner is the 
designee from Energy.
    But we also meet monthly with representatives from EPA, 
CEQ, and all the other agencies very much involved with this 
entire issue, and I think it's bringing a lot of focus to the 
entirety of the efforts.
    In response to your last question about wind, clearly, wind 
is a large component of renewable.
    Mr. Andrew's programs allocate $200 million a year to 
renewables as a set-aside. Jim, do you want to address that 
issue?
    Mr. Andrew. It is not specifically designated. I mean, we 
did specifically designate for renewables.
    We have done several wind projects. We have several that 
we're looking at right now with at least 500 megawatts of power 
that will be incorporated--$200 million out of our budget set 
aside for renewables----
    Ms. Kaptur. Are those mostly west of the Mississippi 
rivers, sir?
    Mr. Andrew. No. Two of them are in Missouri, one of them is 
in North Dakota, one is going to be in parts of South Dakota.
    Ms. DeLauro. Thank you, Ms. Kaptur.
    We will move to a second round, and obviously, more 
questions. Just a couple of points, I think, for clarification.
    And I'm not going to ask you to do this now, Mr. Secretary, 
but I think that there's over-reliance on what is going to come 
from the farm bill, and we are going to be in very, very 
serious shape if the extent to which you are hoping that the 
farm bill is going to provide you with all of these resources.
    As I said earlier on, there isn't any request that is 100 
percent, and I haven't yet heard anything about contingencies 
as to what we do with all of these programs if there is no farm 
bill.

                        ELIMINATION OF PROGRAMS

    But let me move to a couple of other areas.
    This is--the Economic Research Service was here about three 
weeks ago. I want to just give you this quote.
    ``Analysis shows that poor rural counties generally receive 
more grants and fewer guaranteed loans than rural counties in 
general. Poor communities often lack the ability to repay 
loans, given their limited tax base.
    This problem is exacerbated in small communities where the 
per person costs of providing public services are high. 
Consequently, the recent shift from rural development grants to 
direct or guaranteed loans may make it more difficult for low-
income rural communities to finance local environmental 
infrastructure, telecommunication services, and community 
facilities.''
    ERS, sitting where you are not three weeks ago.
    The rural development budget proposes to eliminate most of 
the grant programs, some of the direct loan programs, in favor 
of guaranteed loan programs.
    But budget justifications say more communities can take on 
debt to address needs in this low interest rate environment.
    How do you plan to assist the other communities that cannot 
afford to take on debt, the more impoverished communities that 
need environmental infrastructure, telecommunication services, 
and community facilities?
    Mr. Dorr. I was not aware of that document until after the 
fact, and had I been asked to edit it, I probably would have at 
least asked where they pulled all of that together.
    Again, we all know that there are certain communities that 
have significant problems.
    We have limited resources. We have aggressively tried to 
address many of the housing issues that we felt we could 
address within the context of this budget.
    Our grant levels are nearly, including the rental 
assistance, nearly at the same level that they were a year ago, 
and we will continue within the framework of the limited 
resources we have to try to mitigate those, but also try to 
facilitate mechanisms to create opportunities that historically 
haven't been looked at.
    Ms. DeLauro. Without rental assistance, which you're 
correct about that, but you also talk about your mission as to, 
and first priorities, as to dealing with the most vulnerable 
and the lowest-income areas, and clearly, I'm going to have you 
talk to ERS as to where they got their data, but that's data 
that they provided us here.

                           LOW-INCOME HOUSING

    In terms of rural housing, again, a proposal to eliminate 
direct Section 502 single family housing, direct Section 515 
rural rental housing.
    The budget says that we will receive a legislative proposal 
to increase the guarantee from 2 to 3 percent.
    Budget request is also proposing to remove the subsidized 
interest authorization and the fee component of the Section 538 
guaranteed multi-family housing loan program.
    How will these guaranteed programs provide the same home 
ownership or rental opportunities that are provided through the 
direct Section 502 single family housing, direct Section 515 
rural housing loan programs that you propose to eliminate?
    Also, you are also going to increase fees in the guaranteed 
programs. It would seem that you have given up on helping very 
low-income achieve housing assistance.
    Mr. Dorr. I'm actually going to ask Mr. Davis to respond to 
that, but before he does, I just want to say at the outset, I 
don't think there is, we have not given up at all.
    As a matter of fact, I believe that our housing programs 
have been extraordinarily aggressive and successful over the 
last few years.
    We know that we can clearly reduce costs and access a lot 
more potential homeowners, even in these very low-income 
categories, as we have already been doing through the guarantee 
portfolio.
    We believe that, properly structured, we can continue that 
trend with perhaps some more level of enhanced subsidy.
    But, for example, just to access that market, you have 
2,300 bankers that are involved in our programs, as opposed to 
448 offices.
    Just merely to be able to contact people and to get them 
into the program alone through these kinds of marketing 
strategies makes a big difference in the number of people you 
can contact, plus we----
    Ms. DeLauro. Before we move to Mr. Davis, let me just add, 
on February, I believe it was February 28th, the secretary 
wrote to the president of the Senate, the vice president, ``I'm 
submitting--Rural Housing Section 502 Guaranteed Loan 
Enhancement Act of 2007.''
    In the letter itself it says that the average income of a 
direct home ownership customer 2007 is approximately $25,000, 
because you've got--it says that we're going to deal with 
direct home ownership programs targeted to very low-income home 
owners.
    Now, the data that is then presented indicates that the 
average income of a guaranteed home ownership customer in 
fiscal 2007 was approximately $45,000, and the majority of 
customers are in the moderate income range.
    The statute allows USDA to guarantee only fixed rate 30-
year term loans to ensure long-term affordability.
    Through the proposed new subsidized guaranteed home 
ownership program, USDA anticipates helping families with an 
income of approximately $35,000 at a lower cost than providing 
direct loans.
    You're not going to deal with the people who are at the 
lower income people. This is the recent legislation sent up 
here to deal with this 502 program.
    So one more time, you are not going to be dealing with the 
low-income people, the lowest-income people that you lay out as 
your first and foremost responsibility.
    Mr. Dorr. Well, and I appreciate your concerns on this. I 
think therein lies the crux of this entire sub-prime issue.
    Obviously, there are all kinds of debates about whether or 
not, in a general sense, we were placing people into homes who 
couldn't afford homes, who would have been better off in 
apartments, and consequently, whether we're going from 25 to 35 
thousand, but we are in fact funding rental assistance in a way 
that would make affordable multi-family housing----
    Ms. DeLauro. My time has expired.
    Mr. Dorr. Okay.
    Ms. DeLauro. We're going to get to that, and we're going to 
get to the sub-prime before this hearing is concluded.
    Mr. Kingston.

                   DEFAULT RATE FOR BUSINESS PROGRAMS

    Mr. Kingston. Mr. Dorr, you had mentioned earlier that 
there was a default rate on the direct loan of 47 percent and 
5.75 percent on guarantee?
    Mr. Dorr. That was on the business and industry loan 
portfolio, not the housing portfolio.
    Mr. Kingston. That statistic caught my attention, anyhow. 
Can you talk about that, why the default rate is so high?
    Mr. Dorr. Well, I think this is anecdotal and subjective on 
my part, but it would appear to me, as a farmer and a 
businessman, that what was occurring, obviously, were well-
intended people presenting opportunities in which government 
employees were making a determination as to whether or not a 
business opportunity was viable, and so it was a decision that 
was made between a government lender and a private investor as 
opposed to a decision that's made between the private investor 
enticing an originator, his local banker, and perhaps other 
investors to look at the project, to really flesh it out, make 
sure that it's viable, and then ultimately, if they concurred, 
to originate a loan that they ultimately bring to Rural 
Development to lay off some of the risk through the guarantee.
    Clearly, what you do, it's much like the Open Range loan.
    It took two years to make the Open Range loan, and in that 
process, it effectively got scrubbed--more technology, more 
refinements in the business plan, and a whole host of other 
things took place.
    That's essentially what happens in the guarantee process, 
and I believe that because you've got local investors, local 
business people, and local originators involved in the process, 
there's a much higher level of chance of success, and 
consequently, the long-term benefits are substantively reduced 
default rates.
    Ms. DeLauro. Mr. Kingston, can you yield for a second?
    Mr. Kingston. Yes.
    Ms. DeLauro. I will give you the additional time.
    I think there's a--isn't this a product of an administrator 
who was pushing bad loans against staff advice, and my 
understanding was that he subsequently has resigned, but he 
even had asked staff, when they began to find out about what he 
was doing here, that he asked to have the documents shredded. 
He has subsequently resigned.
    But I mean, part of what you're saying in terms of this 
rate was an administrator who was in fact pushing bad loans.
    I'll increase your time, and I'm sorry to take away, but I 
think this is an appropriate time to mention this.
    Mr. Dorr. Well, I believe that occurred prior to this 
administration.
    I'm not aware of a staffer who was doing that during this 
administration, and we are still working through those loans--
--
    Ms. DeLauro. Wasn't B&I killed after that, though, wasn't 
that the case?
    Mr. Dorr. No. No, I mean, we still have the business and 
industry loan program going forward aggressively.
    Ms. DeLauro. But the direct piece, the direct piece.
    Mr. Dorr. We, when we got there, we made a decision that we 
would disengage from making direct loans, as a result of the 
portfolio that we had.
    I was not aware of the prior activity of the prior staff 
people.

                RENEWABLE ENERGY WEALTH IN RURAL AMERICA

    Mr. Kingston. Okay. Mr. Dorr, on a different subject, you 
had mentioned that there would be a half a trillion dollars in 
wealth moving to rural America?
    Mr. Dorr. What I was indicating was that, if we're 
importing roughly 5\1/2\ to 6 billion barrels of crude oil a 
year, at $100 a barrel is a half a trillion to 600 billion, if 
we can displace a billion barrels of that, or over a period of 
decades, much larger percentage of that, that's income that can 
be largely generated from rural resources.
    I mean, biomass, wind is generally cited in rural areas, 
photovoltaics can frequently be put on buildings, large solar 
generation projects are rural in origin. So yes, a lot of that 
would be originated in rural areas.
    Mr. Kingston. Well, in terms of the money that's going 
there now, the new wealth, how much money actually gets to the 
hand of smaller farmers and the general population versus large 
corporate players?
    Mr. Dorr. That's a terrific question. It's one that I've 
spent a lot of time thinking about.
    I'm not sure we have enough time here at the committee to 
go through it.
    But I will give you one very quick example.
    Mr. Kingston. I want to say, Ms. Kaptur, I think, would 
probably be interested in this answer, as well, so if it is 
something that you can----
    Mr. Dorr. I'd be delighted to--I'll give you one example.
    My home town of Marcus, Iowa, started development of an 
ethanol plant in 2001 about the time I left. I was not in a 
position to participate in it. It went on line in 2003.
    The original shares, of which they raised locally about $15 
million, they needed some investors to put in some additional 
money, local shares were sold for $1,000 a share.
    Today, more or less, they've split, but back to the old 
basis, they're now worth something in the neighborhood of 
$9,000 to $10,000 a share.
    The company has now doubled its capacity to 100 million 
gallons.
    I believe that they have paid out nearly, at least 10 and 
maybe more thousand dollars in dividends against those original 
shares, so everybody has got their money back more than once.
    Land values have obviously escalated in the area. The 
community has built a new truck stop. They're building a new 
motel. They're building several new homes in the community.
    That plant has, I believe, probably in excess, nearly four 
dozen jobs, all high-value jobs.
    That plant was built at the very outset, at the front end 
of the ethanol, the dry mill process.
    To raise $80 million of capital in a rural community is a 
very cost-prohibitive thing, when you have to go out and do 
that many transactions.
    And so now, when you have technology and a business model 
that works, it's easier to go to Sioux City or Omaha or Des 
Moines or Washington or Toledo or wherever. You can raise the 
money in four or five or six transactions.
    My concern is not that rural Americans can no longer invest 
in this.
    What we have to do in the context of policy makers is 
figure out ways to make it less onerous for local people to 
invest in funds that developers can go to so that ultimately, 
20 or 30 or 40 percent of these funds can actually be local 
funds, but run through a local investment vehicle.
    Those are going to be state issues as well as investment 
and security regulatory issues at the Federal level.
    I think we need to address those and ultimately, if we do, 
we can keep a lot of this wealth in these rural areas if we're 
creative about how we do it.
    Mr. Kingston. Thank you.
    Ms. DeLauro. Mr. Bishop.
    Mr. Bishop. Thank you very much.
    Mr. Dorr, I know you're a short-timer, but I would like 
very much if you or some of your staff could come and visit my 
district and actually sit down with some of the communities 
like Chattahoochee County, to work through some of these 
issues, so that we can have--their basic need is just a well, 
so they can provide water and sewer.

                 BUSINESS AND INDUSTRY LOAN GUARANTEES

    But let me turn to the loan guarantees and the rural banks, 
following up on some of what was alluded to earlier.
    The rural development business and industry loan guarantee 
program guarantees loans for banks in rural communities and the 
businesses that will provide economic growth for our rural 
communities.
    There have been several instances where USDA has been 
accused of hanging these small banks out to dry, and where you 
have actually defaulted on the guarantee.
    One example, which of course makes small banks reluctant to 
participate in the guarantee program, the example is in the 
First State Bank of Blakely, Georgia.
    The complaints in my office have been that the program 
regulations placed all the responsibility on the lender to 
determine the eligibility of a proposed borrower and a loan for 
a guarantee, and in short, once the lender has certified that a 
loan is eligible, the agency must issue a guarantee, and it has 
no discretion to undertake its own review to refuse a 
guarantee.
    Shouldn't the agency have some of that responsibility? 
We've got a First State Bank participating in the guarantee 
loan program. There was a default.
    And of course, when they turned to USDA to make them whole, 
USDA said, ``No, you shouldn't have made the loan.'' And so 
they were left hung out to dry.
    And of course, we tried to intercede to assist them, to no 
avail.
    They went all the way up through the process, but still, 
you know, it left a very, very--a real chilling effect on local 
community banks getting involved in a guarantee program when 
they're worried about, if they do participate, being left out 
to dry in case they need the guarantee that's supposed to be 
brought out as a backup for them.
    Mr. Dorr. Well, I'm not familiar with this particular 
situation. I also know that there have been some of these kinds 
of cases that have arisen over the years.
    We have, at least I have aggressively tried to institute 
processes and oversight in a way that would preclude these 
sorts of things from happening, but I would be glad to sit down 
and review it with you or, you know, get into this.
    I do know that it is, historically, it has been the 
requirement in the guarantee program that the banks provide 
servicing of these guaranteed loans. They originate them.
    We know that they can sell off part of the loan. But we 
also know that by servicing, they can also generate revenue.
    But we do expect them to service the loan, because we don't 
have people out there next door to whomever this new company 
might be.
    I suspect in this particular case there were probably some 
disagreements as to, you know, how the servicing was handled. I 
don't know.
    But I do know that we're doing everything we can to try to 
make certain that those kinds of issues don't occur on a 
regular basis----
    Mr. Bishop. Do you understand then the concern that the 
subcommittee has with the shift of the guarantee program away 
from the direct programs which seem to be backing away from 
providing the service to the people who actually need it, and, 
you know, it's almost passing the buck, and not really actually 
grabbing the bull by the horns to help our rural communities 
that need the help, where there is the poverty, where there's 
the greatest need for economic development, the greatest need 
for the broadband and the Internet to try to equalize that 
playing field, but it seems as if the policies that you're 
putting in place are actually doing the opposite to what you 
profess to be your objective.
    Mr. Dorr. These issues that you raise relative to this 
First State Bank of Blakely are, in all sincerity, rather rare, 
and so I mean, I understand your concerns, but I do believe 
that, in the long run, and it takes some time to transition 
into these, but in the long run, the wealth that we create, 
that's created by this partnership of local participants, the 
local banks, the local entrepreneurs, that the loan guarantee 
from the Federal Government in the long run pay pretty 
substantive dividends.
    We certainly would be delighted to come down and spend some 
time, even in the short time we have, to see if there is 
something that we can do that would address some of these 
issues.
    Mr. Bishop. Thank you. But may I just make one statement, 
Madam Chairman?
    The problem is that, and when you look at rural 
communities, you don't have a lot of rural banks, and they all 
know each other and they all are aware when one of their 
brother banks, brother or sister banks gets burned, and they 
try to learn from those experiences, and if they don't trust 
USDA, the guarantee program, they're not going to participate, 
because they don't want to be stuck like their neighbor was 
stuck.
    Ms. DeLauro. Mr. Lahood.
    Mr. LaHood. Thank you, Madam Chair.

                           BROADBAND FUNDING

    Let me go back to this broadband issue.
    The chairwoman brought to my attention, that you had the 
authority to provide broadband loans at 4 percent, but none of 
those funds have been requested for this program, and so we're 
curious as to your explanation why these funds have not been 
requested for these broadband loans at 4 percent to rural 
communities.
    Mr. Dorr. I believe in the budget that we proposed we were 
also, excuse me, in the Farm Bill proposal, we had added, I 
believe it was about 375 million as proposed infrastructure 
issues that would have been utilized in the broadband area in 
conjunction with the anticipated carryover funds that we had in 
the existing program.
    Mr. LaHood. So are you saying that because you were 
writing--participating in the writing of the farm bill, you 
decided to use this money and lop it over into that program, or 
lop it over into the new farm bill, or what?
    I don't understand----
    Mr. Dorr. We were, we have embarked on something called the 
Delivery Enhancement Task Force, which could get pretty muddy, 
but essentially what it is is a process to, and I may have 
mentioned this last year, but we historically say we have 
somewhere between 40 and 50 programs in rural development.
    Essentially what we have are grant programs, direct loan 
programs, and loan guarantee program.
    They were so convoluted and complex that it seemed to make 
sense that we ought to look at how we could mitigate the 
delivery, the ease of delivery, both for our constituents and 
for our associates and their ability to deal and roll out these 
new programs.
    What we've done essentially is aligned them, what we call 
platforms, a loan platform, a direct loan platform, a loan 
guarantee platform, and a grant platform.
    In the Farm Bill proposal, as we laid this out, we 
delivered, we developed a grant platform approach, and in that, 
we put, and a loan guarantee approach, and we plugged in a 
number of these new options and new approaches in the context 
of the Farm Bill proposal with the budget authority, what I 
believe in the overall president's proposal was about $4.8 
billion over baseline. That obviously is a subject for debate 
that's still going on.
    So no, we did not displace funds. In fact, we enhanced our 
rural development programs with the way in which we approached 
that and layered on the 2009 budget approach.
    Mr. LaHood. Well, you're from Iowa and I'm from Illinois. I 
just want a simple answer to the question.
    Why didn't you request the funds? Why weren't the funds 
that were a part of your budget at a 4 percent rate, why 
weren't they requested?
    Just give me a simple answer. Don't do bureaucracy speak to 
me here.
    Mr. Dorr. We thought we had adequate funds and we thought 
it was appropriate the way we budgeted them into the Farm Bill 
proposal.
    Mr. LaHood. So you didn't want to spend them under the 
current program, you wanted to put them into the new farm bill?
    Mr. Dorr. We had authority under the current program with 
carryover dollars, and we felt that, in conjunction with what 
we would get through the Farm Bill proposal, would be more than 
enough to take care of that program.
    Mr. LaHood. So rather than requesting the money, you 
decided to take that money and include it as a part of the new 
farm bill? Is that right?
    Mr. Dorr. I believe that's probably one way of viewing it, 
yes.
    Mr. LaHood. Look, if your previous answer to my question 
earlier under the first round was that you're committed to 
broadband, which I believe you are, coming from Iowa, I know 
you know the value of it, and you expressed that, I don't 
understand why, you know, if there are--I know in Illinois 
there's some broadband proposals out there. Senator Durbin has 
been leading the charge on this with our delegation.
    I don't quite understand why, when you know there are 
proposals out there, you wouldn't make the request for the 
money for those states that are ready to go or at least want to 
get this program started, rather than moving it into a new farm 
bill. I don't get it.
    Mr. Dorr. That was the decision that was made. That's----
    Mr. LaHood. By the secretary or who?
    Mr. Dorr. It was a decision that we made as we put together 
our budget in the context of the entire budget proposal for 
both the 2009 budget and obviously what we felt was an 
appropriate and a progressive Farm Bill proposal that was 
submitted in January of 2007.
    Mr. LaHood. I'll be honest with you.
    You know, your answer in the first round showed a strong 
commitment to broadband.
    Mr. Dorr. That's correct.
    Mr. LaHood. This mechanism, by transferring the money, 
shows no commitment to broadband.
    You had money. It was never requested. There are states out 
there that are ready to go with broadband. And yet you're 
lopping it over to a new farm bill, which we can't get 
agreement on.
    You know what? I don't understand the logic of that, at 
all.
    Was that your decision or was that--I'm asking, was that 
your decision or the decision of somebody higher up?
    Mr. Dorr. It was a decision that we worked out within the 
department.
    Mr. LaHood. Did you agree with it?
    Mr. Dorr. Yes. I mean, it was a decision that we concurred 
on.
    Mr. Bishop. Will the gentleman yield?
    Mr. LaHood. of course.
    Mr. Bishop. You're saying that when you were working out 
your budget, Mr. Dorr, for that particular project's programs, 
you didn't consult with OMB at all?
    OMB had no part in your decision not to request it and the 
decision to carry it over rather than request it?
    Mr. Dorr. Certainly there are a number of people involved 
in these decisions.
    Mr. Bishop. I'm talking about the agency, OMB, Office of 
Management and Budget----
    Mr. Dorr. Certainly.
    Mr. Bishop [continuing]. White House.
    Mr. Dorr. Mr. Steele's office, the Office of Management and 
Budget, a number of us worked together on these projects, and 
when we get down working through them, we clearly come to a 
conclusion.
    I think that there was--wait a minute, what's this?
    Mr. Steele. Excuse me.
    In the budget, we have $298 million of direct loan activity 
for broadband.
    Mr. Dorr. Right.
    Mr. Steele. In the budget.
    Mr. Dorr. Right.
    Mr. Steele. We're not eliminating anything, we're trying to 
continue----
    Mr. Dorr. Exactly.
    Mr. Steele [continuing]. The broadband direct loan program.
    Mr. LaHood. Madam Chair, can I just ask my question again? 
I'm going to just read this to you.
    You have authority--you have authority to provide broadband 
loans at 4 percent to rural communities where broadband 
services do not currently exist, yet you have not requested 
funding for this program.
    It would seem this subsidized program would help get 
broadband to rural, underserved areas, so why are you not 
requesting funding?
    And your answer is, because you took the money--well, fine.
    Shake your head no. Give me a better answer, then. If you--
are you telling me there's $270 million in the current budget?
    Ms. DeLauro. But it is at Treasury rate. It's at Treasury 
rate. It is not at the 4 percent rate.
    You're using the Treasury rate dollars and, the Treasury 
rate, and not the 4 percent rate.
    Mr. Dorr. That's right. And the Treasury rate money is 
very, very close to the 4 percent money.
    Mr. LaHood. Well, look, please don't tell me that you're 
committed to broadband when you haven't requested the money and 
you took the money and lopped it over into a new farm bill that 
we haven't passed yet.
    So please, sir, don't tell me that you're committed to 
broadband when you haven't requested the money, and there are 
states out there that are ready, including Illinois.
    The silence is deafening. Thank you.
    [The information from USDA follows:]

    

    
    Ms. DeLauro. Thank you, Mr. LaHood.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Madam Chair.

                          DEFINING RURAL AREAS

    In last year's questioning, Mr. Secretary, I asked you 
about certain dysfunctions inside of the rural development 
budget where you have agricultural enterprises that are 
operating within cities, and obviously cities aren't eligible 
for agriculture funds.
    For example, greenhouses. I represent the two largest 
greenhousing, floriculture, nursery counties in Ohio.
    The response of the agency last year to me when I said, 
``Can you look at site specific agricultural enterprises that, 
through no fault of their own, are inside city limits and are 
neglected enterprises,'' the answer the administration 
submitted back to me was that, ``Rural development is aware 
that, for example, greenhouses are among those entities that 
have been feeling the effects of population growth and 
increasing density in formerly rural areas. We are hoping we 
can complete our research and consider alternatives to our 
current methods of determining location-based eligibility 
issues.''
    Could you tell me, or someone from the agency, have you 
made any progress on that research, and what do we have to 
offer rural enterprises that, through no fault of their own, 
end up being inside a city or inside an urban county?
    Mr. Dorr. We've actually laid on the table in the Farm Bill 
debate a proposal that would make available B&I loan guarantees 
to a city or town with a population of 50,000 or more, that 
would exclude communities of 50,000 or more, and the urbanized 
area that is contiguous and adjacent to it.
    To the extent that these communities of 50,000 with 
urbanized areas contiguous to it are where these operations are 
located, then, frankly, we are precluded statutorily from 
making loans to them.
    Ms. Kaptur. But if they are under the IRS Code in every 
other measure an agricultural enterprise, all I'm asking you to 
do is to look at their conundrum.
    Most of our small truck farmers and our orchard producers, 
our greenhouse growers, are near their market, and I'm not 
asking you to make a major change in the way that you deliver 
programs, but if you look at these struggling enterprises that 
are the major farms that feed our--that give donations to our 
food banks, that operate without any government subsidy--these 
are unsubsidized, they're not necessarily row crop producers, 
but they are growing vegetables, they're growing fruits, 
they're growing herbs, they're operating their greenhouse 
floriculture nursery--there's some dysfunction within USDA.
    I understand the definition, and I heard what Congresswoman 
Emerson said about all this money goes to urban areas.
    Well, there's quite a bit of money that goes to rural areas 
for row crop producers. But if you are an unsubsidized farmer 
and you are out there in the market and USDA ignores you, 
that's not right. That's not right.
    There ought to be some kind of way to make a, we used to 
just call it nonconforming use in city planning. If they're 
operating as agriculture, see them as agriculture.
    Mr. Dorr. We are precluded by statute from making these 
loans. If the statute is changed, then we could address this 
issue.
    But if they are statutorily precluded, I'm not certain what 
either Rural Development or anyone else in USDA can do to 
mitigate--
    Ms. Kaptur. But there ought to be a waiver, there ought to 
be ability for a waiver. I would appreciate any advice.
    We don't want to mess up your operations, but it's unfair 
to these people, most of whom are small businesses, small 
family run enterprises, to treat them any different than 
somebody who is outside, you know, the border of the city 
limits or the county limits, when they're in the same business.
    So I would really, I'm urging you, please, give me ideas.
    Mr. Dorr. Well, I think it is an, it requires some sort of 
statutory fix.
    I suspect if I waived statutes that you and your members 
put in place, I would be spending time someplace else.
    So we can waive a reg, but I'm not aware----
    Ms. Kaptur. Maybe you need a waiver authority is what I'm 
saying. I can't believe that other members don't have this 
issue.
    And it's come up time and time again, if a greenhouse is 
located five miles down the road, they're eligible, if they 
live in a town of 5,000, but if somebody happened to end up in 
the city next to this area, and they're stuck there with all 
the other--I mean, hey, I got farmers with tractors being 
stolen inside the city limits.
    I mean, there's all kinds of issues these people face, and 
yet USDA turns their back on them.
    I think there ought to be some type of waiver authority. 
Maybe we have to write it into law.
    I know my time has expired, Madam Chair, but this is really 
frustrating. And America today has over 300 million people.
    When I was born, they had 146 million people. We're just 
getting more and more--we'll have 500 million people by 2050 in 
this country.
    And, you know, our objective is so help the farmers that 
want to stay in business, so something is not right there, and 
I was just looking for any suggestions you might have.
    We'll write legislation up here, but your vast experience 
might help us tailor it in a way that would not be terribly 
difficult for you to implement. That's what I was----
    Mr. Dorr. I would be delighted--if you would send a request 
to us, we would be delighted to provide whatever assistance we 
could in drafting.
    Ms. Kaptur. Thank you.
    Ms. DeLauro. Ms. Kaptur, let me just say as well, that when 
we get the information, we ought to sit down and have committee 
members and so forth take a look at this and see what might 
make sense, because your point is well taken that there's 
probably a lot of communities that are facing the difficulty.

                     BUSINESS AND INDUSTRY PROGRAM

    Let me make a point about the guaranteed business and 
industry loan program that's been talked about a lot today. The 
President's budget proposes to reduce funding for the 
guaranteed business and industry loan program by $300 million. 
The budget also proposes to eliminate rural business enterprise 
grants, rural business opportunity grants, renewable energy 
loan and grant program, the value-added producer grants.
    I continue to say that given that the farm bill may not be 
passed before fiscal year 2009, though we all hope it will be, 
I have not seen any indication, any information, and I suppose 
what I'd like to do is to understand from you and for the 
record, if you will, if you will lay out for us how do we plan 
to fund all of these programs while reducing the guaranteed 
business and industry loan program? So if you could provide 
that information for us, it would be helpful.
    [The information follows:]

                     Rural Business Program Funding

    When the President's FY09 budget was formulated, we anticipated 
that a new Farm Bill would be in place by FY09. The Administration's 
Farm Bill proposal includes provisions and funding for the Renewable 
Energy loans and grants program. The Farm Bill also proposes authority 
for a business grant platform. If mandatory funding does not 
materialize for the programs proposed in the Farm Bill, they can be 
operated with discretionary funding at the levels that Congress 
appropriates.

                     RENTAL ASSISTANT PILOT PROGRAM

    Let me ask about the rental assistance pilot program. The 
President's budget request is for a new $100 million pilot 
program for rental assistance vouchers to target rental 
assistance to low-income tenants rather than the property 
owners. Why is the pilot program necessary? Wouldn't the 
existing voucher program allow you the same flexibility that 
you are seeking?
    Mr. Dorr. Russ, do you want to deal with that one?
    Mr. Davis. Yes. You've asked two questions. First of all, 
why is it necessary? And two, could the current program handle 
it? The necessity is that there have been great changes in the 
population in rural America, and where we built the houses 40 
years ago is not necessarily where the people or the need is 
any more.
    We're asking that about a tenth of our portfolio have the 
flexibility essentially to have the subsidies follow the people 
instead of being stuck in--nothing against Western Kansas, but 
there are places in the country that have had serious 
migration. So there's a flexibility aspect of that.
    Also, there's a cost aspect, that there are markets where a 
voucher would be cheaper than the property that is there, 
particularly the older, obsolete properties that have high 
energy costs and so forth. So, more flexible and cheaper.
    As to whether we could use the current voucher program, we 
only have a one-year demonstration, and we thank the committee 
for that. We're actually saving, we saved 1,700 families last 
year from eviction or loss of their home by having those 
vouchers. But right now their only protection vouchers. They 
can only be used for somebody who is in a property that's being 
lost to the program. So we can't use those vouchers for 
anything greater.
    Ms. DeLauro. So what will--the properties that are there, 
what will happen to those properties?
    Mr. Davis. According to our engineering study, about a 
tenth of our portfolio is economically or physically obsolete. 
Properties get old, and we have properties----
    Ms. DeLauro. And you don't have the current tools to put 
those properties in shape?
    Mr. Davis. Well, the biggest tool we have right now is the 
revitalization program. Again, that's a demo that this 
committee has given us, and we're saving about a hundred 
properties a year with that, so that's a great program. But 
there are properties that they're just too old, and it would 
cost too much to fix them.
    Ms. DeLauro. So you would raze them? R-a-z-e.
    Mr. Davis. Well, we wouldn't do that. We would sell them 
off into the private sector essentially through whatever 
mechanism, foreclosure or whatever. The private sector would 
take those and we would use the vouchers to----
    Ms. DeLauro. Can you get for us, you know, examples of the 
properties that you are describing, and----
    Mr. Davis. Sure.
    Ms. DeLauro [continuing]. You know, where they are, what 
they're----
    Mr. Davis. We would be happy to. And--go ahead.
    [The information follows:]

    Rural Development's primary priority is to protect tenants, either 
through provision of the affordable rental housing itself or through 
vouchers that will make it easier for tenants to have access to 
affordable housing.
    A small percentage of Rural Development's Multi-Family Housing 
properties have come into disrepair and require substantial funding to 
rehabilitate in order to make them decent, safe and sanitary. We are 
uncertain of the exact scope of this type of property within our 
portfolio at this time. Sometimes, the cost of rehabilitation far 
exceeds the cost to build new housing, or it is not economically viable 
to rehabilitate a property due to economic conditions impacting demand 
for rental units in a particular market.
    The following are several recent examples of properties where it 
was determined to be more practical to provide alternatives through the 
use of vouchers than repair existing units.
    A property in Alaska suffered structural damages. Alaska's harsh 
weather and negligence by the owner combined to create serious physical 
problems that made the units uninhabitable. This is a 40-unit property, 
currently less than half filled. The estimated cost to bring this 
property to acceptable condition was $6.5 million, or $163,000 a unit. 
USDA Rural Development has executed foreclosure and plans to sell the 
property to mitigate losses. The tenants will be provided Rural 
Development vouchers when the foreclosure is finalized.
    In Oregon, a 38-unit property which had suffered from years of 
neglect resulted in USDA Rural Development taking the property into 
inventory through receivership. As the Receiver, Rural Development has 
worked to find an acceptable owner to take over the debt and pay the 
cost of repairs to this property, which is estimated to be $2,965,000 
or about $78,000 a unit. No such buyer who will operate the property 
under federal standards can be found. Since a viable owner cannot be 
identified, USDA Rural Development has executed foreclosure and plans 
to sell the property to mitigate losses. Tenants are eligible for Rural 
Development vouchers which may be used elsewhere to obtain affordable 
housing.
    In Louisiana, a 16-unit property was severely damaged by Hurricanes 
Katrina and Rita. Insurance proceeds were minimal. While waiting for 
the insurance appeal to be resolved, the property suffered additional 
damage from mold that was not covered by insurance. The pervasive mold 
could only be mitigated by tearing down the structure. The owner was 
unable to obtain tax credits to help finance rebuilding the property. 
The new construction cost of this property is estimated to be 
$1,733,000 or $108,000 a unit. Cited by the town because the property 
was a health and safety hazard, the owner has demolished the property. 
Rural Development vouchers for displaced tenants have been provided 
that may be used to secure other affordable housing.

    Ms. DeLauro. No, no. You go ahead.
    Mr. Davis. I was just going to say that there's two 
preservations problems we face. One is preservation of the 
subsidies, but preservation of properties. Properties get old, 
roofs fall in, there's fires. And we're trying to, it's that 
second category that actually has a bigger risk to us. Ninety 
percent of our properties have inadequate reserves to last 
another 20 years. We're very concerned about the physical 
protection of the program.
    Ms. DeLauro. I will just express our concern here is that 
are we looking at a proposal to reduce the amount of rental 
assistance necessary in future years? And that is truly what 
concerns me with this effort, because as I take a look at what 
happened with HUD, with the Housing and Urban Development, we 
did move from project-based contracts, and then we moved to 
tenant-based focus, and now what we have seen is the scaling, 
drastically scaling back of those tenant-based vouchers and 
Section 8, et cetera. Are we looking at a similar trajectory 
here of a project tenant moving downward to less rental 
assistance?
    Mr. Davis. Absolutely not. Our policy is to renew contracts 
and to protect all of our low-income tenants. Our budget 
increase is I believe $500 million for rental assistance.
    Ms. DeLauro. It's $518 million. So let me just add this for 
a second and have my colleagues bear with me. You say that 
that's to renew 82 percent of the 2009 expiring RA contracts. 
Are you proposing to not renew 18 percent of the expiring 
contracts in 2009?
    Mr. Davis. Well, the dollar amount is sufficient to handle 
100 percent of the subsidized units. What we're saying is that 
there is a portion of the portfolio that we can house those 
people cheaper and more flexibly with vouchers. But this is not 
a major drastic change. This is for the small part of our 
portfolio, 10 percent that we think is obsolete, misplaced, 
overpriced. And this is a fix, not a change.
    Ms. DeLauro. But one-tenth is about 18 percent.
    Mr. Davis. I'm not sure about the 18 percent.
    Ms. DeLauro. I mean, no, there's the one-tenth that--18 
percent----
    Mr. Davis. The difference is that there is about 10 percent 
of the portfolio has long-term contracts. They had five or 20-
year contracts, and those don't need to be renewed. They have 
enough cash in the bank to go for another 5 or 20 years. So 
we're talking about just a small portion of the portfolio.
    Ms. DeLauro. Mr. Kingston.

                           FARM LABOR HOUSING

    Mr. Kingston. Thank you, Rosa. Mr. Davis, you had mentioned 
earlier about you found that it was costing $150,000 a unit for 
apartments. Do you want to expand on that?
    Mr. Davis. Well, this is the farm labor housing program. 
There are a couple of things that add to the cost. Number one, 
it's subject to Davis-Bacon 515 isn't. There are a lot of 
things like that. But also farm labor housing has to be made 
stronger. There's a lot more turnover in the units, and so we 
have to use heavier materials and just build them stronger 
because people are in and out of there with boots, mud, 
whatever. It has to be built tough to last.
    Mr. Kingston. How much extra does Davis-Bacon cost?
    Mr. Davis. I could get you numbers on that. I'm not--I know 
that there are a series of different provisions for new 
construction of farm labor that we don't have in 515.
    [The information follows:]

    The section 516 Farm Labor Housing (FLH) grant program requires 
that all projects utilizing grant funds must certify that laborers 
building or rehabilitating the property must receive prevailing wages 
as required under Davis-Bacon. Projects that utilize only the section 
514 Farm Labor Housing loan program do not have this requirement, nor 
does the section 515 Multi-Family Housing new construction or 
rehabilitation programs. However, the majority of the FLH projects 
financed by Rural Development utilizes a combination of both section 
514 FLH loans and section 516 FLH grants, and consequently must abide 
by Davis-Bacon wage determinations.
    USDA Rural Development does not have precise figures on the 
additional costs the prevailing wage requirement adds to the overall 
costs of the FLH projects. It is estimated that labor is approximately 
30 percent of the cost of building a FLH project and that the 
prevailing wage requirement adds approximately 20-30 percent to the 
cost of the labor. With the average cost of building a FLH unit at 
approximately $150,000 based on the 2006 data, the labor component is 
estimated to be approximately $45,000 per unit. The impact of Davis-
Bacon is estimated to add approximately $10,500 per unit or 
approximately 7.5 percent of the cost per unit.

    Mr. Kingston. And when you say that they have to be built 
stronger, stronger than what? What are you comparing it to?
    Mr. Davis. Well, I'm comparing it to our Section 515 new 
construction. But a lot of it is just the type of the units 
have changed. We used to build a lot of dormitories. You could 
put four bunks in a room. Now we're building four- or five-
bedroom units because we're seeing large families instead of 
single migrant workers, we're seeing a lot of families who have 
large numbers of children and then the parents go work farther 
out. It's just a different product.
    Mr. Kingston. Are these for H2A workers or for anybody?
    Mr. Davis. We have--and Section 514 and 516 of the Housing 
Act restricts us to only citizens or permanently admitted 
aliens with green cards. H2A doesn't fall under that, and so 
we're limited.
    Mr. Kingston. Do you have any other problems that you want 
to bring up on it?
    Mr. Davis. On farm labor housing?
    Mr. Kingston. Yeah.
    Mr. Davis. You know, obviously, we support the idea of farm 
labor housing. It's just in its current configuration, we can't 
put the money out responsibly and in a way that we think is--we 
can do it other ways a lot cheaper. Let me put it that way.
    Mr. Kingston. Okay. Let me yield back.
    Ms. DeLauro. Let me just take--well, Mr. Bishop.

                  RURAL COOPERATIVE DEVELOPMENT GRANTS

    Mr. Bishop. Thank you very much. Rural cooperative 
development grants program is small, but it's very effective in 
funding co-op development centers that provide critical 
technical assistance to co-ops that are revitalizing rural 
communities. Despite annual demand, which more than doubles the 
amount that's been given out annually, the program has never 
received more than around $6 million or $6.5 million.
    Given this fact, given the fact that the program has 
leveraged millions of dollars for cooperative development in 
rural areas, created hundreds of jobs and businesses, and 
providing grants to far fewer centers that are seeking to be 
funded, wouldn't it make sense for you guys to be requesting 
more money for this program by rural areas?
    Mr. Dorr. I believe that the way the program is presently 
operating, we are addressing the majority of the needs.
    Mr. Bishop. You're saying that you didn't have a greater 
demand than you were able to fulfill?
    Mr. Dorr. We always have greater demands than we can 
fulfill, on virtually any program at a particular point in time 
or in whatever set of unique circumstances.
    Mr. Bishop. Isn't this acute? I mean, don't you always have 
that repetitively every year? A greater than demand than you 
have funds? And wouldn't that suggest in your planning that you 
would ask for more money?
    Mr. Dorr. There is always an acute demand for grants. 
There's no question about that. Grants are obviously something 
that people look at a great deal. What we have tried to do with 
this Rural Development grant program is foster an appropriate 
utilization of those funds to build out other economic 
opportunities, and I am certain that if we had more grant 
funds, there would undoubtedly be requests for them. We believe 
this is an appropriate level for that program.
    Mr. Bishop. But if you run out, and if the program is 
delivering the desired results, wouldn't that magnify your 
results if you asked for more money and you were able to 
magnify your output? Wouldn't that give you greater results?
    Mr. Dorr. If that was the result, yes, that would.
    Mr. Bishop. Are you saying that they're not working?
    Mr. Dorr. No. I'm not saying that they're not working. I'm 
saying that there are challenges to any grant program, and we 
believe that, I think we've requested this year about $5 
million for the program. We work closely with those that are 
engaged in the program. We're actually trying to work on a 
couple of agendas, not agendas, but a couple of projects that 
enhance the productivity from producers that are involved in--
--
    Mr. Bishop. Isn't that a drop in the bucket, though, 
compared to many of your other programs? This is a small amount 
of money that has the capacity and the potential and has 
apparently proven to be exponential in the results that it 
gives. So why would you cut back on that when--I mean, it's 
like being penny wise and pound foolish.
    Mr. Dorr. Well, certainly there are challenges for 
resources, and this was a decision that we made, and we may 
disagree on it, but we believe that this is--this is a program 
that continues to function pretty well the way we have it, and 
we continue to work with the participants.
    Mr. Bishop. I just--I'm just baffled that you have such 
lofty goals and objectives, yet you, when it comes to acting on 
them, you seem to be actually doing the opposite. You know, 
you're cutting back your requests for resources to deliver on 
the programs that you say are so important and that are so 
workable. It sounds like doublespeak.
    Mr. Dorr. Well, Mr. Anderson just sent me a note, and he 
indicated, because he administers the program, but he had 
indicated that this is pretty consistent with the demand. And I 
believe that's true. We have not had substantively greater 
demand for that program than, I think we've got $5 million in 
the budget for that this year.
    Mr. Bishop. And last year it was six, six and a half?
    Mr. Dorr. No. I think it was five. What was it, five last? 
Okay. It was $9 million last year. Excuse me.
    Mr. Bishop. You reduced it 40 percent.
    Ms. DeLauro. Ms. Kaptur.

                     RENEWABLE ENERGY OPPORTUNITIES

    Ms. Kaptur. Thank you, Madam Chair. Mr. Secretary, again I 
repeat your quote, which I really like, ``renewable energy is 
the biggest opportunity for economic growth and wealth creation 
in our lifetimes.''
    And I'm glad my colleague, Congressman Kingston, has 
returned, because I wanted to follow up on his excellent 
questioning a little bit earlier, and our mutual desire to keep 
wealth and grow wealth so that those who are most involved in 
agriculture and in production benefit. And I don't believe we 
have the financial structure yet. It's evolving, but we don't 
have it yet, that permit them to buy in and to benefit.
    We've had several, for example, in Ohio, that have tried to 
raise the capital you talked about and found themselves unable 
to do this so some of the big players in the market come and 
get involved and are moving forward.
    I want to share a quote. You mentioned the Anderson Company 
in our discussions yesterday. And there was a great--one of the 
Andersons was Bob Anderson, who is no longer living. And he 
said to me, you know, Marcy, he said--and they've been involved 
in agriculture and farming in our community for generations--he 
said where we went wrong in farming years ago is, he said we 
didn't allow the farmer to buy up the chain of production.
    We didn't have the financial means for them to do that, and 
so now we face an agriculture in America where two or three 
companies own the ability to control the chicken market, the 
poultry market, three or four the beef market. I mean, if you 
really look at the way this is structured. And in many cases, 
our farmers are becoming sharecroppers again rather than--this 
may not be happening in Iowa, but I think it is to some 
extent--where people become contract farmers rather than 
freeholders.
    And this is a system I personally do not like, especially 
with East European background, I know what that system feels 
like at its worst, and it's not a good system. We always--our 
country was founded on freeholding. This was the idea. And what 
I am concerned about in the energy market and where I think you 
are in a unique role, because of your combination of farming 
and business background, we need a mechanism to permit farmers 
and others who support the development of this energy industry 
across rural America to buy in.
    I think back to the old Roosevelt model of postal savings 
stamps. This will sound a little strange. But we found a way to 
get a denomination that people could buy, no matter what their 
income, and they ended up buying into that security, that bond.
    We need something that will permit individuals, perhaps 
even communities that want to come together and help, to buy 
into this industry that is just growing at such a fast rate it 
sort of scares me sometimes, because I think maybe this is 
going to go the route of the dot.coms. And because we don't 
have the financial mechanism in place, we're going to have a 
lot of collapses. Bad things are going to happen, because we 
don't have the financial architecture in place.
    We've had situations where foreign companies are coming 
into Ohio and trying to strike deals with our Farm Bureau, for 
example, to just lease, say to our farmers, you know, well, 
we'll lease a corner of your acreage there. You know, we'll pay 
you fifty bucks a month or a hundred. You know, it sounds 
great, right? No. Because they don't own it.
    So my question to is, in your meetings, are you thinking 
about a way of creating a financial mechanism so that 
individuals and farmers can--and those who would want to help 
this industry grow, where we could either securitize or bond or 
find a means for them to buy in to create that financial 
platform? We had a biodiesel plant just blow up in our region. 
Thank God nobody was killed. But they were scraping pennies to 
try to make this thing work. It shouldn't be that hard. USDA 
should be there. And they actually got one of those 900----
    Mr. Dorr. Six.
    Ms. Kaptur [continuing]. Six? Five hundred thousand dollar 
grants, you know. They got used equipment. They were trying to 
do this, and I think, you know, these are inventive people. 
They shouldn't have to go through--it shouldn't be this hard 
when they want to do this.
    Our counties, that our urban counties want to buy some of 
what they're producing to power, let's say our downtown civic 
center, there's no means to connect the city to the producers 
out there, to take the biomass material and bring it in. It's 
too hard. It's too hard to--we've got to find ways to connect 
rural to urban procurement, and we've got to find a financial 
means to help them invest and to let these deals go forward.
    You have guarantee authority. You have some loan authority. 
I know you're thinking about this already. Can you share any of 
that with us at a big enough level where it would make a 
difference in communities that are trying to bring up these 
new, and invest in these new wind farms and solar fields and so 
forth?
    Mr. Dorr. Well, we have given a lot of thought to it. I 
think these are of statutory and ultimately regulatory issues 
that probably have to be addressed at some point. The reason 
largely--and I've said this earlier--the reason that many of 
these distributed energy systems are cost effective is because 
you have distributed computing. That means that in a general 
sense, the size and the scope of these various projects will be 
considerably smaller, yet they'll be multi-million-dollar 
projects than if you were dealing with a 400 megawatt nuclear 
or coal-fired generation plant or a more traditional fossil 
fuel refinery of some sort or a coal mine.
    Once they begin to work, then it becomes very easy to 
finance them. The transaction costs involved in trying to get 
local investment in small sums is a dealbreaker. It kills it. 
So what you have to try to do in the bigger sense, in the 
bigger picture, is figure out ways to mitigate the transaction 
cost, to mitigate the business model and regulatory issues to 
aggregating those resources so that you can allow local 
ownership or local participation in these projects.
    And that, frankly, in many cases, is as much a state issue 
as it is a Federal issue. For example, how do you integrate a 
20 megawatt wind farm into a legacy REC or investor-owned 
utility transmission system? They react and say, you know, we 
can't put this in our net metering basis because we already 
have contracts. We already have commitments. And they're right. 
Does that mean that they're wrong or that they're nasty because 
they won't let you in? No. It does mean that we have to sit 
down and get realistic and sensitive about what do we have to 
do to develop new regulations and new business models that 
acknowledge the kind of consistent demand in electric growth 
that occurs in Toledo or wherever and that part of that can be 
met by these community-owned wind projects or these other 
distributed owned energy opportunities in ways that make that 
sense. I think it can be done, but it's just going to take a 
lot of hard regulatory and public policy work to develop the 
mechanisms to do this.
    Ms. DeLauro. Thank you. I just have two or three questions 
to finish up. I don't know if my colleagues do. If we do, we 
will get these questions answered. I think Mr. Kingston doesn't 
have any more questions. But if one should come to your mind, 
Mr. Kingston. And we are over the time, but we won't take your 
time much longer, Mr. Secretary.

                           BROADBAND PROGRAM

    On the broadband issue, just a couple of comments. It 
looks--the OIG in their audit in September 2005 found that the 
program had not maintained its focus on rural communities 
without preexisting service. Eight hundred ninety-five million 
dollars in loans, grants, funded at the time are reviewed--OIG 
reviewed 599 million and questioned the use of over 340 
million, almost 57 percent of the approved funds reviewed.
    I'm still concerned that RUS is not focusing the loan 
program on unserved communities, and there is going to be 
another OIG review, as I understand it. Publishing the final 
rule that would incorporate changes recommended in the 2005 OIG 
report has been delayed by the Department to incorporate 
additional changes made to the program once again in the farm 
bill.
    Will you move forward and publish the final rule if the 
farm bill is not signed into law by April 30th, 2008?
    Mr. Dorr. We will certainly proceed, depending upon what 
happens with the Farm Bill, to get the final reg out, yes. I 
believe that is incumbent upon us to do that.
    I would like to just for a moment go back to the discussion 
that I had with Mr. LaHood.
    Ms. DeLauro. Yeah. Let me just----
    Mr. Dorr. Sure. Certainly. Go ahead.

                            OPEN RANGE LOAN

    Ms. DeLauro. Could you have made the open range loan under 
the new rule as the loan is currently structured?
    Mr. Dorr. In all likelihood, it may have been very 
difficult. And therein again gets to the issue of why this 
program is so difficult to administer. Because trying to 
identify those areas that could stand on their own or they're 
completely unserved and underserved is very difficult.
    Ms. DeLauro. Well that is--it would appear that your answer 
is a no in that respect or it would have been more difficult. 
So I don't know what additional modifications would be 
necessary to make the loan agreement meet the requirements of 
the final rule, which is more unserved areas, less competitors 
allowed into underserved areas.
    And I'm going to submit for the record, which is one of the 
reasons why in terms of the vigilance and the monitoring of 
this loan is something that I believe that this committee has 
an obligation to look very, very carefully at, and in terms of 
what would be useful to us in terms of that monitoring and the 
reporting requirements on this loan, because I think we have--
are within a month of a new rule with regard to this, and then 
we have just negotiated the largest loan in the history of this 
project--of this program that will not conform to a new rule. 
And it has been delayed because of a farm bill.
    And it would seem to me that we have almost allowed 
something to happen without the new set of rules and 
regulations that we want to implement, and it is of a magnitude 
and scope that is beyond anything else that we have done and 
that we may have the ability to monitor in the way that would 
ensure that federal dollars and taxpayer dollars and everybody 
else's dollars are going to be safeguarded.
    Mr. Dorr. You make some good points. But let me point the 
following out. This loan has ultimately become, we believe, a 
very strong loan. It took over two years to make the loan, as I 
indicated before. It is using very unique new technology. There 
are certain prescriptions that suggest that if they are, if in, 
and I believe your staff has seen a copy of the letter of 
conditions or the attachments that went with that loan--if 
certain conditions are not met by September 1 of 2008, we 
clearly have the ability to, if we so choose, rescind the 
obligation of that loan. And I can assure you that we are going 
to monitor this very closely.
    For the first time in a loan of this nature, I have 
specifically indicated that we will assign three of our general 
field representatives who will do nothing but live, eat and 
breathe this loan from the time they break ground, and it is a 
go, until it is done. We will work with the firm and work with 
our State Rural Development directors to make sure that all 
rural citizens are aware of this opportunity as it's spelled 
out in those states.
    Again, I go back to the fact that we all want broadband 
deployment, and we all realize that we are effectively redlined 
without access to the Internet. And yet there are a varying 
number of competitive technologies that are out there that make 
it very complicated for the Federal Government to intrude in 
the private sector's realm of opportunity. And whether we're 
doing it, in the final analysis, right or wrong I guess history 
will judge. But we're doing the best we can and our staff is 
doing I think an extraordinary job of trying to pull this 
together.
    Ms. DeLauro. I don't deny that, but I do say this, and I 
will repeat, because I think it's important to know that we 
have spent how long in terms of putting together this new rule. 
And the rule has been delayed, and delayed, and delayed. And 
now once more delayed because of the farm bill. And in the 
interim, we are not abiding by what good minds, a myriad of 
diverse views and opinions felt was the direction in which we 
ought to proceed in terms of achieving the goal that you want 
to achieve and what this nation needs to achieve in this area. 
And we may be at cross purposes with this loan and with the 
final rule.
    Mr. Dorr. Well----
    Ms. DeLauro. And that is--I mean, I really do believe that 
that is, you know, it really is, if you will, a dereliction of 
what our obligations are in terms of the--what it is that we 
are trying to achieve.
    Mr. Bishop. Will the gentlelady yield?
    Ms. DeLauro. Yes.
    Mr. Bishop. To underscore what the gentlelady is saying, 
isn't this loan going to usurp just about all of the authority 
and capacity for this particular broadband program so that 
there's nothing left for other communities that are not covered 
by open range to have access?
    Ms. DeLauro. It's about 90 percent of what we have 
appropriated. But there is carryover money there, but your 
point is well taken, because we did this when we--and I might 
add, and I would just say this in compliments to this 
committee, on a bipartisan basis--the review of that loan, the 
review of that loan came, I believe, directly out of the 
questions asked on both sides of the aisle from this 
subcommittee. That loan was to have been finalized months ago, 
but it was taken in for a review based on the questions that 
came out of this committee.
    So we are--our responsibility is to be vigilant with the 
money that we appropriate. Ninety percent of the appropriated 
money is being used for this loan. Yes, you have carryover. We 
are concerned as to what happens to the appropriated tax 
dollars. I think we have--you've stated your position. We have 
stated our position, and it will--is going to be--we're taking 
it on as to monitor and evaluate what happens with this loan.
    Mr. Dorr. I just have one question. You indicated that 
there was dereliction of our duty or responsibilities, and if 
you would care to lay those out at some point, I would be most 
interested in finding out where we've been derelict.
    Ms. DeLauro. Well, I would just say this about--and I--
because I want to be precise in language. It seems to me not 
exactly coincidental that the final rule is not enacted and you 
felt a moment ago that it was the obligation if we're not 
getting anywhere with the farm bill, that in fact we would 
proceed to having a final rule by the end of April. And yet, in 
March--in March, we granted a loan that by your words say it 
would have been difficult to finalize the negotiations on 
because of the new requirements that have, as I said, been 
discussed for a very long time. And they have been--apparently 
we have sorted it out.
    Mr. Dorr. Well, let me make this observation. The number of 
calls that I received from the members in this loan, I had none 
that were in opposition to this loan. We probably took a 
tougher look at this loan in our office than any other loan for 
some of the reasons that you're laying out.
    In fact, we have $700 million of existing appropriated and 
carryover authority. This does not deplete the program. We will 
have $395 million available next year in our telecom and 
treasury programs. This is new technology. This is a way to 
mitigate some of those availability issues, and we are going to 
monitor it very, very closely, and we will share that 
information with you on a regular basis.
    Ms. DeLauro. I appreciate that, but I will also say that I 
do not believe it is coincidental that the final rule was not 
enacted prior to this contract being let. That's my point. If 
somebody can persuade me to the contrary, it doesn't have to be 
here today. Afterward, I would be happy to be persuaded, but I 
do believe that this--there was someone someplace somewhere who 
had in mind that, wow, we are going to have a rule that would 
preclude us doing this, new technology and all. Let's examine 
it. Let's look at it. Let's get it done. But we are going to 
delay the final rule until this is done. Now, I don't see how 
that----
    Mr. Dorr. I would respectfully differ from you completely 
on that matter. That was not the intent. What we were waiting 
for was a number of things that we believe may come through the 
legislation that would conform with the way the rule was and 
would mitigate elongating the difficulty in making additional 
loans. If that was an error in judgment, I'll subscribe to 
that. But there was nothing at all in the discussion in our 
office in the way in which we approached this that was subject 
to making a loan predicated on prior to a new rule being 
imposed. And, frankly, that bothers me that you would assume 
that that's the way we approached it, because that was 
definitely not the case.
    Ms. DeLauro. Well, I hadn't approached it until this point, 
till I find out that, yes, in fact we'll move forward with the 
final rule by the end of April if the farm bill doesn't 
generate that. But I take you at your word, and I hope that you 
do understand my concern, serious concern, that it just seems--
I would be derelict in my duty if I did not ask the question, 
given specifically that the size of this loan--the size of it--
and the historical size of it, I would not be doing my job, Mr. 
Secretary.
    Mr. Dorr. Well, I appreciate your comments, and on the 
lighter side, I informed almost everyone that I was involved 
with in making this loan that I anticipated the respected 
chairwoman would probably have some of these concerns, so this 
does not surprise me, and I anticipated your oversight.
    Ms. DeLauro. Thank you. Does anyone have any further 
questions? I do have one or two things I would want to--Ms. 
Kaptur?

                     BIOENERGY AND RENEWABLE ENERGY

    Ms. Kaptur. Thank you very much, Madam Chair. I just wanted 
to place on the record the cross-cutting budget that we 
requested in the area of bioenergy, renewable energy programs, 
we estimate this year $103,975,000 in those programs. The 
proposed budget is a cut of $85,436,000. I respect what you're 
saying, that you're waiting for the farm bill, I don't agree 
with the decision that was made in the bioenergy area. So I do 
want to place that on the record.
    You also mentioned in your testimony, your questioning, 
that you're involved with the Department of Energy and other 
agencies in interagency cooperation on the energy issue. I want 
to encourage you on in those efforts.
    Mr. Dorr. Thank you.
    Ms. Kaptur. And make a suggestion. I've not been able to 
get this done. I have a bill to do it. You know, we have a 
strategic petroleum reserve, and I really react when I hear 
that middle word. And I really believe America should have a 
strategic energy reserve, including biofuels. I have one 
mechanism to get there.
    I would encourage you to perhaps take a look at that bill, 
and in your discussions with the Department of Energy, consider 
how the Department of Agriculture could help transform America 
from a petroleum-based economy, a carbon-based economy, to a 
carbohydrate-based economy, along with other alternatives that 
we have before us. So I just wanted to mention that to you. And 
you're in a unique position in that interagency group.
    Also, I wanted to ask Mr. Andrews--Mr. Andrew--in the area 
of renewables--solar, wind, geothermal--you mentioned several 
proposals that you have been funding through the utility 
service. Could you give me a sense of how many--the volume of 
the requests that you receive in the growing market of 
renewable energy, what total dollar volume you might be being 
asked for versus what you're able to fund? And then could you 
just very briefly describe one or two projects underway that 
you consider successful that have been launched by local 
consortias of farmers or farmers in cooperation with municipal 
powers, for example, or rural electrics that are generating 
energy through wind, through solar, through geothermal? So the 
first question is on the volume of requests versus what you're 
able to fund in the renewables area, and then could you discuss 
a couple of projects you consider model around the country?
    Mr. Andrew. First of all, the volume is picking up. The 
$200 million that I mentioned earlier that we've been setting 
aside for several years, we've only put out about $190-some 
million. But the volume is picking up because we're pushing it 
very hard through our state offices.
    The wind farms I mentioned earlier, which by the way are 
west of the Mississippi----
    Ms. Kaptur. Thank you.
    Mr. Andrew. Knowing where you're from, I just assumed you 
were talking about east, but you were talking about west. They 
are west of the Mississippi.
    Ms. Kaptur. Some people mix us up with Iowa, Idaho----
    Mr. Andrew. You're right.
    Ms. Kaptur [continuing]. Ohio. We all have a lot of vowels.
    Mr. Andrew. Anyway, I'm glad I had the opportunity to clear 
that up. In Georgia, for example, I'll use that as an example. 
We have a project there where we're taking, there's a farmer, 
there's a gentleman up in north Georgia who recognized that we 
had a lot of chicken manure, they couldn't get rid of it. We're 
building, we have funded a process where they're going to be 
burning chicken manure and wood waste out of construction to 
generate electricity, that will be about 20 megawatts of power 
that that will be generating, and the electric co-ops are going 
to put that into their green power----
    Ms. Kaptur. Will the gentleman yield? I'm glad you're 
talking about that because in Ohio, we have a problem with 
dairy manure. And I don't see the kind of leadership there that 
you're describing in Georgia in terms of your poultry farmers.
    Mr. Andrew. Well, frankly, that came from the farmer--I 
mean, the individual himself, if that's what you're referring 
to.
    Ms. Kaptur. All right.
    Mr. Andrew. In the Dakotas, we've got a dairy farm that was 
down there by Dairyland Power, which is a generation 
transmission co-op. They're located in Wisconsin, excuse me. My 
geography is bad today. But anyway, they've got a dairy farmer 
was buying the methane gas that comes out of the farm, they're 
burning it and generating electricity and putting it on the 
grid.
    We have several projects that we're talking to now. For 
example, wood biomass. There's three sites in Georgia as a 
matter of fact. We'll be taking wood and burning it. It would 
be renewable.
    Ms. Kaptur. Sir, may I ask you, could you--could somebody 
in your agency give me a little summary of those so I could 
send them to some of our farmers and say, look, this is what's 
being done----
    Mr. Andrew. Sure.
    Ms. Kaptur [continuing]. Are you aware of this program? Do 
you do both grants and loans, or just loans?
    Mr. Andrew. Just loans.
    Ms. Kaptur. Just loans. And what is the interest rate on 
those loans?
    Mr. Andrew. Treasury. We'll be glad to, because we're proud 
of it. And we're trying to do more and more and more. Our 
outreach that Tom mentioned earlier, is going to have a great 
deal to do with this, too, because we're telling more people 
that we've got these things available.
    Ms. Kaptur. If you're trying to urge farmers to do this, 
sir, even though they may be paying Treasury rate on the loan, 
they're getting a payback through energy generation aren't 
they?
    Mr. Andrew. Yes, if they're putting--yes.
    Ms. Kaptur. Yes. You see, and they really have to--we have 
to help them understand how this works so they don't feel like 
they're going to lose their shirts if they get involved in 
this.
    Mr. Andrew. Right.
    Ms. Kaptur. So I would appreciate information we could 
share with Ohio farmers. I'd really appreciate that.
    Mr. Andrew. The state director, Randy, has done a good job 
of this. We've done a lot of work with Randy on this project.
    [The information follows:]

    

    
    Ms. Kaptur. Thank you.

                    WATER AND WASTE PROGRAM BACKLOG

    Ms. DeLauro. Under Secretary, this is a question about 
rural water and waste and the long-term needs. I know that the 
Department has put forth a one-time funding increase proposal 
in the farm bill to address this. But it doesn't close--it's 
not close to meeting the need. The proposal would have only 
covered about a quarter of the current backlog, as I understand 
it, of the projects.
    How does Rural Development anticipate lowering the water 
and waste grant backlog and considering that rural development 
studies show the need for the program to be in excess of $80 
billion over the next 20 years, are there any proposals you're 
considering to ensure this backlog will not continue to grow?
    Mr. Dorr. Well, there has historically been a backlog in 
this program. As you recall, the 2002 Farm Bill did in fact 
give additional funds that allowed us to address about $700 
million of that. And as you correctly indicate, we have 
proposed some additional resources to do that in the Farm Bill.
    I frankly don't know that the backlog will ever go away. We 
have had an ongoing outmigration out of rural America. That has 
meant that we have not sustained or invested in new water and 
waste infrastructure. We are now beginning to see a 
stabilization in some areas where this is changing or areas 
where these systems are worn out. And it's all catching up with 
us. And it's an issue that I suspect we will continue to work 
on for some time.
    One of the things we have clearly done, and I know you're 
well aware of this, is we have adjusted our loan grant 
relationship, taking advantage of the lower cost of money over 
these last few years, to try to extend these funds, and yet 
maintain a very affordable water and sewer rate in the 
communities that participate.
    We'll probably have some disagreements on the approach 
we've taken on this, but we'll continue to do what we can with 
the funds that we have available, and we believe that we are 
addressing this as aggressively as is reasonable.

                      SINGLE FAMILY HOUSING LOANS

    Ms. DeLauro. This is my final question. This is again about 
the Section 502 guaranteed single-family housing loan program. 
I think you would concur a safe alternative for subprime 
mortgages, for creditworthy low- and moderate-income rural home 
buyers. The subcommittee provided about $5.3 billion in fiscal 
year 2008 for the direct and guaranteed section of 502 single-
family housing loan programs.
    Given the unprecedented demand the guaranteed program is 
experiencing, do you expect that demand will remain strong and 
grow throughout the rest of the fiscal year as the market 
continues to adjust from the diminished availability of 
subprime loans for home purchase loans? Will you have 
sufficient funds to meet this demand?
    Mr. Dorr. I would turn to Russ on that. We evaluate that 
monthly, sometimes biweekly. There was a period of time early 
in the fiscal year when we thought we weren't, then the market 
slowed down, we thought we would. Russ, where do you think we 
are at this point?
    Mr. Davis. Our demand is accelerating every month. We now 
are using $700 million of carry forward from last year, and 
Katrina money will get us just barely into September. We're 
looking at options for how we get through the fiscal year, but 
we are experiencing accelerating demand.
    Ms. DeLauro. Well, will you then need to--are you 
planning--you're transferring authority to move funds from 
other housing programs to this program. What programs will you 
transfer from?
    Mr. Davis. Well, obviously, we'll use that as a last resort 
if we can't find some other way to smooth out the demand or so 
forth. But we would look to see if there are any programs that 
don't have 100 percent demand. Actually, it happens that we 
have programs that don't get 100 percent applications, and we 
would look to those.
    Ms. DeLauro. What programs are you thinking of?
    Mr. Davis. Well, an example was in previous years has been 
farm labor housing. Developers have been going to low-income 
housing tax credits, and we've had extra money.
    Ms. DeLauro. Is the direct single-family housing loan 
program seeing the same unprecedented demand in 2008 over last 
year's activities? And if so, how much demand has increased 
over the previous fiscal year?
    Mr. Davis. We're seeing pretty much flattened demand. One 
thing that's interesting is that there is competition between 
direct and guaranteed. And people come into our offices and 
they say, oh, I can get a house today in the guaranteed program 
or I can wait and get a direct loan a year from now and buy 
$20,000 more house. Some people decide to wait for the subsidy 
and buy a bigger house. We would prefer that they go into the 
guarantee program, which is stronger and has a better record of 
home ownership.
    Ms. DeLauro. Mm-hmm. And maybe I know the answer to this 
already, but I think you've got a request of $4.8 billion.
    Mr. Davis. Mm-hmm.
    Ms. DeLauro. The adequacy of 4.8, you know, with the 
demand, do we see it dropping from 7 billion to 4.8? That's----
    Mr. Davis. If I could throw in a commercial for the fee 
increase. The entire mortgage industry has realized that it has 
mispriced mortgages. And 2 percent is our fee right now, and 
for 2 percent, we're taking all the risks of a hundred and two 
percent mortgage. By going to 3 percent, we would have 
essentially a break-even credit subsidy rate. We could do a 
trillion dollars. I mean, we would be not limited by budget 
authority. We really think the fee increase would make this a 
program forever.
    Ms. DeLauro. Well, but there again, you know, we could--and 
I don't want to get back into this again because I think it--
but it bears the conversation then that you're then looking at 
the inability of people to, you know, deal with an escalated 
fee cost. I mean, so there you've got, you know, a market issue 
as well there in terms of going to 3 percent and the inability 
then of people who are at the low end to be able to deal with 
that kind of an increase.
    Mr. Davis. There is a tradeoff, but we view it as--the fee 
increase comes out to about $5.20 a month or so. That means you 
buy a house, you know, without the garbage disposal or 
something. You know, it buys $600 less house. Or view it as a 
loan that you would not have been able to get in the private 
sector. We are doing loans that the private sector won't touch. 
And that has value.
    Ms. DeLauro. Well, I think that that is, you know, part of 
the continued debate. And I guess in terms of a final comment 
that I would make, it goes back to the beginning conversation a 
couple of hours ago.
    I think it's true that the more rural a place is, the more 
difficult the circumstances are. And we see that borne out by 
the statistics. I mentioned median income is 25 percent lower. 
Poverty rate is 28 percent higher than in the metro areas. 
You've got today 31 percent of food stamp beneficiaries are 
living in rural areas.
    When you talk about the wealth of the communities, yeah, I 
concur that there are pockets where that is occurring. But I 
think that that is the exception, is my view, and not the norm, 
for rural communities, which gets me back to the mission and 
role of this agency, which is I think substantial and one that 
we all have a very, very keen interest in. And when I look to 
both my colleagues who are here with me now, who are from 
Georgia, and these issues are more critical in the South, and 
rural poverty is probably--the South has the highest percentage 
in that area, that we have to take a hard look at the programs 
and the direction that we are taking these programs based on 
economic research and their data, et cetera about what 
direction our programs take in order to be able to meet the 
needs that would state that we want to try to meet.
    And I thank you all very, very much for your time and for, 
you know, staying over, et cetera, and appreciate your work, 
and I appreciate the committee members in hanging in there as 
well.
    Thank you very, very much to all of you, Mr. Secretary and 
your team.

    




                           W I T N E S S E S

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                                                                   Page
Anderson, Ben....................................................   391
Andrew, J. M.....................................................   391
Davis, R. T......................................................   391
Dorr, T. C.......................................................   391
Houston, Kate....................................................     1
Johner, N. M.....................................................     1
Salazar, Roberto.................................................     1
Steele, W. S..................................................... 1,391


                               I N D E X

                              ----------                              --
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                                                                   Page
Food and Nutrition Service.......................................     1
Beef Quality Standards...........................................    33
Child Nutrition Programs.....................................14, 25, 82
Commodity Entitlement Purchases..................................60, 70
Commodity Purchases..............................................    37
Commodity Supplemental Food Program...............17, 27, 140, 384, 389
Dietary Guidelines for Americans/MyPyramid.......................    61
Emergency Food Assistance Program................................18, 28
Food Stamp Program.............................14, 24, 55, 57, 152, 382
    Categorical Eligibility......................................36, 56
    Employment and Training......................................    40
    Enrollment and Unemployment..................................    39
    Error Rate...................................................    35
    Fraud........................................................   385
    Outreach.....................................................    34
    Participation................................................    35
Food Stamp Program, Indiana......................................    74
Food Stamp Program, Texas........................................    73
Fresh Fruit and Vegetable program................................    59
Fresh Produce Program............................................   157
Hallmark/Westland Beef Recall...............................30, 42, 247
Healthier U.S. Schools Challenge.................................    56
High Performance Bonuses.........................................   167
Improper Payments...............................................22, 164
Indian Reservations, Food Distribution Program.................157, 175
Leadership and Resource Collaboration............................    36
Nutrition Assistance Programs....................................46, 79
Nutrition Education..............................................    79
Nutrition Programs Administration................................19, 28
Opening Remarks, Ms. Johner......................................     3
Proposed Legislation.............................................   181
Puerto Rico and American Samoa, Funding..........................   173
Quality Standards................................................   359
Questions Submitted by Ms. DeLauro...............................    82
Questions Submitted by Mr. Farr..................................   374
Questions Submitted by Mr. Latham................................   385
Questions Submitted by Ms. Kaptur................................   382
School Lunch Program.............................................   387
Senior Farmer's Market...........................................   383
Simplified Summer Food Service Program...........................    68
Studies, Completed...............................................   197
Studies, Ongoing.................................................   187
Toledo School Lunch and School Breakfast.........................    38
WIC.....................................................15, 26, 95, 105
WIC Budget Requests..............................................    43
WIC Participation................................................    45
Written Statement, Nancy Montanez Johner, Under Secretary, FNS...     6
Written Statement, Roberto Salazar, Administrator, FNS...........    21
Rural Development................................................   391
Administration's Budget Requests.................................   480
Alternative Energy Policy and Commodity Prices...................   482
Broadband............................................437, 454, 468, 511
Business and Cooperative Programs................................   405
Business and Industry Guaranteed Loan Program.............409, 453, 461
Community Facilities in California...............................   438
Community Programs...............................................   417
Default Rate for Business Programs...............................   450
Defining Rural Areas.............................................   459
Direct Loans and Guaranteed Loans................................   500
Electric Programs................................................   421
Elimination of Programs........................................425, 448
Energy Independence..............................................   493
Evaluation of Rural Development Programs.........................   499
Expanding Rural Development's Portfolio..........................   494
Farm Community versus Rural Community............................   433
Farm Labor Housing........................................439, 463, 504
FY 2009 Budget...................................................   398
Helping Small Communities........................................   435
HIV/AIDS.........................................................   480
Housing and Community Facilities.................................   402
Housing Grants and Loans.........................................   502
Housing Loan Crisis..............................................   441
Intermediary Relending Program...................................   409
Loan Guarantees/Rural Banks......................................   481
Low-Income Housing...............................................   449
Low-Income Suburban Communities, Assistance......................   432
Minority Programs................................................   484
Multi-Family Housing Programs..................................413, 414
Multi-Family Revitalization of Existing Stock....................   506
Mutual and Self-Help New Construction............................   507
Open Range Communications Broadband Loan.........................   444
Open Range Loan..................................................   469
Opening Statement, Mr. Dorr......................................   393
Overall State of the Rural Economy...............................   501
Persistent Poverty Counties......................................   442
Population Limits................................................   497
Promotion of Locally-Owned Development...........................   496
Questions for the Record Submitted by Mr. Bishop.................   479
Questions for the Record Submitted by Mr. Latham.................   499
Questions for the Record Submitted by Ms. Kaptur.................   493
Renewable Energy.....................................447, 451, 466, 472
Rental Assistance Funding Levels.................................   507
Rental Assistance Pilot Program..................................   461
Role of Rural Development........................................   398
Rural Business-Cooperative Service...............................   509
Rural Cooperative Development Grant............................409, 464
Rural Economy....................................................   426
Rural Healthcare.................................................   479
Rural Housing....................................................   492
Rural Utility Service............................................   510
Rural Water Challenges...........................................   481
Rural Water Waste Project........................................   500
Single Family Housing Programs.................................416, 476
Small Business Administration Programs...........................   499
Small, Socially Disadvantaged Producers Grant Program............   409
Telecommunications Programs......................................   421
Utilities Programs...............................................   404
Water and Environment Programs...................................   423
Water and Waste Program Backlog..................................   476
Written Statement by Ben Anderson, Administrator of the Rural 
  Business-Cooperative Service, USDA.............................   408
Written Statement by James M. Andrew, Administrator of the Rural 
  Utilities Service..............................................   420
Written Statement by Russell T. Davis, Administrator of the Rural 
  Housing Service................................................   411
Written Statement by Thomas Door, Under Secretary for Rural 
  Developent, USDA...............................................   396

                                  
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