[Senate Hearing 110-]
[From the U.S. Government Publishing Office]


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

                              ----------                              


                         TUESDAY, APRIL 8, 2008

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:06 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Herb Kohl (chairman) presiding.
    Present: Senators Kohl, Reed, Bennett, Cochran, Specter, 
and Craig.

                       DEPARTMENT OF AGRICULTURE

                        Office of the Secretary

STATEMENT OF HON. ED SCHAFER, SECRETARY
ACCOMPANIED BY:
        CHUCK CONNER, DEPUTY SECRETARY
        DR. JOSEPH GLAUBER, CHIEF ECONOMIST
        SCOTT STEELE, BUDGET OFFICER


                 opening statement of senator herb kohl


    Senator Kohl. Hello and welcome to one and all. Today we 
begin hearings for the fiscal year 2009 budget. We have before 
us Secretary Schafer and other distinguished guests from the 
Department of Agriculture. As you know, this is our first 
budget hearing for the year.
    Secretary Schafer, Dr. Glauber, and Mr. Steele, we want to 
welcome you before our panel. It is good to have you here 
today. I would also like to note that Dr. Glauber did receive 
his Ph.D. from the University of Wisconsin, which makes you a 
very smart man and a very intelligent man.
    Before we get started with you, that is.
    The President's budget includes fiscal year 2009 
discretionary spending levels of $17.3 billion for USDA, which 
is a decrease of over $400 million from last year. We have to 
assume that you were told to hold the line on spending, but 
however, this budget, notwithstanding that, as you know, does 
not have very many highlights to it.
    Although the WIC budget provides an increase of $80 
million, we are already hearing that up to an additional $750 
million could well be necessary and that number might go even 
higher.
    CSFP is eliminated yet again. Although we are hearing calls 
from all over to fix the food safety problems, this budget 
provides no funding for additional inspectors or inspections.
    Research is cut by over $250 million. Conservation is cut 
by over $140 million. Scores of rural development programs 
vital to America are simply abolished. Food aid requests remain 
stagnant, although the need is clearly growing, and a looming 
Farm Service Agency IT disaster is not addressed.
    As we move through the appropriations process, I pledge to 
you that we will maintain a constructive dialogue with USDA. We 
have many challenges this year, and I hope to work closely with 
the Department so we can produce a constructive and a 
responsible bill.
    I am going to turn to my very good friend and the ranking 
member, Senator Bennett, but first I want to thank publicly 
Senator Bennett and his staff for the helpful and bipartisan 
manner in which we have worked over the past few years. And I 
assume him and all members of the subcommittee that that very 
constructive working relationship will continue.
    So, Senator Bennett will now make an opening statement, and 
then we will turn to other members, if they arrive, for their 
opening statements. Following that, we will be pleased to hear 
from Secretary Schafer.
    Members will have 1 week to submit questions for the 
record, and we will act quickly on their questions.
    Now, Senator Bennett.


                 statement of senator robert f. bennett


    Senator Bennett. Thank you very much, Mr. Chairman, not 
only for your leadership, but for your kind words. We have 
worked together in a bipartisan fashion and I hope for the 
benefit of agriculture in the country.
    I want to welcome Secretary Schafer back to the 
subcommittee and those joining him, Deputy Secretary Conner and 
Chief Economist Glauber, and Budget Director Steele.
    Dr. Glauber, congratulations on your appointment. I enjoyed 
the analysis provided by your predecessor, Dr. Keith Collins, 
who retired earlier this year, and look forward to hearing from 
you and working with you.
    The atmosphere in which we find ourselves with respect to 
this budget hearing is that food prices are rising sharply 
throughout the whole world and causing unrest in certain 
places, not excluding our own country. Decades of nearly 
stagnant farm gate prices have led us to anticipate stable 
prices in the marketplace, but farmers are now enjoying record 
high commodity prices at the same time as costs for feed, fuel, 
and fertilizer are also reaching record highs.
    Biofuel production continues to grow. This year roughly a 
third of the U.S. corn crop will be used for biofuel 
production. And that, too, helps increase the price for 
farmers.
    But the other side of it, which may have serious problems 
for the rest of us, is that the cost of WIC, food stamps, and 
other feeding programs keeps going up. I am not sure these are 
issues that are easily resolved, and I hope we can talk a 
little bit about them this morning.
    Now, we have had food recalls and people have been 
concerned about the safety of their food supply. I appreciate 
your quick response to the humane slaughter violations in the 
Hallmark/Westland case, Mr. Secretary, but as a subcommittee, 
we will continue to fully and properly fund and monitor the 
activities in the area of food safety. We want to make sure the 
Department has all of the resources that it needs, but we 
recognize that everybody else, producers, processors, 
suppliers, importers, retailers, and so on, must work together 
in conjunction with the regulators to make sure that the 
consumers have no reason to question the safety of our food 
supply.
    Mr. Secretary, you are defending a budget you did not 
prepare by virtue of the timing of your entry into your present 
position, but you are accompanied by Deputy Secretary Conner 
who did help prepare this. So I am confident that between the 
two of you, you will be able to give us a full explanation of 
where we are and how we got there. And I look forward to 
hearing your thoughts.
    Thank you, Mr. Chairman.


                           prepared statement


    Senator Kohl. Thank you very much, Senator Bennett. And now 
we will hear from you, Mr. Secretary.
    The subcommittee has received a statement from Senator 
Johnson which will be placed in the record.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    Thank you, Chairman Kohl and Ranking Member Bennett, for holding 
today's Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies subcommittee hearing to discuss the state of 
fiscal year 2009 appropriations for agriculture. Your leadership is 
invaluable and appreciated during this process. Thank you also, 
Secretary Schafer, Deputy Secretary Conner, Chief Economist Dr. 
Glauber, and Budget Officer Steele, for your time this morning. We 
appreciate your coming to the Hill to discuss appropriations for this 
next fiscal year for the United States Department of Agriculture.
    As members of the Senate Appropriations Committee, we have an 
obligation to ensure that our Federal programs function as both 
intended and promised in enacted legislation. Programs addressed by 
this subcommittee specifically should strive to ensure that our 
Nation's rural and agriculture communities remain intact, and that we 
provide opportunity in those regions that are struggling. I'm sure that 
many subcommittee members' home States are impacted by rural out-
migration as significantly as mine is, and population loss is often 
irreversible. The Department of Rural Sociology at South Dakota State 
University released an analysis in 2006 that addressed population 
changes. The study's findings included an 8.0 percent gain in 
Southeastern Minnehaha County from 2000-2005, which includes Sioux 
Falls, the largest city in South Dakota. Minnehaha County's gain 
presents a stark contrast to rural Harding County, located in the 
Northwest corner of South Dakota, which experienced a 10 percent drop 
in population over that same time. Rural communities are impacted 
dramatically by the shortfalls or inadequacies of each fiscal year's 
budget proposals, and as a member of this subcommittee I will continue 
to fight to keep our rural communities vibrant.
    There are many areas in the President's proposed budget for fiscal 
year 2009 that are enormously concerning, and I do not believe that the 
administration's proposed budget can accomplish the intended goal of 
our Federal programs. I will work with my colleagues to make these 
areas whole, and I would like to touch on just a few of those programs 
today.
    The 2002 farm bill included an 80 percent increase in Federal 
dollars for conservation programs over previous measures. However, this 
administration's most recent suggestion for conservation funding 
includes a 20 percent reduction. In the wake of the Department of 
Agriculture's handling of the Conservation Reserve Program with 
expiring 2007-2010 contracts, which has discouraged participation in 
the program, this additional proposal is counterproductive for 
conservation efforts in South Dakota and nationally.
    The President's budget proposal includes eliminating the Resource, 
Conservation and Development (RC&D) program entirely. The President has 
clearly not been a fan of this program, proposing substantial 
reductions consistently for several years. The RC&D program encourages 
economic growth in rural areas that aren't privy to the economic 
stimulus of urban areas. For every $1 invested into this program by the 
Federal Government, the program generates an impressive $7.50 in 
return. I have worked to restore this program in the past, and I will 
continue to support full funding for this program.
    For the third year in a row, this administration has attempted to 
slash funding for the Commodity Supplemental Food Program (CSFP). 
Elimination of this program would cause nearly half a million low-
income seniors and children to be cut off from nutritious commodities. 
In my home State, nearly 300,000 senior citizens rely on the nutritious 
meal boxes CSFP provides each month. The Bush administration proposes 
simply transferring CSFP recipients to the food stamp program. However, 
food stamp benefits alone are not sufficient to meet the dietary needs 
of most CSFP participants. I will again fight to reinstate funding for 
CSFP and ensure that this important program receives meaningful dollars 
to support their growing needs.
    I have heard from many South Dakotans who share in my concern for 
the President's proposed budget, and I appreciate the opportunity to 
share some of these concerns. I will continue to work for the strongest 
possible agriculture budget we can achieve in Congress, which is simply 
what America's farmers and ranchers deserve.

                   STATEMENT OF SECRETARY ED SCHAFER

    Secretary Schafer. Thank you, Mr. Chairman and ranking 
member. I am pleased to appear before the committee, and thank 
you for the opportunity to discuss our fiscal year 2009 budget 
for the Department of Agriculture.
    As was mentioned, I am joined at the table here by my 
esteemed colleagues who can provide the expertise and 
background to your questions.
    I am grateful that the President has provided me this 
opportunity to serve the people of the United States, and I 
will do my very best to promote, preserve, and enhance the 
mission of the United States Department of Agriculture.
    Before I discuss the 2009 budget, I would like to thank the 
committee for the opportunity to appear before you in late 
February to testify on the inhumane handling of cattle at the 
Hallmark/Westland Meat Packing Company. At that hearing, I 
described actions that we took immediately. Also, soon after 
learning of the situation, we asked the Office of Inspector 
General to immediately begin an investigation into the matter.
    Since that hearing, we have taken additional actions, 
including auditing 18 beef processing facilities that supply 
products to the Department's nutrition assistance programs, 
including the school lunch program. In addition, FSIS has 
directed inspectors to increase the amount of time spent on 
humane handling surveillance.
    I have been concerned that some Members of Congress and 
some of the media have mischaracterized this recall as a food 
safety issue. I again want to assure our citizens that this 
class II recall does not pose an imminent threat to our food 
supply.
    As we learn more from the ongoing investigations, we look 
forward to keeping the committee well informed.
    Now I would like to discuss the USDA and our 2009 budget. 
As I mentioned earlier, I am very pleased to have been given 
the opportunity to lead this great Department at a time in 
history when the agriculture economy has never been stronger. 
Market prices are at or near record levels for virtually all of 
our major crops and net cash income for 2007 will exceed $87 
billion, which is up almost $20 billion from last year.
    I look forward to working with you, Mr. Chairman, as well 
as your other members, during the 2009 budget process to ensure 
that we have the resources needed to continue making a positive 
impact on the economic well-being, safety, and health of all 
Americans.
    Let me start by saying we are proud that USDA's 2009 budget 
advances the President's goal of achieving a balanced Federal 
budget by 2012, also while encouraging our economic growth and 
enhancing our security.
    As was noted, I am new to the Federal budget process, but I 
have faced many challenges in developing budgets at a State 
level. As a Governor for 8 years, I was required to make tough 
decisions to balance our State budget as required by law. Today 
at the Federal level, we face similar challenges to keep 
spending under control and meet the President's deficit 
reduction goals.
    The USDA's total budget authority request pending before 
this committee proposes an increase from $88 billion in 2008 to 
$93 billion in 2009, while the discretionary appropriation 
request is $17.4 billion. That is a decrease of approximately 
$400 million from the 2008 enacted level.
    The budget before you proposes to terminate $1 billion in 
lower-priority activities, earmarks, and programs that 
duplicate other activities. I would like to point out that even 
within this tight overall budget framework, we request that 
additional funds be allocated to food safety, nutrition, and 
high-priority bioenergy research.
    The budget requests nearly $1 billion in appropriated funds 
for the Food Safety and Inspection Service, a record level of 
funding. This funding will ensure that the demand for 
inspection is met, and we will build on our success in 
improving the safety of our food supply. We will continue to 
pursue the development and implementation of inspection systems 
that are better grounded in science and that can increase the 
speed in which we detect and respond to outbreaks of food-borne 
illnesses.
    The budget supports increased participation and food costs 
for the Department's three major nutrition assistance programs: 
food stamps, WIC, and child nutrition. I would like to mention, 
Mr. Chairman, that we are monitoring the WIC situation very 
carefully, both food costs and participation levels, and I know 
that you have been as well. We will keep the committee informed 
of the trends and work with you to ensure that this important 
program is appropriately funded.
    The budget includes additional funding for bioenergy 
research aimed at increasing the efficiency of converting 
cellulose to biofuels. Under the National Research Initiative, 
USDA will support efforts to develop and enhance feedstock 
sources and biocatalysts for cellulosic conversion.
    The Agricultural Research Service will focus on developing 
sustainable, efficient production of energy from a variety of 
agriculture products and from enabling on-farm processing for 
cellulosic feedstocks.
    The budget also provides support to ensure that critical 
program delivery systems are maintained so the infrastructure 
is in place that we can build upon to meet the demands of 
implementing a new farm bill and addressing other needs in 
rural America.
    The budget proposes the funding needed to increase the 
enrollment of our conservation programs to record levels of 
acres. These programs are essential to protecting and 
preserving our land, our water, and our air resources for 
future generations.
    The budget provides $15 billion for rural development. This 
level of support maintains USDA's role in financing rural home 
ownership, rural utilities, and business and industry. It also 
includes $1 billion to protect the rents of low-income rural 
residents.
    Within this program level, we are proposing to shift the 
emphasis from grants to loans and from direct loans to loan 
guarantees. These shifts permit us to continue to address the 
priorities but at a lower cost to the taxpayer.
    All Americans and particularly our farmers and ranchers 
know the importance of a healthy economy. It creates jobs and 
it boosts incomes. Keeping America's agriculture strong means 
we must continue to build on our recent successes in trade. We 
are forecasting record agriculture exports of $101 billion in 
2008, an increase of over $19 billion from 2007. And as you 
know, agriculture is the sector of the economy that provides a 
positive trade balance.
    USDA has worked aggressively to open new markets for 
America's farmers and ranchers, and those efforts are showing 
results. Progress was made in our efforts when the President 
signed the trade promotion agreement with Peru last December.
    Congress can continue to help create jobs and economic 
opportunity by passing the Free Trade Agreements with Colombia, 
Panama, and South Korea. As you know, the President yesterday 
sent up the signed Colombia FTA for ratification, and we urge 
Members of Congress to vote for American agriculture and pass 
this legislation.
    We also need to secure a new farm bill. More than a year 
ago, the administration announced a comprehensive set of farm 
bill proposals for strengthening the farm economy in rural 
America. These proposals represent a reform-minded, fiscally 
responsible approach to supporting America's farmers and 
ranchers and our rural communities.
    Because of that, we are still working with Congress to 
shape the farm bill, but as of today, we do not have new 
legislation in place. The President's 2009 budget for USDA is 
based on the provisions of the 2002 farm bill and reflects the 
administration's proposals for change. We expect, however, some 
changes will be made to the budget estimates when the new farm 
bill is finally passed. I am still confident that that will 
happen.

                          PREPARED STATEMENTS

    In closing, I would like to emphasize that this budget 
provides the critical resources we need to keep our agriculture 
economy strong, and it is in keeping with the President's 
policy of funding the highest priorities while restraining 
spending.
    I look forward to working with the members of the staff and 
the committee. We will now be pleased to take your questions.
    [The statements follow:]

                    Prepared Statement of Ed Schafer

    Mr. Chairman and distinguished members of this committee, I am 
pleased to appear before you to discuss the fiscal year 2009 budget for 
the Department of Agriculture (USDA).
    I am joined today by Deputy Secretary Chuck Conner, Scott Steele, 
our Budget Officer; and Joseph Glauber, our Chief Economist.
    Before I begin to discuss the fiscal year 2009 budget, I would like 
to provide you an update to my February 28 appearance before this 
committee to testify about the inhumane treatment of cattle at the 
Hallmark/Westland Meat Packing Company in California. As you know, on 
January 30 when the Humane Society of the United States released the 
video from this facility, I asked the USDA Office of Inspector General 
to immediately begin an investigation into the matter. Since that time, 
USDA's Food Safety and Inspection Service (FSIS) has implemented a 
series of interim actions to verify and thoroughly analyze humane 
handling activities in federally inspected establishments. FSIS has 
also audited all 18 beef slaughter plants that supply beef to the 
Federal nutrition assistance programs. I have been concerned that some 
Members of Congress and some of media have mistakenly characterized 
this recall as a food safety issue. I again want to assure our citizens 
that this class II recall does not pose any eminent threat to our food 
supply. Therefore, once this review has concluded, we will have 
additional information that, along with the results of the additional 
verification activities and audits, will determine the actions for FSIS 
oversight, inspection and enforcement that may be required. We will 
continue to keep the committee informed of all developments and will 
report back to the committee on our actions.
    As I previously mentioned, it is a pleasure to come back before 
this committee today, this time to discuss the President's 2009 budget 
request for the Department of Agriculture. I come from an agriculture 
State and understand the important role the Department plays in the 
lives of many Americans. I look forward to working with you, Mr. 
Chairman, as well as the other members, during the 2009 budget process 
to ensure that we have strong programs that serve not only U.S. 
agriculture, but a broad spectrum of rural residents and consumers. By 
continuing the effective cooperation between this committee and the 
Department, we can build a stronger America.
    After reviewing the record, I am proud to report that the 
Department has made significant progress in achieving its goals to 
improve the rural economy, strengthen U.S. agriculture, protect 
America's natural resources, and improve nutrition and health. 
Specifically, I would like to note:
  --Under President Bush's economic policy, rural America and U.S. 
        agriculture has prospered.
  --Renewable energy production continues to grow and is contributing 
        to the energy security of the United States as well as 
        improving the farm economy.
  --U.S. agricultural exports were at a record level of $82 billion in 
        2007, the fourth record year in a row, and are now projected to 
        set another record of $101 billion during 2008. This would be 
        an unprecedented increase of $32 billion in just the last two 
        years.
  --USDA continues to pursue the President's trade agenda that will 
        create new market opportunities overseas and ensure the United 
        States remains a leader in a rules-based global trading system. 
        In this regard, we are continuing our efforts to achieve a 
        successful conclusion to the Doha Round of multilateral trade 
        negotiations--one that will provide fundamental reform of 
        agricultural trading practices and spur economic growth and 
        development.
  --In the future, as in the past, our long-term economic growth will 
        be enhanced by supporting international trade, by opening world 
        markets to U.S. goods and services and by keeping our markets 
        open. Progress was made in our efforts to remove trade barriers 
        and ensure a level playing field for U.S. farmers and ranchers 
        when the President signed the Trade Promotion Agreement with 
        Peru last December. Congress can continue to help increase jobs 
        and economic opportunity by passing the pending Free Trade 
        Agreements with Colombia, Panama and South Korea.
  --The Department continued its efforts to regain our beef export 
        markets. We have reopened or maintained the markets in over 40 
        countries that closed or threatened to close their borders to 
        U.S. beef products after the first detection of BSE. Recently, 
        Peru, Colombia, Panama, the Philippines, Indonesia, and 
        Barbados have removed their remaining restrictions for beef and 
        beef products in accordance with international guidelines.
  --In December 2007, the Department made the first major revision of 
        the Special Supplemental Nutrition Program for Women, Infants, 
        and Children (WIC) food package in nearly 30 years. The changes 
        take into account an improved understanding of nutritional 
        requirements as well as the changing profile of supplemental 
        nutrition needs of WIC's diverse population.
  --Actions were taken to improve the safety of meat, poultry, and egg 
        products, by identifying contamination earlier and reducing the 
        exposure to foodborne pathogens.
  --The 2006 supplemental funding provided the resources for USDA to 
        work with domestic partnerships to prepare for a potential 
        influenza pandemic. Through these efforts, we have played a 
        leadership role in the worldwide effort to stop the spread of 
        the H5N1 virus overseas and have increased our preparedness to 
        deal with an outbreak should one occur.
    In 2007, the administration announced a comprehensive set of farm 
bill proposals for strengthening the farm economy and rural America. We 
are continuing to work with the Congress to formulate a new farm bill. 
The enactment of the new farm bill may affect some of the 2009 budget 
estimates depending on specific provisions.
2009 Budget
    Although I did not participate in the development of the 2009 
budget, Deputy Secretary Conner conducted an in-depth review of USDA's 
budget and program performance in order to develop a budget that meets 
the administration's 2009 budget targets and contributes to the 
President's policy of reducing the deficit and balancing the Federal 
budget by 2012. Tough choices had to be made to keep spending under 
control and achieve the President's deficit reduction goals. Therefore, 
this budget funds the Department's highest priorities, while reducing 
or terminating duplicative or lower priority programs, including 
earmarks. I believe this is a responsible budget that funds critical 
programs and priorities and focuses efforts on programs that work and 
achieve results. Key priorities in the budget include:
  --Reducing trade barriers and expanding overseas markets;
  --Increasing funding for bioenergy research in support of the 
        President's goal for achieving energy independence;
  --Supporting policies that enhance job creation, improve rural 
        infrastructure, and increase homeownership opportunities;
  --Ensuring Americans continue to enjoy a safe and wholesome food 
        supply;
  --Protecting agriculture from diseases and pests;
  --Increasing funding for our major nutrition assistance programs;
  --Providing for a record number of acres in conservation programs; 
        and
  --Carrying out high priority basic and applied sciences that provide 
        the technology and information necessary for the development of 
        innovative solutions facing American agriculture.
    The USDA's total budget authority request pending before this 
committee proposes an increase from $88 billion in 2008 to $93 billion 
in 2009, while the discretionary appropriation request is $17.4 
billion, a decrease of approximately $400 million below the 2008 
enacted level. The discretionary appropriation request is based on the 
2008 enacted level.
    I would now like to focus on some specific program highlights.
Food and Agriculture Defense Initiative
    USDA continues its vigilance in ensuring the safety of our food and 
agriculture system. The Department is a strong partner in the 
administration's efforts to prepare for any potential bioterrorist 
attack. We are working to ensure an appropriate government response to 
a wide array of threats.
    To protect American agriculture and the food supply from 
intentional terrorist threats and unintentional pest and disease 
introductions, the budget proposes $277 million for USDA's part of the 
President's Food and Agriculture Defense Initiative. Funding for on-
going programs is $264 million, an increase of $81 million from the 
2008 level. Of the total amount for on-going programs, an increase of 
about $14 million for Food Defense would enhance research to safeguard 
the Nation's food supply from foodborne pathogens and pathogens of 
biosecurity concern. For Agriculture Defense, the budget includes an 
increase of about $20 million for research to improve animal vaccines 
and diagnostic tests. An additional $47 million would be used to 
improve USDA's ability to safeguard the agricultural sector through 
enhanced monitoring and surveillance of pest and disease threats, 
improve animal identification, strengthen response capabilities, and 
other efforts, such as an expansion of the National Veterinary 
Stockpile.
    In order to keep USDA in the forefront of avian disease research, 
the budget requests $13 million to proceed with the design and planning 
of the Biocontainment Laboratory and Consolidated Poultry Research 
Facility in Athens, Georgia. This facility is critically needed to 
conduct research on exotic and emerging avian diseases that could have 
devastating effects on animal and human health.
Food Safety
    One of the Department's top priorities is to ensure the safety of 
our food supply. The 2009 budget requests record funding of nearly $952 
million, an increase of about $22 million over 2008, for FSIS to 
protect the Nation's supply of meat, poultry and egg products. About 80 
percent of the FSIS funding goes for staff pay for Federal and State 
inspection programs to meet the demand for inspection services. With 
this funding, in addition to providing necessary food inspection, FSIS 
will continue to develop the food safety infrastructure to ensure that 
inspections systems are better grounded in science and inspector 
observations and data are captured and used in a timely manner. The 
objective is to reduce the risk of foodborne pathogens in meat, poultry 
and processed eggs and consequent infection.
    The budget estimates that $140 million in existing user fees for 
voluntary inspection will be collected. We will submit authorizing 
legislation to Congress to expand these collections, adding another $96 
million in new user fees. These fees will be used to offset needs in 
2010, so they have no direct effect on 2009. The proposed legislation 
will authorize a licensing fee projected to collect $92 million from 
meat, poultry, and egg products establishments based on their volume. 
An additional $4 million would be collected from establishments that 
require additional inspection activities for performance failures such 
as retesting, recalls, or inspection activities linked to an outbreak.
Farm Program Administration and Agriculture Credit Programs
    The budget requests $1.5 billion for the Farm Service Agency to 
deliver farm programs. This level of funding will support approximately 
the same number of staff years as in 2008. The budget includes funding 
to support on-going operational needs based on current programs and the 
current delivery system.
    USDA's farm credit programs provide an important safety net for 
farmers by providing a source of credit when they are temporarily 
unable to obtain credit from commercial sources. The 2009 budget 
supports about $3.4 billion in direct and guaranteed farm loans. The 
2009 budget proposes loan levels that generally reflect actual usage in 
recent years.
Crop Insurance
    Crop insurance is designed to be the primary Federal risk 
management tool for farmers and ranchers. In 2009, crop insurance is 
expected to provide coverage for nearly $72 billion in risk protection, 
more than double the amount of coverage provided as recently as 2000. 
This growth has been accomplished, in part, through the development of 
new and innovative plans of insurance. These innovations have expanded 
coverage to new crops or improved the coverage available under existing 
policies.
    Over the years, Congress has challenged USDA to expand the 
availability of crop insurance to under-served commodities, in 
particular, to livestock and pasture, rangeland, and forage. Our 
Department is meeting that challenge. Currently, the crop insurance 
program offers revenue protection for swine, fed cattle, feeder cattle 
and lamb. In 2007, the crop insurance program began offering two 
innovative pilot programs covering pasture, rangeland, and forage. The 
programs proved to be highly popular with farmers and ranchers and, in 
2008, the pilot area is being expanded to provide additional 
information on program performance.
    For 2009, the budget re-proposes legislation to initiate a small 
participation fee in the Federal crop insurance program to fund 
modernization and maintenance of a new information technology (IT) 
system. Modernization of the IT system would improve program efficiency 
and provide the capacity needed to keep pace with the ever expanding 
workload for developing new crop insurance products. The fee would 
generate about $15 million annually, which would initially supplement 
the annual appropriation to modernize the IT system. However, in future 
years, the fee would replace appropriated funding for IT maintenance. 
Based on current program indicators, we estimate that the fee would 
amount to about one-quarter cent per dollar of premium sold. In 
addition, the budget proposes to expand on language included in the 
2008 Appropriations Act by including IT modernization as an authorized 
purpose for mandatory funding already provided under the Federal Crop 
Insurance Act. Either approach could be implemented without increasing 
the Federal budget deficit.
International Programs
    Expanding access to overseas markets and securing a level playing 
field are critical for the continued prosperity of America's farmers 
and ranchers. Future growth in demand for our agricultural products is 
primarily going to occur overseas, particularly in developing countries 
which are experiencing rapid economic growth and rising incomes. We 
must, therefore, ensure that our producers and exporters have the tools 
they need to be competitive in a rapidly expanding global marketplace.
    Our 2009 budget proposals support our continued commitment to 
opening new markets and expanding trade. Increased funding is provided 
for the Foreign Agricultural Service (FAS) to maintain its overseas 
office presence and continue its representation and advocacy activities 
on behalf of American agriculture.
    For the foreign food assistance programs, the budget continues to 
place the highest priority on meeting emergency and economic 
development needs of developing countries. The 2009 request for 
appropriated funding for the McGovern-Dole International Food for 
Education and Child Nutrition Program is $100 million. This level will 
allow USDA to extend school feeding and educational benefits to about 2 
million women and children during 2009. The program is helping children 
in countries with severe educational and nutritional needs. In recent 
years, more than 15 million children throughout the world have received 
benefits from the McGovern-Dole program and its predecessor, the Global 
Food for Education Initiative.
    The budget requests appropriated funding of $1.2 billion for the 
Public Law 480 Title II program, which provides emergency relief needs 
and addresses the underlying causes of food insecurity through non-
emergency programs. In addition, to help improve the timeliness, 
efficiency, and effectiveness of the U.S. Government's response to food 
needs overseas, increased flexibility is requested in the purchasing of 
Title II commodities. As the President said in his State of the Union 
message, this flexibility is important to help break the cycle of 
famine. In countries like Bangladesh, this authority would have allowed 
us to provide more assistance, quicker, to those affected by the 
cyclone several months ago.
    The budget requests funding of $12.5 million in the Office of the 
Secretary to support the Department's efforts to assist in agricultural 
reconstruction activities in Afghanistan and Iraq. USDA is providing 
technical advisors assigned to the Ministry of Agriculture in Iraq, who 
are assisting in agricultural economics and planning, soil and water 
policy, extension, and food safety and animal inspection. This 
collaboration supported the development of the first national strategic 
plan for agriculture under the new government. Other USDA agricultural 
advisors are serving on the Provincial Reconstruction Teams (PRTs) 
working in the rural provinces of Afghanistan and Iraq on activities 
such as soil and water conservation, irrigation and water management, 
grain and seed storage, post-harvest loss reduction, marketing system 
improvements, and livestock health, nutrition, and breeding. These 
advisors are providing much needed assistance in addressing a wide 
range of problems brought on by years in some cases decades, of neglect 
and mismanagement in the agricultural sectors of these two countries. 
Additional funding will be needed for USDA to continue to be a key 
player in these areas.
Conservation
    USDA fosters environmental stewardship through conservation 
programs supported with appropriated and mandatory CCC funding. Since 
2001, USDA has provided assistance to farmers and ranchers resulting in 
conservation on more than 130 million acres of land.
    The 2009 budget reflects a strong commitment to conservation and 
includes nearly $4.6 billion in mandatory funding. Of this amount, $775 
million is needed to support the Administration's Farm Bill proposals. 
This funding will be allocated among the various conservation programs 
described below when new program levels are established by the Farm 
Bill.
    Within the total amount of mandatory funds, the budget proposes 
$181 million for the Wetlands Reserve Program (WRP). The projected WRP 
enrollment for 2009 is approximately 100,000 acres, and will bring the 
total acreage enrolled in the program to 2,275,000 acres, the maximum 
level authorized by the 2002 Farm Bill. The WRP is the principal 
support program of the President's goal to restore, protect, and 
enhance 3 million acres of wetlands by 2009. The Administration's Farm 
Bill proposals for WRP would provide the funding necessary to achieve 
an annual enrollment goal of 250,000 acres.
    The Conservation Reserve Program (CRP) accounts for more than half 
of the mandatory funds with total funding of just under $2 billion. 
Enrollment in CRP is expected to decline by about 2 percent to 34.2 
million acres in 2009 due to expiring contracts and the conversion of 
farmable land to crop production. In addition, funding for the 
Environmental Quality Incentives Program (EQIP) will increase by $50 
million to just over $1 billion to protect 17.5 million acres in 2009.
    The budget includes $360 million for the Conservation Security 
Program (CSP). This level of funding is expected to support almost 
25,400 contracts signed in prior years, which cover 20.4 million acres. 
The Administration's Farm Bill proposals would increase funding for 
these programs to enroll and treat more acres. In addition, these 
proposals would reduce the complexity of conservation programs to 
encourage greater participation.
    The 2009 budget includes $801 million in discretionary funding for 
on-going conservation work. This level of funding supports programs 
that provide the highest quality technical assistance to farmers and 
ranchers and address the most serious natural resource concerns. The 
budget includes savings of $136 million from the elimination of funding 
for earmarked projects, duplicative programs, and programs that do not 
represent a core responsibility of the Federal Government. No funding 
is proposed for the Resource Conservation and Development Program and 
the Watershed and Flood Prevention Operations Program.
Rural Development
    USDA's Rural Development (RD) programs support the quality of life 
and economic opportunities in rural America by providing financial 
support for housing, water and waste disposal and other essential 
community facilities, electric and telecommunication facilities, 
broadband access, and business and industry. This support includes 
direct loans and grants and guarantees of loans made by private 
lenders.
    The 2009 budget supports a program level of $14.9 billion for the 
RD programs. This level is similar to the level requested in the 2008 
President's budget, but is about $3.6 billion less than the amount 
appropriated for 2008. The difference is due primarily to a reduction 
in electric utility loans and the elimination of direct loans in favor 
of loan guarantees for single family housing. The budget supports 
shifting resources to address the highest priority programs.
    The 2009 budget includes almost $1 billion for rental and voucher 
assistance to protect the rents of 230,000 low-income households. This 
is $518 million more than the amount appropriated for 2008. Of this 
amount, $100 million is for vouchers that will promote choice by 
providing the rental subsidy directly to the low-income tenant. Within 
the last few years, the period to renew expiring rental assistance 
contracts has been reduced from 5 years to 1 year. This action provided 
initial budget savings but increased the number of expiring contracts 
and, hence, the funding needed for renewing these contracts in 2009 and 
beyond.
    With regard to single-family housing, the 2009 budget reflects a 
shift from direct to guaranteed loans as proposed for 2008. This shift 
would reduce the cost of providing homeownership opportunities in rural 
America in a manner than is consistent with the administration of other 
Federal housing programs and sustainable as a long-term policy. 
Guaranteed loans have accounted for almost all the growth in USDA's 
single-family housing program since the mid-1990's and have proven to 
be effective in reaching low-income as well as moderate income 
households. The 2009 budget includes $4.8 billion for such guaranteed 
loans, an increase of $658 million and an amount estimated to provide 
about 43,000 homeownership opportunities in rural America.
    For the water and waste disposal program, the 2009 budget supports 
$1.3 billion in direct loans, $75 million in guaranteed loans and $220 
million in grants, for a total program level of $1.6 billion, which is 
a slight increase over the program level for 2008. The 2009 budget does 
not repeat the 2008 budget proposal to change the interest rate 
structure for direct loans, but it does reflect a sizeable shift from 
grants to direct loans. This shift achieves substantial budget savings 
while maintaining a high level of financial assistance that most rural 
communities can afford to repay at low interest rates.
    For the electric program, the 2009 budget supports $4.1 billion in 
direct loans for distribution, transmission, and power generation 
improvements. This level is expected to meet the demand for these 
categories of loans. Funding for baseload generation loans will be 
determined contingent upon enactment of legislation to authorize a fee 
to cover all subsidy costs. It is the administration's policy that the 
Department of Energy be the sole source of financial support for 
nuclear power generation facilities.
    The 2009 budget supports almost $300 million in broadband access 
loans. We believe this amount will provide sufficient resources to 
serve creditworthy applicants. It is anticipated that new program 
regulations for the broadband program will be in place for 2009 to 
ensure proper administration of the program and that more assistance 
will be directed to areas without existing providers. The budget also 
proposes $20 million in distance learning and medical link grants.
    Based on recent trends in applications and the potential 
availability of carryover, the 2009 funding level for Business and 
Industry guaranteed loans is $700 million. In addition, the budget 
supports almost $33 million in zero-interest direct loans for 
intermediary relending.
Research
    Research to improve the quality and productivity of America's food 
production and distribution system has contributed to the strength of 
American agriculture. By improving the competitiveness of agricultural 
research, we will continue to post gains in agricultural efficiency and 
production. The administration strongly believes that merit-based, 
peer-reviewed grants represent the best mechanism for providing the 
highest quality research. In support of this approach, the 2009 budget 
for the Cooperative State Research, Education and Extension Service 
(CSREES) includes a $19 million increase for the National Research 
Initiative (NRI), the Nation's premier competitive research program for 
fundamental and applied sciences in agriculture for bioenergy and 
biobased fuels, a continuing high priority of the administration. The 
NRI also supports integrated projects that focus on water quality, food 
safety, and pest management.
    The budget also supports the administration's goal for earmark 
reform to bring greater transparency and accountability to the budget 
process. In this regard, the budget proposes to eliminate $144 million 
in earmarked projects within CSREES. The budget also proposes to modify 
the Hatch and McIntire-Stennis formula programs. This proposal will 
expand multi-state research programs and direct a higher proportion of 
these funds to competitively awarded research projects. This will 
ultimately foster greater competition and improve the quality of USDA 
supported research. As proposed in the 2008 budget, the 2009 proposal 
would sustain the use of Federal funds to leverage non-Federal 
resources, maintain program continuity, facilitate responsiveness to 
State and local issues, and leverage and sustain partnerships across 
institutions and States.
    The budget for the Agricultural Research Service (ARS) includes $47 
million in increases for high priority research conducted in areas such 
as emerging and exotic diseases of livestock and crops, bioenergy, 
plant and animal genomics and genetics, and human nutrition and obesity 
prevention. Funding increases for these critical research priorities 
are offset by the discontinuation and redirection of $105 million in 
lower priority programs as well as the elimination of $41 million in 
Congressional earmarks.
    Finally, the budget includes $39 million to complete the 2007 
Census of Agriculture, the most comprehensive source of statistically 
reliable information regarding our Nation's agriculture. With 
information collected at the national, State, and county levels, the 
Census provides invaluable, comprehensive data on the agricultural 
economy which are relied upon to keep agricultural markets stable and 
efficient.
Nutrition Assistance
    The budget supports increased participation and food costs for the 
Department's three major nutrition assistance programs--Food Stamps, 
WIC, and Child Nutrition. For WIC, the budget supports an average 
monthly participation of 8.6 million in 2009, up from 8.5 million in 
2008. Food Stamp monthly participation is estimated at 28 million, 
about 200,000 above the 2008 level. School Lunch participation is 
estimated to grow a little over 1 percent to keep pace with the growing 
student population to a new record level of 32.1 million children per 
day.
    For Food Stamps, legislation will be reproposed to allow 
participation of certain households currently not eligible due to 
retirement and education savings accounts, child care expenses, and 
military combat pay. These re-proposals will also include legislation 
to close a loophole that some States used to enroll people not intended 
to be served by the program. For 2009, the budget includes increased 
funding to assess ways to increase participation among the elderly and 
the working poor, two populations that historically have been 
underserved. In addition, funds are also included to study ways to 
improve the application process as well as for nutrition education so 
that we can continue to refine the program.
    The President's appropriation request is $6.1 billion for WIC and 
will provide benefits to an average of 8.6 million monthly 
participants. Language is reproposed to cap the national average grant 
per participant for State administrative expenses at the 2007 level, 
which will reduce overall financial requirements by about $145 million 
in 2009. This reduction will encourage States to seek ways to be more 
efficient without affecting core services. In addition, the budget is 
reproposing to limit automatic WIC income eligibility to Medicaid 
participants with household incomes that fall below 250 percent of the 
Federal poverty guidelines. The automatic eligibility provisions for 
Medicaid participants make some people with incomes up to 300 percent 
of poverty eligible, well above the 185 percent of poverty WIC 
statutory standard.
    The Food and Nutrition Service is working with the States to 
implement the revised WIC food packages rule promulgated in December. 
The new rules allow the States to offer fruits and vegetables, whole 
grains, and more flexibility to offer foods likely to appeal to a 
variety of cultural preferences which will improve WIC's ability to 
achieve its nutritional objectives.
    The budget reproposes the elimination of the Commodity Supplemental 
Food Program (CSFP), since the program is only available in limited 
areas, and overlaps with two of the largest nationwide Federal 
nutrition assistance programs--Food Stamps and WIC. USDA intends to 
pursue a transitional strategy to encourage the 30,000 women, infants 
and children that are eligible for WIC to apply for that program, and 
to encourage 434,000 elderly CSFP recipients to apply for the Food 
Stamp Program. As part of this strategy, the budget provides resources 
for outreach and temporary transitional food stamp benefits to CSFP 
participants 60 years of age or older. These benefits would equal $20 
per month for the lesser of 6 months or until the recipient starts 
participating in the Food Stamp Program. Overall the Food Stamp Program 
budget includes $72 million for the transition in 2009.
    The Department has had great success in promoting healthy eating 
habits and active lifestyles with MyPyramid, the new MyPyramid for 
Pregnant and Breastfeeding Women and associated web-based, interactive 
tools. There have been 4.3 billion hits to MyPyramid.gov and 3.2 
million registrations to MyPyramid Tracker, the on-line tool that 
assesses diet quality and physical activity status, since MyPyramid was 
made available April 2005. The budget includes an increase of $2 
million to update and improve these popular tools plus develop the 2010 
Dietary Guidelines for Americans. USDA has the lead in developing the 
Dietary Guidelines--the basis for determining benefit levels in Food 
Stamps, Child Nutrition Programs, WIC and others, as well as for 
Federal nutrition policy and nutrition education activities. This 
supports the HealthierUS Initiative, which is aimed at improving diets 
and increasing physical activity in order to reduce obesity in America.
Department Management
    The 2009 budget continues to support the overall management of the 
Department. Increased funding is being sought for selected key 
management priorities including:
  --Reviewing agency compliance with civil rights laws in program 
        delivery and affirmative employment goals, while providing 
        effective outreach to ensure equal and timely access to USDA 
        programs and services to all customers.
  --Ensuring that ethics oversight and the delivery of ethics services 
        to the agencies is carried out in a consistent manner with 
        clear accountability in the USDA program.
  --Providing oversight of program delivery by conducting audits and 
        investigations and limiting fraud, waste, and abuse throughout 
        USDA.
  --Funding rental payments to the General Services Administration and 
        security payments to the Department of Homeland Security to 
        provide USDA employees with a safe working environment.
    In closing, I want to emphasize that the USDA budget fully supports 
the President's goals and funds the Department's highest priorities.
    That concludes my statement. I look forward to working with members 
and staff of the committee and we will be glad to answer questions you 
may have on our budget proposals.
                                 ______
                                 

Prepared Statement of Phyllis K. Fong, Inspector General, Office of the 
                           Inspector General

    I want to thank Chairman Kohl and Ranking Member Bennett for the 
opportunity to submit testimony to the subcommittee about the work of 
the Office of Inspector General (OIG) and our fiscal year 2009 budget 
request.
    I am pleased to have the chance to provide the subcommittee with an 
overview of our most significant recent activities and the oversight 
work we have planned and in-process at this time. In fiscal year 2007, 
OIG issued 61 audit reports containing 255 recommendations to improve 
and protect USDA programs and operations. Pursuant to the statistical 
reporting requirements established by Congress in the Inspector General 
Act of 1978, we determined that OIG audits resulted in a potential 
monetary impact of $91 million in fiscal year 2007.\1\ OIG criminal 
investigations resulted in over 520 indictments and 440 convictions in 
fiscal year 2007 and achieved an additional potential monetary impact 
of over $63 million.\2\
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    \1\ 5 U.S.C. App. 3  5.
    \2\ Components of the monetary impact figure include fines, 
recoveries/collections, restitutions, claims established, cost 
avoidance, questioned costs, and administrative penalties achieved in 
OIG criminal investigative cases.
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    This written statement will follow the framework of our four 
Strategic Goals. We organize our audit and investigative work under 
these Strategic Goals to effectively target OIG resources toward the 
key programmatic issues and public concerns facing the Department and 
our Congressional oversight committees. Our four Strategic Goals are 
(I) Safety, Security, and Public Health; (II) Integrity of USDA 
Benefits and Entitlement Programs; (III) Management Improvement 
Initiatives; and (IV) Stewardship of Natural Resources. The final 
section of my testimony provides information in support of the 
President's fiscal year 2009 Budget Request for OIG.
                  safety, security, and public health
OIG Food Safety Reviews
            Assessing USDA's Risk Based Inspection Program for Meat and 
                    Poultry Processing Establishments
    In February 2007, the Food Safety and Inspection Service (FSIS) 
announced its plan to implement a pilot risk-based inspection (RBI) 
program for meat and poultry processing establishments. The agency 
believed it had comprehensive and reliable data and that ``real and 
immediate'' improvements could be made to the effectiveness of 
inspection operations. Congress and other stakeholders became concerned 
that FSIS was beginning to implement RBI before it had corrected 
deficiencies reported in prior OIG audits and that issues regarding the 
agency's methodology for determining risk had not been addressed. 
Consequently, there was a concern that food safety might be compromised 
if RBI proceeded at that time.
    This subcommittee, working with the House Agriculture 
Appropriations Subcommittee, included language in the May 2007 
emergency appropriations act \3\ to prevent FSIS from using funds to 
implement RBI in any location until OIG studied the program, including 
the data supporting its development and design. We conducted an 
assessment of the FSIS processes and methodologies used to design and 
develop its proposed RBI program, as well as FSIS' infrastructure and 
management controls that would support a reliable, data-driven RBI 
program. Our December 2007 report questioned whether FSIS has the 
systems in place to provide reasonable assurance that risk can be 
properly assessed, especially since the agency lacks current and 
comprehensive assessments of food safety systems at meat and poultry 
processing facilities.
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    \3\ Public Law 110-038, enacted May 25, 2007. The U.S. Troops 
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007.
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    Throughout the course of OIG's review, we discussed our concerns 
and provided recommendations to FSIS so that the agency could act to 
immediately address the weaknesses we identified. OIG's concerns 
related to FSIS' (1) assessments of establishments' food safety 
systems, (2) security over information technology (IT) resources and 
application controls, and (3) management control structure, among other 
issues. OIG reached agreement with FSIS on the agency actions necessary 
to implement each of the 35 recommendations we presented in our report.
    OIG recommended that FSIS complete its plan for improving the use 
of food safety assessment-related data and determine how the assessment 
results will be used in determining risk. As the agency moves forward 
with the development and implementation of an RBI program, FSIS should 
ensure that its risk analysis and assessments are thoroughly documented 
and any data limitations are mitigated, and the decisions made in its 
inspections process are published and transparent to all stakeholders. 
FSIS also needs to implement appropriate oversight for the development 
of critical IT systems needed to support RBI. We made numerous 
additional recommendations to improve FSIS' management controls, data 
collection and analyses processes, and staff training.
    FSIS has responded substantively to OIG's findings and 
recommendations. During the course of our audit, FSIS began a critical, 
in-depth examination of the data used as the components of its RBI 
assessment with a view to refining and expanding the data used in 
future versions of RBI. As of September 2007, FSIS awarded a contract 
to build the agency's new Public Health Information System (PHIS) to 
better integrate its numerous IT systems that are used to manage 
inspector activities. The primary goal of PHIS is to improve the 
timeliness of collecting/analyzing inspection data, and thereby enhance 
the agency's capability to address food safety hazards.
Strengthening USDA's E. coli Testing Program
    In response to a large recall involving contaminated ground beef 
product, the then-Acting Secretary requested in October 2007 that OIG 
determine whether improvements could be made to FSIS' sampling and 
testing procedures for Escherichia coli O157:H7 (E. coli) and identify 
relative costs and benefits associated with these improvements. OIG 
promptly initiated a review of the actions FSIS already had in process 
to improve its E. coli sampling and testing program. As part of our 
review, we solicited feedback from a broad array of stakeholders 
actively involved in this issue, such as representatives from other 
USDA and Federal entities with similar sampling and testing programs, 
meat industry representatives, academic institutions that perform E. 
coli research, and the quick-service restaurant industry.
    OIG provided a memorandum report to USDA officials at the end of 
January 2008 containing our observations and suggestions. We concluded 
that while the actions FSIS has in process will improve its testing 
program, we believe that strengthening the adequacy, timeliness, and 
effectiveness of other aspects of the agency's Hazard Analysis and 
Critical Control Point (HACCP) verification activities would provide 
stronger assurance that federally-inspected establishments are properly 
identifying and controlling their food safety hazard risks. FSIS 
generally concurred with our findings and conclusions.
Improving Safety Inspections for Egg Products
    Since 1995, FSIS has administered USDA's responsibilities under the 
Egg Products Inspection Act. FSIS inspects egg products to ensure they 
are wholesome, processed under sanitary conditions, and properly 
packaged and labeled to protect consumers. OIG evaluated FSIS' 
monitoring and inspection of egg processing plants to assess the 
agency's performance in meeting these responsibilities.
    OIG found that FSIS has not yet integrated egg product inspections 
into its overall management control structure, including the science-
based HACCP program and the automated Performance-Based Inspection 
System (PBIS).\4\ FSIS increasingly depends on PBIS and other automated 
systems to provide safeguards and oversight of its meat and poultry 
inspection operations. However, these automated systems cannot be 
extended to egg processing inspections until a system of electronic 
records is created to record inspection data for this area. This delay 
raises concerns about potential adulteration of processed products.
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    \4\ FSIS has not implemented HACCP at the egg processing plants and 
it needs to accomplish this first before egg inspection results can be 
included in PBIS. Once egg inspection results, non-compliance records 
and other data are in PBIS, FSIS will have information in an electronic 
format that can be analyzed.
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    FSIS is developing a rule that would require egg product processing 
plants to develop and implement HACCP systems. In response to OIG's 
recommendations, FSIS agreed to develop a new IT system to track 
domestic inspection activities, including egg products processing, 
thereby replacing PBIS. FSIS also agreed to conduct trend analyses to 
identify and correct serious or widespread deficiencies at egg products 
processing plants.
OIG Investigations: Food Safety
            Investigating Allegations of Adulterated Beef Entering the 
                    Food Supply
    As members of the subcommittee are aware, USDA's investigation into 
recent allegations, made by the Humane Society, of inhumane treatment 
of cattle at a Chino, California, slaughter/processing facility has 
identified potentially adulterated beef entering the food supply. This 
has led to the biggest food recall in U.S. history. At the request of 
the Secretary, OIG is leading the Department's investigation into 
potential violations of the Federal Meat Inspection Act and the Humane 
Slaughter Act.\5\ Our investigation is ongoing, and we are working 
cooperatively with FSIS and other law enforcement agencies. We are 
coordinating our efforts with the U.S. Department of Justice (DOJ). At 
the conclusion of our investigation, we will report on our findings to 
the appropriate USDA officials. We have also initiated a companion 
audit that will examine procedural issues arising from the allegations 
against the Chino, California, facility. (Described on the following 
page of this statement.)
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    \5\ Federal Meat Inspection Act, 21 U.S.C. Sec. Sec. 601-695 
(FMIA); Humane Slaughter Act, 7 U.S.C. Sec. Sec. 1901-1907.
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            Investigating Fraud in the BSE Surveillance Program
    OIG investigated allegations of fraud on the part of an Arizona 
facility that housed both pet food slaughter and meat processing 
operations and that participated in the Department's Bovine Spongiform 
Encephalopathy (BSE) Surveillance Program. Our agents revealed that the 
corporation's owner used various schemes to increase the number of 
brain stem samples submitted for testing, thereby increasing the amount 
of USDA payments he received. Some of the samples the company submitted 
were from healthy, USDA inspected cattle. The owner was convicted of 
theft, mail/wire fraud, and aiding and abetting. A Federal court 
sentenced him to 8 months of imprisonment and 36 months supervised 
release and ordered him to pay a total of $490,000 in fines/
restitution.
            Fraudulent Conduct Involving Contaminated Food Products
    A joint OIG-Food and Drug Administration (FDA) food safety 
investigation in the past year disclosed that a Florida food processing 
company was the source of poultry and seafood products that were 
contaminated with Listeria monocytogenes, a potentially fatal 
pathogenic bacterium that can be found in ready-to-eat food products. 
The company did not initiate a recall of the product after learning 
that it tested positive for Listeria monocytogenes. The product was 
misbranded and shipped to several locations throughout the United 
States and Canada. The company president was charged with a scheme to 
defraud through the sale of adulterated foods and a scheme to introduce 
misbranded food into interstate commerce. He was sentenced to 15 months 
imprisonment and 36 months supervised release. Additionally, he 
received a fine of $5,000 and was ordered to pay $200,000 in 
restitution to the University of Florida to support its food safety 
programs.
    OIG assisted in a multi-agency food safety investigation into the 
egregious conduct of a man who had made several allegations that his 
two young children were harmed by eating contaminated soup. The younger 
child, an 18-month old, had to be airlifted to an Atlanta hospital for 
critical care. A sample of the soup submitted to an FDA laboratory for 
analysis tested positive for Prozac and other anti-depressants. The 
investigation revealed that the father was responsible for 
contaminating the soup. He was charged in Federal court with food 
tampering and ultimately sentenced to 60 months imprisonment and 36 
months supervised release.
Food Safety Oversight Work for Fiscal Year 2008: Planned and in Process
    As mentioned above in my discussion of OIG's investigation into 
allegations of what occurred in the Chino slaughterhouse facility, OIG 
has recently initiated an audit concerning FSIS' Management Controls 
Over Pre-Slaughter Activities. Our objectives are to determine whether 
inspection controls and processes in that facility may have broken down 
and whether the alleged conduct (or omissions) represents an isolated 
or systemic problem. OIG will evaluate the adequacy of pre-slaughter 
controls and determine whether improvements are needed to identify and 
prevent similar problems from occurring elsewhere. We will coordinate 
this new audit with our ongoing inquiry into alleged criminal 
violations of food safety and humane animal handling laws at the Chino 
facility.
Follow-up Review on Meat and Poultry Import Inspections
    We are currently conducting a follow-up audit of the Federal 
inspection system for meat and poultry imports. We will evaluate the 
adequacy of FSIS' foreign inspection processes concerning the 
equivalency of foreign food safety systems to U.S. standards; the 
agency's periodic, in-country reviews that assess whether foreign 
systems remain equivalent; and FSIS' re-inspection of imported products 
at U.S. ports of entry. We anticipate releasing our report in late 
April 2008.
FSIS Recall Procedures for Adulterated or Contaminated Product
    As part of a request from the former Acting Secretary, OIG is 
evaluating issues regarding FSIS recall procedures for adulterated or 
contaminated product that have already entered the food distribution 
chain. We will identify whether improvements can be made to FSIS 
processes for handling recalls to ensure that appropriate information 
is rapidly conveyed to the appropriate agency decisionmakers. We plan 
to also evaluate whether FSIS is taking full advantage of its statutory 
authority to address recall situations. We anticipate releasing this 
report in late May 2008.
Oversight of the National Organic Program
    America's organic foods industry is growing rapidly. Without 
effective oversight, non-organic products could be marketed as organic 
and sold for significant profit. To ensure producer compliance with 
USDA's National Organic Program, OIG plans to conduct an audit to 
evaluate the oversight provided by the Agricultural Marketing Service 
(AMS) and State and private certifying agents. As will be discussed 
below (Section V), the start of this audit has been delayed but we 
anticipate beginning work in August 2008.
OIG Investigations into Animal Cruelty and Dog Fighting
    OIG is devoting increased attention to animal cruelty cases. During 
fiscal year 2007 and the first 4 months of fiscal year 2008, OIG 
criminal investigators opened 21 cases and helped achieve 132 
convictions related to animal cruelty investigations.
Shutting Down Dog Fighting
    OIG dog fighting investigations in 2007 resulted in two of the most 
significant cases we have pursued in recent years with respect to the 
number of convictions gained and the extensive public attention 
received. Foremost was our investigation into a dog fighting ring in 
Smithfield, Virginia, involving a professional athlete and his 
associates. This dog fighting ring operated from 2001-2007, until it 
was shut down as the result of OIG's investigation. The primary 
defendant's property contained structures specifically designed for dog 
breeding, housing, and fighting. A total of 66 dogs (52 pit bulls and 
14 other breeds) were seized by State and local authorities in the 
execution of a search warrant on the property. OIG's Emergency Response 
Team (ERT) assisted in this investigation by recovering and 
transporting evidence located on the grounds. Pursuant to a court 
order, the 47 pit bulls forfeited to the U.S. Government were 
eventually transferred to a Utah animal sanctuary or seven other animal 
rescue organizations for foster and/or lifetime care of the dogs.
    The five subjects of the dog fighting ring pled guilty in Federal 
court to conspiracy to travel in interstate commerce in aid of unlawful 
activities and to sponsoring a dog in an animal-fighting venture. The 
primary defendant was sentenced to 23 months incarceration and was 
ordered to pay $928,073 in restitution to fund the lifetime care of the 
dogs rescued from his property. The four other subjects received 
varying sentences ranging from 2 to 21 months incarceration.
    Our second major animal fighting investigation in 2007 was 
``Operation Bite Back,'' an investigation conducted jointly with the 
Ohio Organized Crime Investigations Commission into a multi-state dog 
fighting and gambling enterprise operating in Ohio, Kentucky, and 
Michigan. This investigation resulted in more convictions than any 
other single OIG investigation into dogfighting. During surveillance of 
various dog fighting events, we observed food stamp (Electronic 
Benefits Transfer, EBT) fraud, illegal wagering, the sale and use of 
narcotics, and felons illegally carrying firearms. Agents from OIG and 
other agencies seized pit bulls, U.S. currency, marijuana, cocaine, 
firearms, a bulletproof vest with a ski mask, and a warehouse full of 
dog fighting equipment and blood-stained fighting pits.
    Operation Bite Back resulted in charges against 55 individuals, 
including violations of Federal and State laws prohibiting dog 
fighting, possession of firearms, gambling, food stamp trafficking, and 
interstate transportation of stolen vehicles. Guilty pleas were entered 
by 46 of the accused. OIG's National Computer Forensics Division 
provided digital analysis of three seized computers for the Dayton, 
Ohio, Police Department. Federal and State prosecution activity in this 
case is ongoing.
Homeland Security Oversight
            Evaluating USDA Controls on the Importation of Biohazardous 
                    Materials
    In order to protect our Nation's animal and plant resources from 
diseases and pests--and preserve the marketability of U.S. agricultural 
products--USDA's APHIS requires permits for entities \6\ seeking to 
import or move certain animals, animal products, pathogens, plant 
pests, and specified agricultural products. OIG evaluated APHIS' 
controls over its permit system regarding the importation of 
biohazardous and other regulated materials and assessed the 
effectiveness of APHIS' corrective actions in response to our 2003 
audit report.
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    \6\ Examples include private, State, and Federal research 
laboratories, universities, and vaccine companies.
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    OIG determined that APHIS has taken some of the corrective actions 
recommended in a prior audit, such as restricting the hand-carrying of 
packages containing regulated materials through ports of entry. Persons 
authorized to hand-carry must now be named in the permit, and the 
permit holder must contact APHIS in advance to coordinate the arrival 
of all hand-carried regulated material. In addition, inspectors at the 
ports can now access the ``ePermits'' database system to verify the 
basic information contained on incoming permit documents.
    Our audit found, however, that other key OIG recommendations to 
strengthen APHIS' permit systems against vulnerabilities and misuse 
still needed to be implemented. The agency had not fully implemented 
the new ePermits monitoring system. Until ePermits is fully 
operational, APHIS cannot monitor import activity at a nationwide 
level.\7\ Inspectors have not been provided instructions for using 
ePermits to screen incoming shipments. Although APHIS has made progress 
in improving its screening procedures for plant inspection stations at 
ports of entry, APHIS needs to develop controls to ensure that 
biohazardous materials are routed to those facilities.
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    \7\ For example, until the ePermits system is fully operational, 
the agency cannot perform analyses to identify trends in permit 
activity that could signal possible misuse of the permit system. The 
ePermits system could not provide officials with information on which 
permit holders had been inspected or were required to be inspected 
before permit issuance.
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The National Strategy for Pandemic Influenza: Reviewing USDA's Response
    In late 2005, the President announced the National Strategy for 
Pandemic Influenza (National Strategy), a comprehensive approach to 
addressing the threat of pandemic influenza. The Implementation Plan of 
the National Strategy included over 300 tasks that were designed to 
ensure that the Federal Government, along with its State and local 
partners, continues to prepare for a possible outbreak in the United 
States. USDA was assigned responsibility for completing 98 of these 
tasks.
    We have provided testimony to the subcommittee about the findings 
of our review of APHIS oversight of Avian Influenza (AI).\8\ We 
continued our oversight work in this area by evaluating USDA's progress 
regarding its responsibilities under the National Strategy. We found 
that USDA has made significant progress in developing or revising 
policies and procedures to detect, contain, and eradicate highly 
pathogenic
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    \8\ APHIS-Oversight of Avian Influenza. OIG report number 33099-11-
HY. June 2006.
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    AI in order to reduce the threat of a pandemic.
    USDA took action on each lead task we reviewed, such as helping to 
develop the interagency response playbook that detailed step-by-step 
actions that Federal agencies should take in response to an outbreak. 
Our review found, however, that these new procedures were not tested to 
ensure they worked as designed.
    We also found that APHIS had not implemented all of the 
recommendations from our 2006 report intended to strengthen the 
agency's outbreak response capabilities. One was the recommendation 
that the agency work closely with State and industry representatives 
regarding outbreaks affecting live birds, in order to develop necessary 
response plans and review/certify State plans. These State plans are 
necessary to address gaps in the Federal response plan, including 
cleaning and disinfection, humane euthanasia, quarantine, and movement 
control. As a result, we believe APHIS has reduced assurance that it 
will be able to timely and effectively respond in the event of an 
outbreak. APHIS generally agreed with OIG's findings and 
recommendations.
Homeland Security Oversight in Fiscal Year 2008: Planned and in Process
            USDA Participation in the Rehabilitation of Flood Control 
                    Dams
    The Natural Resource Conservation Service (NRCS) is authorized to 
assist local organizations with the rehabilitation of aging flood 
control dams. Many NRCS assisted dams in the United States are near or 
at the end of their 50-year design life and warrant inspection and 
potential rehabilitation. A dam failure in Hawaii and a ``near 
bursting'' dam in Massachusetts demonstrate the need to determine the 
conditions of NRCS-financed dams. OIG initiated an audit to review the 
adequacy of NRCS' controls for the rehabilitation of agency-assisted 
flood control dams. We anticipate releasing this report in mid-2008.
   protecting the integrity of usda benefit and entitlement programs
USDA's Response to Hurricanes Katrina and Rita: Preventing Waste and 
        Abuses
    Since I last submitted testimony to the subcommittee (March 2007), 
OIG has concluded several of the primary audits we initiated in 
response to the devastating 2005 hurricane season. Members of Congress 
urged Federal OIGs to work in concert to ensure that the massive 
Federal funds allocated for multi-agency disaster relief efforts in 
2005 were expended efficiently and not subject to waste and abuse. In a 
series of audits, OIG found areas where improved agency controls were 
necessary to avoid further waste and fraud, and we identified USDA 
``best practices'' that could also benefit other Federal entities. I 
would like to highlight several of our more significant reviews for the 
subcommittee.
    At the onset of the hurricanes, OIG quickly deployed audit teams to 
the Food and Nutrition Service's (FNS) food stamp distribution centers 
in the Gulf region. Our personnel reviewed and observed the operation 
of FNS disaster food stamp programs \9\ as State and local personnel 
disbursed benefits to families affected by the disasters. Our audit 
teams were able to provide feedback to FNS and State personnel on 
whether program controls were sufficient to prevent abuses such as 
duplicate payments, dual participation, and employee fraud. OIG 
concluded that FNS and participating State agencies quickly and 
effectively provided over $800 million in disaster food stamp benefits 
to millions of disaster victims. However, we did note that improvements 
could be made to ensure that State agencies are adequately prepared in 
disaster situations. States did not always include required components 
in their disaster plans, such as fraud prevention procedures. Some 
application processing systems used by States did not track denied 
applications or account for all family members--two factors that can 
result in fraudulent benefits. Based on OIG recommendations, FNS agreed 
to specify in regulations the State agency responsibilities for 
developing and implementing disaster assistance programs.
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    \9\ Under a disaster food stamp program, FNS can waive requirements 
of the regular program in order to provide benefits quickly to disaster 
victims. Some items that were waived during the hurricanes included 
income requirements, eligibility tests, and identity tests. Benefits 
are provided at many different locations. Because of the reduced 
eligibility requirements, duplicate participation and other types of 
fraud can readily occur.
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    Focusing primarily on loan and grant funds being disbursed to 
repair hurricane damage in the Single Family Housing Program (SFH), OIG 
audit staff found that USDA's Rural Housing Service (RHS) and other 
Federal agencies had not coordinated activities to prevent duplicate 
housing assistance payments to hurricane victims. RHS had not required 
recipients to provide information about reimbursements and assistance 
they received from insurance companies and charitable organizations. 
This resulted in some recipients receiving duplicative financial 
assistance from RHS and other sources for a single damage claim. We 
also found that RHS emergency grant funds were awarded for ineligible 
purposes, such as non-disaster related repairs, improvements and 
repairs unrelated to health and safety concerns, and use of unlicensed 
contractors. RHS is taking action to address the majority of our 
recommendations. We are continuing discussions with agency officials to 
reach management decision on the propriety of using hurricane disaster 
funding for non-hurricane related repairs.
    Disruptions resulting from Hurricanes Katrina and Rita temporarily 
impacted commodity prices received by farmers. Afterwards, USDA 
developed initiatives to alleviate transportation congestion on the 
Mississippi River, such as providing grants to move damaged corn from 
New Orleans and move agricultural commodities through other regions. 
The Farm Service Agency (FSA) implemented the initiatives and provided 
monetary assistance through the Commodity Credit Corporation (CCC). OIG 
conducted an audit that determined USDA needed an improved response and 
recovery plan to relieve future, serious disruptions in the movement of 
commodities along the Mississippi River. Due to the urgent situation 
brought about by the hurricanes, USDA had initially used ad hoc 
procedures to award noncompetitive agreements that resulted in higher 
costs compared to competitively-secured agreements. FSA acted upon OIG 
audit recommendations to coordinate with USDA entities, industry 
stakeholders, and other Federal agencies to formalize a response/
recovery plan for disruptions to the grain transportation/storage 
system.
    OIG also conducted numerous criminal investigations into 
allegations of fraudulent activity resulting from Federal hurricane 
relief efforts. To date, our investigations have achieved 61 
indictments and 18 convictions involving the Food Stamp Program. We 
continue to work closely with DOJ Fraud Task Forces in Louisiana and 
Mississippi to ensure that allegations of fraud are investigated.
    While the aforementioned audit and investigative work represent 
OIG's most recent contributions to USDA's disaster relief activities, 
this year we will assess the efficiency of other USDA programs that 
assist citizens and communities during emergencies. In fiscal year 
2008, we expect to issue reports on the Hurricane Indemnity Program, 
Livestock and Feed Indemnity Programs, Emergency Forestry Conservation 
Reserve Program, and Emergency Conservation Program, among others.
Review of Misreported Nonfat Dry Milk Pricing Data
    Each week, the National Agricultural Statistics Service (NASS) 
collects data from plants that commercially produce in excess of 1 
million pounds of dairy products, which are then used to determine 
current market prices. In brief, the nonfat dry milk prices NASS 
publishes are used by AMS to help set the minimum prices paid to milk 
producers in the Federal milk marketing order system.
    In a review done by OIG's Office of Inspections and Research, OIG 
determined that a large dairy firm misreported nonfat dry milk volume 
and price information when submitting its weekly reports to NASS 
beginning in 2002. The incorrect data, once aggregated with other 
firms' data, was then factored into the Federal milk marketing order 
formula, resulting in a $50 million underpayment to milk producers.
    We offered recommendations to NASS centering on the need for the 
agency to verify the information previously received from dairy plants 
which will allow the calculation of a more precise Federal milk 
marketing order price for milk producers. We also recommended measures 
to ensure improvement in NASS' data collection process. NASS agreed 
with each of our recommendations and has taken steps to improve its 
data collection and review processes.
Identifying Improper Payments: Conservation Programs
    The Natural Resources Conservation Service (NRCS) administers 
conservation easement programs that restore lands to their natural 
state (i.e., wetlands and grasslands) by purchasing conservation 
easements from landowners. Participating landowners agree to limit use 
of their land to activity that both enhances and protects the purposes 
for which the easements were acquired. Land under conservation 
easements may be ineligible for farm assistance payments from FSA.\10\ 
NRCS field offices are required to notify FSA whenever land is placed 
under a conservation easement, so that FSA does not make payments to 
landowners with conservation easements on farm land. In a previous 
audit, OIG found situations where FSA made improper farm assistance 
payments to landowners for land under conservation easements. To 
determine the extent of such ineligible payments in one major 
agricultural State, we conducted an audit in 2007 to expand our 
previous work in California.
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    \10\ If a landowner with NRCS conservation easements participates 
in FSA farm assistance programs, he or she is required to inform FSA 
about the easements so the agency can appropriately reduce the 
landowner's crop bases and calculate their assistance payments.
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    OIG's review found additional examples demonstrating the need for 
better interagency communication, coordination, and program integration 
between NRCS and FSA. In 49 of the 53 Wetland Reserve Program and 
Emergency Watershed Protection Program easements we reviewed, NRCS did 
not notify FSA when the easements were recorded. This occurred because 
the local NRCS field offices mistakenly expected the relevant NRCS 
State office to fully inform FSA of the easements. Without the 
necessary easement information, FSA made improper farm assistance 
payments on 33 easements, totaling $1,290,147. During our fieldwork, we 
recommended that NRCS immediately provide a list of easements in 
California to FSA. Our report recommended that NRCS provide training 
for field staff in California regarding their responsibility to notify 
FSA about recorded easements. NRCS and FSA responded that each agency 
has taken appropriate corrective action to remedy the specific concerns 
noted in OIG's report and established a protocol to ensure better 
interagency communications.
Assessing USDA's Efforts to Promote U.S. Farm Exports
    In response to a Congressional request, OIG reviewed the extent to 
which the Foreign Agricultural Service's (FAS) market development 
programs foster expanded trade activities in the exporting of U.S. 
agricultural products. OIG was asked to review concerns regarding U.S. 
trade practices, promotion efforts, and financing operations, and to 
identify areas for USDA to achieve greater results with improvements 
such as enhanced inter-department coordination.
    OIG found that FAS does not formally track its efforts to expand 
exports or its outreach to U.S. exporters and thereby had no assurance 
that outreach efforts were effective in expanding U.S. agricultural 
exports. OIG issued recommendations intended to allow USDA to more 
effectively measure its accomplishments and thereby prioritize limited 
resources to better promote U.S. exports. FAS generally concurred with 
OIG's recommendations and has agreed to take corrective action on each.
Reviewing the Tobacco Transition Payment Program
    Legislation enacted in 2004 ended the Depression-era tobacco quota 
program and established the 10-year, $10.14 billion Tobacco Transition 
Payment Program (TTPP) to provide annual transitional payments to 
eligible tobacco quota holders and producers.\11\ Payments began in 
fiscal year 2005 and are funded through assessments on tobacco product 
manufacturers and importers. CCC estimates that payments made over the 
10-year period will approximate $6.7 billion to quota holders and $2.9 
billion to tobacco producers. OIG is conducting a three-phase review of 
TTPP. The first phase has now been completed; we examined FSA's 
controls on payments to quota holders and concluded that they were 
generally adequate to ensure that TTPP payments were issued to eligible 
quota holders. The second phase (audit of TTPP assessments) is ongoing 
and the final phase (audit of payments to producers) is planned for 
later this fiscal year.
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    \11\ TTPP quota holders are the landowners of farms to which 
tobacco quota was assigned.
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OIG Investigations: Farm Programs and Crop Insurance Fraud
    In fiscal year 2007, OIG criminal investigators helped obtain 35 
convictions in cases involving criminal activity related to FSA and 
Risk Management Agency operations. Our investigative work related to 
these two agencies achieved approximately $21.6 million in monetary 
results during fiscal year 2007.
            Uncovering Fraud Related to the Tobacco Program
    OIG conducted a joint investigation that resulted in two North 
Carolina men being ordered to forfeit $4.5 million for their conspiracy 
to structure financial transactions to avoid filing currency 
transaction reports. The men used an extensive network of accomplices, 
family members, and friends to conduct over $4.5 million of 
transactions in increments under $10,000 to avoid filing the required 
reports. OIG agents determined that both men intentionally engaged in 
fraudulent actions regarding the proper identification of tobacco grown 
under FSA's Burley Tobacco Marketing Program. The IRS, FBI, and 
Tennessee Bureau of Investigation participated in this investigation.
            Uncovering Fraud in the Crop Insurance Program
    OIG agents revealed a crop insurance scheme in Virginia wherein an 
insurance company supervisor and a claims adjuster colluded to 
misrepresent a tomato farmer's production records. The supervisor 
backdated forms to enable the producer to meet planting dates approved 
by RMA and falsified production totals to ensure the producer would 
realize a loss. The adjuster made false statements by verifying that he 
visited the producer's fields; in fact, no such visits were made. The 
producer was unaware of the actions taken by the supervisor and the 
adjuster. OIG determined that the misrepresentations resulted in the 
producer receiving a $308,000 Federal crop insurance indemnity payment 
for purported tomato losses. The supervisor and the adjuster were 
sentenced in 2007; the supervisor was sentenced to 5 months 
imprisonment and additional home detention; and the adjuster received a 
sentence of 24 months probation. Both men were ordered to pay $240,031 
in restitution and were debarred by RMA from participation in the crop 
insurance program for 3 years.
    A second crop insurance case investigated by OIG determined that 
producers in Georgia conspired to use a third producer as a ``front.'' 
The scheme involved using the front's name as the producer because he 
had a higher production yield for tobacco. The two producers thereby 
received larger crop insurance payments during several years from 2000 
to 2004 and paid cash to the front for his participation. OIG's 
investigation resulted in the two producers paying a combined 
restitution of $739,000 to USDA prior to their sentencing for 
misprision (concealment) of a felony. The producers were each sentenced 
in August 2007 to 48 months probation and fined $80,000 in addition to 
the restitution. The front producer cooperated in the investigation and 
received pretrial diversion.
OIG Investigations: RD Programs-Fraud by Company Financial Officer 
        Results in Sentence and Restitution
    OIG conducted an investigation into an Oklahoma manufacturing 
company's former chief financial officer who used falsified documents 
to obtain RD loans. Our investigation disclosed that the individual 
fraudulently obtained $4.9 million in financial assistance from USDA 
and an Oklahoma bank, and another loan of $275,000 from a local lender. 
USDA ultimately paid the lender $1.8 million as a result of the loans 
going into default. The investigation resulted in the former financial 
officer being sentenced to 40 months imprisonment and 60 months 
supervised release. He was also ordered to pay $3.8 million in 
restitution.
OIG Oversight of the Crop Insurance Program in Fiscal Year 2008: 
        Planned and in Process
            Reviewing RMA Compliance Activities
    RMA administers the Federal crop insurance program in a partnership 
with approved, private sector insurance providers (AIP). RMA is 
mandated to ensure integrity in the program; its actions include 
monitoring AIP performance and conducting various compliance 
activities. We are in the latter stages of our review of the 
effectiveness of the agency's compliance activities and expect to issue 
our report in mid-2008.
            Implementing an Effective Quality Control System for Crop 
                    Insurance
    We previously reported that RMA must have an effective quality 
control system in place to fully implement the Agricultural Risk 
Protection Act of 2000 and thereby strengthen the program's integrity 
and improve participant compliance. To date, we still have not reached 
management decision on three of the four recommendations in OIG's 2002 
report. OIG recently initiated a review of the corrective actions 
planned and/or implemented by RMA. We will assess the agency's 
oversight activities concerning AIP program delivery and examine 
whether AIPs have implemented the controls required to prevent/detect 
program abuses, waste, and improper payments.
            Evaluating Crop Losses and Indemnity Payments Due to 
                    Aflatoxin-Infected Corn
    RMA issued indemnity payments totaling $27 million nationwide for 
the 2005 crop year due to Aflatoxin-infected corn.\12\ Agency concerns 
about the market price data used to calculate the resulting indemnity 
payments led RMA to request OIG's assistance. We therefore initiated an 
audit to evaluate (1) whether RMA had sufficient management controls 
regarding those payments, (2) whether indemnity payments were properly 
determined, and (3) whether payments were based on reasonable 
reductions in market value, among other issues.
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    \12\ Aflatoxin, produced by the fungus Aspergillus flavus, is a 
potent carcinogen. Its presence in corn reduces marketability.
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OIG Oversight of Rural Development Programs in Fiscal year 2008: 
        Planned and in Process
            Rural Business Cooperative Service: Reviewing Economic 
                    Development Loans to Intermediaries
    RBS' Intermediary Relending Program (IRP) seeks to increase 
economic activity and employment in rural communities and alleviate 
poverty by providing loans to local organizations that utilize the 
funds to make direct, smaller loans to eligible businesses and projects 
in the community. In fiscal year 2007, the IRP had over 400 borrowers 
and a loan portfolio of $687 million. Congress has appropriated 
approximately $33 million for the IRP for each of the past 3 fiscal 
years. OIG is examining RBS' internal controls to determine if they are 
sufficient to ensure that IRP loan funds are properly spent. OIG will 
examine whether these loans are made to eligible borrowers for eligible 
purposes, the liens are appropriately used to secure the loans, and 
RBS' servicing actions are effectively managing collections, 
delinquencies, and defaults.
            Rural Rental Housing: Concerns About Owner Financial Data 
                    and Maintenance
    OIG has previously found theft of project funds by owners and 
management companies, totaling $4.2 million.\13\ The thefts contributed 
to deteriorated Rural Rental Housing (RRH) projects that threatened the 
health and safety of rural residents nationwide. We are planning a new 
review to determine whether there is adequate accounting for the 
financial data submitted by owners, whether the RRH project's operating 
expenses are reasonable and documented, and whether Rural Development's 
(RD) inspection procedures effectively resolve RRH maintenance and 
repair issues.
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    \13\ Rural Rental Housing Program, Uncovering Program Fraud and 
Threats to Tenant Health and Safety. OIG Report 04801-6-CH, issued 
March 1999.
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    During fiscal year 2008, OIG also plans to audit the Rural Housing 
Service's (RHS) management controls to determine if they are sufficient 
to limit delinquencies in the SFH Direct Loan Program.
            Rural Utilities Service: Broadband Loan Programs and Water 
                    and Waste Programs
    Based upon the findings of OIG's September 2005 audit, the House 
Agriculture Appropriations Subcommittee expressed concern that the 
Rural Utilities Service (RUS) had not taken sufficient corrective 
actions regarding its Broadband Loan Program. OIG reported that of the 
$599 million in broadband funds reviewed, over $340 million (67 
percent) was expended for questionable purposes. We plan to conduct a 
comprehensive follow-up audit to determine RUS' progress in managing 
its broadband programs and address specific concerns raised by Members 
of Congress.
    In fiscal year 2007, RUS' Water and Waste Programs provided over 
1.3 million rural subscribers with new or improved service facilities 
at a cost of approximately $1.6 billion. These programs are limited to 
communities that have populations of 10,000 or less, with low median 
household income levels, and cannot obtain credit elsewhere. OIG plans 
to evaluate management controls in the agency's Southeast region to 
determine whether water and waste funding is being allocated only to 
communities meeting these criteria.
Improving USDA Nutrition Programs: Oversight of Governmental and 
        Private Entities
    In addition to our disaster food stamp program work, we also issued 
several other nutrition assistance program audits in 2007. We audited 
nonprofit sponsors in California and Nevada participating in the 
agency's Summer Food Service Program. We found several deficiencies in 
three sponsors' administration of the program, including unsafe food 
handling and storage. The sponsors also submitted reimbursement claims 
for unsupported and questionable costs. Our review of the Special 
Supplemental Nutrition Program for Women, Infants, and Children (WIC) 
in Puerto Rico determined that FNS had not ensured that the 
Commonwealth's agency resolved deficiencies noted in prior FNS reviews, 
including inadequate oversight of WIC vendors. Commonwealth WIC 
officials compromised the vendor bidding process by releasing 
information that allowed vendors to calculate bid prices in ways that 
increased food costs to the program and violated regulations by 
permitting in-store credits. These credits resulted in reimbursement to 
vendors for products that were not delivered to WIC participants.
    In 2007, OIG also assessed the EBT system controls of the company 
that is the program's largest EBT processor. In fiscal year 2008, we 
will continue our oversight in this field by reviewing elements of the 
EBT systems in Colorado and California.
OIG Investigations: Targeting Fraud and Theft in USDA Nutrition 
        Programs
    In fiscal year 2007, OIG investigators helped obtain 77 convictions 
in cases involving criminal activity related to food stamp program/EBT 
fraud and achieved $25.4 million in monetary results.\14\ For criminal 
activity related to the WIC program in fiscal year 2007, OIG 
investigators helped obtain 10 convictions and $507,884 in monetary 
results.
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    \14\ Each of the monetary result statistics contained in this 
testimony statement were determined as required by the Inspector 
General Act of 1978, 5 U.S.C. App. 3 Sec. 5.&
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    The following cases provide examples of the type of criminal 
activity and schemes our agents uncover.
            Vendor Fraud in the Food Stamp Program
    A repeat offender of the food stamp program received an extended 
sentence after a joint investigation OIG conducted with Internal 
Revenue Service (IRS) and the Syracuse Police Department. The 
individual was a ``straw owner'' of a grocery store that redeemed over 
$1 million in illegal food stamp benefits during 2005 and 2006. Seeking 
to hide his prior conviction on food stamp fraud, the individual had 
another person act as the store owner and obtain the FNS license 
necessary to redeem food stamp benefits. The straw owner purchased food 
stamp benefits for below face-value from recipients and was then 
reimbursed by the food stamp program for their full value. The OIG/
joint investigation resulted in the former store owner being sentenced 
in June 2007 to 30 months in prison, 36 months probation, and 
restitution of $330,074 to USDA. The sentence will run consecutively 
with the 33-month sentence (currently being served) he received for 
money laundering in an earlier food stamp fraud case prosecuted in the 
Northern District of Ohio.
    OIG conducted an investigation with U.S. Immigration and Customs 
Enforcement (ICE) into the former owners of two Chicago grocery stores 
engaged in EBT trafficking. The owners redeemed approximately $1.2 
million in EBT benefits and over a year's time withdrew more than 
$100,000 without reporting the financial transactions to IRS. The two 
were found guilty of wire fraud, aiding and abetting, money laundering, 
and conspiracy to avoid currency regulations. In September 2007, the 
first owner was sentenced to 90 months of imprisonment, to be followed 
by deportation and was ordered to pay $1.1 million in restitution. The 
second owner was sentenced to 12 months imprisonment and ordered to pay 
approximately $61,000 in restitution.
            Investigations to Safeguard the Women, Infants, and 
                    Children Program
    A major OIG case involved an interstate conspiracy in which 
extremely large amounts of infant formula that were shoplifted in the 
Atlanta metro area were transported to New York in rental trucks. A 
covert search during the investigation revealed that the baby formula 
was stored in an infested, non-refrigerated storage unit during extreme 
heat conditions, causing the formula to become adulterated. The value 
of the stolen goods for the two organized crime organizations involved 
was approximately $6.48 million. In December 2007, five members of the 
two organizations received sentences ranging from 27 to 60 months in 
Federal prison for conspiracy and 42 to 65 months for interstate 
transportation of stolen property. The five members each received an 
additional 36 months of supervised release. OIG investigated this case 
with FDA and the Organized Crime Unit of the Atlanta Police Department. 
Prosecutorial activity is ongoing.
    We are currently awaiting sentencing in a case in which OIG agents 
determined that the husband and wife owners of a Michigan grocery store 
had fraudulently redeemed approximately $917,000 in WIC coupons and 
food stamp benefits. In July 2007, the husband pled guilty to food 
stamp trafficking and agreed not to contest the forfeiture of 
approximately $108,000 (including WIC vouchers) seized from his 
business and residential properties. The woman was enrolled in Medicaid 
and childcare subsidy programs; she did not disclose her part-ownership 
in the store and provided false information regarding her family 
income, thereby improperly receiving over $22,000 in Government 
subsidies. The wife pled guilty to false statements related to her 
welfare fraud. OIG worked this case jointly with the State of 
Michigan's Human Services Department.
    OIG agents worked with Federal and local law enforcement agencies 
to reveal that an FNS authorized convenience store operator in North 
Carolina was involved with other individuals in a stolen infant formula 
theft ring and counterfeit pharmaceutical scheme. A Virginia man 
involved in the conspiracy had devised a scheme to illegally transport 
stolen ``WIC approved'' infant formula from the North Carolina 
convenience store to Virginia and New York. Two suspects paid 
undercover agents approximately $100,000 for ``stolen'' infant formula 
that had a retail value in excess of $700,000. The store operator was 
sentenced in June 2007 to 37 months in prison and 36 months supervised 
probation; a deportation hearing will be held upon release. The 
individual responsible for transporting and trafficking the infant 
formula had previously pled guilty in Federal court. The FDA, FBI, and 
the Wilson, North Carolina, Police Department participated in the 
investigation.
                       improving usda management
USDA's Fiscal Year 2007 and 2006 Consolidated Financial Statement 
        Audits
    Pursuant to the Chief Financial Officers Act of 1990 and Office of 
Management and Budget (OMB) guidance, Federal OIGs are responsible for 
annual audits of Departmental and agency financial statements to obtain 
reasonable assurance that the financial statements are free of material 
misstatements. For fiscal year 2007, OIG issued a qualified opinion on 
the USDA Consolidated Financial Statements and the RD Financial 
Statements. The qualified opinions were the result of significant 
revisions made to RD's credit reform processes related to the Single 
Family Housing Program cash flow model and subsidy re-estimates. We 
were unable to obtain sufficient evidence to support USDA's or Rural 
Development's financial statement amounts as of the end of fiscal year 
2007 for estimated allowances for subsidy costs.
    The Commodity Credit Corporation, Forest Service (FS), FNS, and 
Federal Crop Insurance Corporation/RMA received unqualified opinions on 
their fiscal year 2007 financial statements.\15\ However, OIG noted 
that the Department needs to continue improving its overall financial 
management, information technology security and controls, and certain 
financial management processes. The Office of the Chief Financial 
Officer (OCFO) has immediate and long-term plans to substantially 
improve these financial and IT material weaknesses.
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    \15\ An unqualified opinion means USDA and standalone agencies' 
financial statements fairly presented their financial position and 
related reporting.
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Oversight of USDA's Information Technology Security
    Last fall, we issued our annual review of the Department's Federal 
Information Security Management Act (FISMA) efforts for fiscal year 
2007. Our review determined that the Department has improved its IT 
security oversight in several areas during the fiscal year. For 
example, the inventory of agency systems had significantly improved. In 
other areas, such as the certification and accreditation (C&A) process, 
improvements were noted, but additional work is still needed. However, 
a continuing material IT control weakness exists within the Department 
due to the lack of an effective, Departmentwide IT security plan. In 
our view, an effective plan would measurably improve USDA's ability to 
correct IT issues that affect its agencies and the Department as a 
whole. If the Department and its agencies effectively identify and 
prioritize the IT risks that exist and work collaboratively to resolve 
them, they can implement a time-phased plan to systematically mitigate 
them. Increased agency emphasis will facilitate improvements in 
compliance with required standards, plan of action and milestones 
reporting, risk level characterization, C&A of key IT processes, 
Privacy Act implementation and encryption, and configuration 
management.
    The Department concurred with OIG findings and recommendations and 
is taking steps to implement corrective actions. USDA officials advise 
that these IT control weaknesses are complex, affect most agencies 
within the Department, and will take time to fully resolve.
Processing USDA Employee Civil Rights Complaints
    In response to a request from Senators Harkin and Lugar, we 
followed up on an earlier OIG review and evaluated USDA's performance 
in tracking and processing equal employment opportunity (EEO) 
complaints from USDA employees and job applicants.\16\ We found that 
the Office of Civil Rights (CR, now known as the Office of Adjudication 
and Compliance) had significantly reduced the time required to complete 
an average case by approximately 50 percent from 1997 through 2006. The 
agency also began implementation of its Civil Rights Enterprise System 
(CRES) a web-based application that enables USDA agencies and CR to use 
a single, improved automated system for processing/tracking EEO 
complaints. Previously, USDA agencies all maintained separate systems 
that were not reconciled. However, our audit also found that CR could 
not track EEO complaints effectively or process them on time and 
material weaknesses persisted in CR's management control structure and 
environment. Consequently, CR continued to miss Equal Employment 
Opportunity Commission (EEOC) required timeframes. While the 
implementation of CRES was a positive step, CR did not establish 
sufficient protocols in the system to ensure the accuracy and 
sufficiency of complaint data.
---------------------------------------------------------------------------
    \16\ Office of Civil Rights--Management of Employment Complaints. 
OIG report 60801-3-HQ, issued March 10, 2000.
---------------------------------------------------------------------------
    In response to OIG's recommendations, CR agreed to a series of 
corrective measures. These include developing a detailed formal plan to 
process EEO complaints timely and effectively, fully test and implement 
improved CRES protocols and validate the accuracy of its complaint 
information, and implement procedures to control and monitor case file 
documentation and organization.
OIG Investigations Involving USDA Employees
    In addition to OIG's law enforcement activities regarding external 
parties and individuals who violate Federal laws pertaining to USDA 
programs and operations, we are responsible for examining and 
investigating allegations that USDA employees have engaged in serious 
misconduct or criminal activity related to their employment. Following 
are two examples of such cases from 2007.
    An OIG investigation involving a former RD Community Development 
Technician with 25 years of Federal service revealed that the 
individual had created fictitious loan files and grant applications. 
The former employee wrote checks from an agency supervised account 
regarding fictitious loan applications and stole the funds for her 
personal use. The former employee was sentenced to serve 24 months in 
prison, followed by 36 months supervised release, and ordered to pay 
$160,484 in restitution for embezzlement.
    Following a joint OIG-FBI investigation, an Illinois man was 
arrested by the Cairo, Illinois, Police Department and found to possess 
hundreds of counterfeit identification cards, including two APHIS 
Veterinary Service photo identification (ID) cards. The police also 
found an identification-making machine and related paraphernalia. The 
individual utilized the false ID cards to cash fabricated checks at 
grocery stores throughout the Midwest. He was sentenced in Federal 
court in May 2007 to 60 months in prison, 60 months of supervised 
release, and ordered to pay $26,129 in restitution for the manufacture/
possession of counterfeit USDA identification documents.
Oversight Work Regarding USDA Management in Fiscal Year 2008: Planned 
        and in Process
            The Use of Suspension and Debarment in USDA
    OIG is conducting an audit to assess the use of suspension and 
debarment procedures by USDA agencies. We will determine the extent to 
which USDA personnel are effectively using and enforcing existing 
authorities, so that individuals and entities found to have previously 
abused Federal programs do not cause further injury or loss to the 
Government.
              the stewardship of usda's natural resources
Implementation of Renewable Energy Programs in USDA
    In 2006, the President developed the Advanced Energy Initiative to 
reduce the Nation's dependence on foreign energy sources as a matter of 
economic and national security. USDA established an Energy Council to 
coordinate and guide renewable energy activities within the Department 
and with other Federal departments. USDA uses its renewable energy 
funding to conduct research and to provide loans and grants to build 
facilities for ethanol, cellulosic, wind, and solar renewable energy 
projects.
    OIG has an audit ongoing to evaluate the Department's efforts to 
promote renewable energy projects, as it was directed by the 2002 Farm 
Bill, the 2005 Energy Policy Act, and the Advanced Energy Initiative. 
Our review includes an assessment of the agencies' internal controls 
regarding recipient eligibility, the issuance of renewable energy 
funds, and the coordination of renewable energy research within USDA. 
Our audit work is focusing on renewable energy activities at the 
Departmental level and within the following agencies: RBS; RUS; 
Agricultural Research Service; Cooperative State Research, Education, 
and Extension Service; and FS. We anticipate releasing this report in 
April 2008.
Natural Resources Oversight Work for Fiscal Year 2008: Planned and in 
        Process
            Conservation: Wetlands Reserve Program--Restoration Costs 
                    and Oversight
    The Wetlands Reserve Program (WRP) assists private landowners by 
providing financial and technical assistance to restore, enhance, and 
protect wetlands in a cost-effective manner through long-term easements 
and cost-share agreements. WRP focuses on enrolling marginal lands that 
have a history of crop failure or low yields and restoring and 
protecting degraded wetlands. OIG is examining WRP restoration costs 
and NRCS' monitoring of restoration efforts on these lands.
            Farm and Ranch Lands Protection Program--Review of Non-
                    Governmental Organizations
    The Farm and Ranch Lands Protection Program provides matching funds 
to purchase development rights to keep productive farm and ranch lands 
in agricultural use. NRCS uses cooperative agreements to partner with 
State, tribal, or local governments and non-governmental organizations 
(NGO) to acquire conservation easements or other interests in land from 
landowners. Due to our 2006 audit findings that an NGO circumvented 
NRCS policies, we initiated a nationwide audit to evaluate the adequacy 
of NRCS' controls regarding NGOs and the appraisals used in 
conservation easement purchases.
            Effectiveness of NRCS' Reviews Regarding Producer 
                    Compliance with Conservation Requirements
    In order to maintain their eligibility for USDA program benefits, 
producers are required to apply conservation systems to control soil 
loss or preserve wetlands on highly erodible lands and wetlands. NRCS 
implemented a status review process to assess producer compliance with 
its conservation requirements and thereby determine (with FSA) 
producers' continued eligibility for farm program benefits. Due to 
problems disclosed in prior OIG and Government Accountability Office 
audits, OIG is reviewing actions taken by NRCS to address our prior 
findings and recommendations and evaluating the agency's current status 
review operations.
OIG Oversight of Forest Service Programs and Operations
    While I recognize that the subcommittee does not appropriate funds 
for FS, I would like to briefly discuss OIG's oversight work related to 
FS because it is an important area of oversight responsibility for us. 
Due to FS' vast size--a budget of $4.4 billion and approximately 30,000 
FTEs in fiscal year 2008--and its vital mission to manage America's 
national forests and grasslands, OIG devotes considerable resources to 
FS oversight activities.
    To address concerns about the airworthiness of firefighting 
aircraft, we audited the FS Air Safety Program to determine whether it 
minimizes the risk of accidents and contributes to the effective use of 
aerial resources.\17\ We concluded that FS has made strides in 
improving its air safety program, but believe the agency still needs to 
implement an airworthiness assessment and maintenance program for all 
of its aircraft that is targeted towards the demands that a 
firefighting flight environment imposes on aircraft.
---------------------------------------------------------------------------
    \17\ Forest Service's Air Safety Program. OIG Report 08601-48-SF, 
issued February 2008.
---------------------------------------------------------------------------
    In 2007 and 2008, OIG provided testimony on three occasions to 
House and Senate committees regarding our work assessing the 
increasing, large fire suppression costs borne by USDA/FS, and the 
over-accumulation of hazardous fuels in the national forests that is 
contributing to these larger and more destructive fires.\18\ We advised 
that the majority of FS' large fire suppression costs (50 percent to 95 
percent) are directly linked to protecting private property in the 
Wildland Urban Interface. At the time of our audit, FS did not have the 
ability to ensure that the highest priority fuels reduction projects 
were funded first. The financial burdens on FS due to wildland 
firefighting are likely to continue to rise because of current public 
expectations and uncertainties about Federal, State, and local 
responsibilities.
---------------------------------------------------------------------------
    \18\ Fire suppression costs for FS averaged $994 million annually 
from fiscal year 1998 through fiscal year 2006. Suppression costs for 
the 2007 fire season are estimated to exceed $1.3 billion.
---------------------------------------------------------------------------
OIG Investigations: FS Operations and Personnel
    As part of our FS oversight responsibilities, OIG has a statutory 
duty to conduct an independent investigation into the death of an 
officer or an employee of the Forest Service that is caused by wildfire 
entrapment or burnover and to provide the results of our investigation 
to the Secretary and Congress. With the support of this subcommittee, 
we therefore established our Wildland Fire Investigation Team (WFIT) to 
ensure that select OIG criminal investigators receive extensive 
training in the highly specialized field of wildland fire fighting. We 
currently have two investigations ongoing related to FS firefighter 
fatalities. The first pertains to the Thirtymile Fire that occurred in 
July 2001 in the Chewuch River Canyon area north of Winthrop, 
Washington. The second ongoing investigation pertains to the FS 
fatalities that occurred during the Esperanza Fire that occurred in 
October 2006 in Riverside County, California.
    A further OIG investigation of note regarding FS in 2007 was our 
investigation into the cause of several 2004 wildfires in the Coconino 
National Forest (Arizona) that consumed 24 acres. OIG agents found 
evidence that a long-serving, experienced FS fire management officer 
had intentionally set the fires. The former FS employee eventually 
confessed to starting two wildfires in the forest and retired during 
the course of the investigation. He was sentenced in Federal court in 
June 2007 to 24 months in prison and 36 months of supervised release 
and ordered to pay a total of $15,390 in fines and restitution.
FS Oversight Work for Fiscal Year 2008: Planned and in Process
    We have audit initiatives underway to review FS' firefighting 
succession planning (ensuring the agency will have a sufficient number 
of skilled, well-trained Incident Commanders), the agency's use of 
contract labor crews, and its replacement plan for firefighting aerial 
resources. We also plan to review FS' acquisition practices for IT 
hardware and software.
                 oig's fiscal year 2009 budget request
    Finally, I would like to provide the subcommittee with information 
describing OIG's budget situation in fiscal year 2008 and the 
President's fiscal year 2009 request for OIG. We are very appreciative 
of the support this subcommittee has shown for OIG's work and your 
understanding of our need for resources to produce that work. We are 
providing this information to assist you with your review of the fiscal 
year 2009 budget request.
OIG's Current Budget Situation
    As the chart below demonstrates, OIG's Congressional appropriation 
was essentially straight-lined between fiscal years 2006 and 2007 and 
actually went down between fiscal years 2007 and 2008. For fiscal year 
2008, the President had requested $83,998,000 in appropriated funds for 
OIG. OIG received only $79,491,000 (an appropriation of $80,052,000 
minus a recision of $560,364). This does not include funding requested 
to cover the mandatory pay raise, allow OIG to expand its work on crop 
insurance issues, or make needed improvements to its IT infrastructure.
    In order to live within these budget constraints, meet our mission 
as best we can, and fund legislatively mandated pay increases, OIG has 
now reached the point where it has instituted a hiring freeze with the 
goal of reducing staff levels. Our plan calls for OIG staffing levels 
to be reduced, through attrition, to 570 by the end of fiscal year 
2008. This is a reduction of 18 staff from fiscal year 2007, which 
itself was a reduction of 7 staff over fiscal year 2006.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Unfortunately, these reductions follow an extended period of 
decline for OIG staffing levels. In the 10 years between fiscal year 
1996 and fiscal year 2006, OIG staff declined approximately 22 percent. 
With the reductions over the last 2 years, OIG has lost 26 percent of 
its work capacity in just a 12 years.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Staff reductions alone do not tell the full story of operational 
changes OIG has had to make. For instance, for fiscal year 2008 we have 
made a series of tough budget decisions to enable us to live within our 
appropriated funds.
  --We postponed equipment purchases for the National Computer 
        Forensics Division (NCFD), which are necessary to keep that 
        unit within compliance with professional equipment and training 
        standards.
  --We postponed necessary training and equipment purchases for the 
        Emergency Response Program (ERP).
  --We cut a total of $900,000 from our IT budget. Most recently, we 
        concluded that we would have to skip a year in our normal cycle 
        of replacing one third of our laptops each year. We cannot 
        suspend this replenishment cycle another year without finding 
        ourselves in the position of having laptops that will not be 
        compatible with the new operating system USDA is expecting to 
        roll out in fiscal year 2009 or fiscal year 2010.
  --We cut basically all other OIG discretionary spending (contracting, 
        training, and travel) by an average of 8 percent. The travel 
        cuts were particularly painful as they have a direct effect on 
        the number and scope of the audits and investigations OIG can 
        do. Where previously an audit might have included sufficient 
        sites to support nationwide projections and recommendations, we 
        will likely have to limit a number of our future audits to a 
        regional scope.
President's Fiscal Year 2009 Budget Request for OIG
    The President's Budget request for OIG for fiscal year 2009 is 
$85,776,000. The request would enable OIG to:
  --Cover the mandatory pay raise costs expected for fiscal year 2009.
  --Eliminate the hiring freeze and address critical vacancies.
  --Purchase two new Storage Area Networks (SAN) to enable OIG to take 
        advantage of data replication and disaster recovery options not 
        available when OIG's current SANs (which go out of warranty in 
        fiscal year 2009) were purchased.
  --Make the delayed purchases to support our NCFD and ERP.
  --Restore funds cut from Audit and Investigations travel, thereby 
        increasing the scope of oversight work we can perform.
    If, however, OIG does not receive the staff support and IT costs 
requested by the President, OIG would have to reduce staff further in 
fiscal year 2009. Should OIG not receive the requested funding, we 
estimate that it will be necessary to reduce the fiscal year 2009 
staffing level by 21 staff, or almost 4 percent below the already 
drastically reduced fiscal year 2008 levels. OIG staff would then be 
down 30 percent since fiscal year 2006.\19\
---------------------------------------------------------------------------
    \19\ This estimated reduction is based on the following 
assumptions: OIG would have to absorb a pay cost approximate to the 
$1.9 million we absorbed this year, the postponed NCFD and ERP 
enhancements would have to be funded at $.3 million, and one-third of 
OIG laptops would need to be replaced at approximately $.4 million. 
This would equal a total additional cost of $2.6 million that would 
have to be absorbed at OIG's current budget level. Estimating $122,000 
per FTE, that would be approximately 21 staff.
---------------------------------------------------------------------------
    OIG's ability to provide services to the Department, Congress, and 
the public is directly tied to the number of staff it can support 
through pay and related costs. Over the last 3 fiscal years, management 
has agreed to over 1,143 OIG recommendations for program improvements 
and over $1.8 billion in OIG financial recommendations and 
investigative recoveries. Those numbers--which are really just a 
statistical barometer of OIG's impact on Departmental operations--will 
most likely decrease as our staff continues to decline, as will our 
ability to do the types of work we summarized for you today in this 
testimony. We have done all we can to do more with less; we are now at 
that juncture where, in truth, we can only do less with less.
  --In fiscal year 2008 alone, our Audit office will lose approximately 
        12 work years and $400,000 in travel funds. Several audits 
        (including some identified as high priority) will need to be 
        delayed; the scope of some audits will have to be reduced; and 
        some audits will have to be cancelled outright. The following 
        is a partial list of audits that have already been delayed and 
        may have to be cancelled.
      An audit of the National Organic Program, which was scheduled to 
        start in January 2008, will now be delayed until August 2008. 
        Organic food sales have grown between 14 to 21 percent each 
        year since 1997. Sales of organic foods in 2006 exceeded $16 
        billion. However, with the staffing and travel requirements for 
        this audit, the work will need to be split between 2 fiscal 
        years to have sufficient resources to conduct the audit.
      Audits addressing WIC vendor monitoring, new farm programs 
        included in the Farm Bill, acquisition of IT software and 
        hardware, the FSA comprehensive compliance system, and the RMA 
        National Program Operations Review are being delayed, and no 
        estimated start date has been set due to lack of currently 
        available resources. These audits involve billions of dollars 
        in program payments and analyses of agency internal control and 
        compliance systems that help ensure program integrity.
  --Should staff, equipment, and travel resources available to our 
        Investigations office continue to diminish, OIG will have to 
        increasingly limit our investigative focus only to those food 
        safety and security issues that directly imperil public health. 
        The resources dedicated to detecting and preventing fraud in 
        USDA programs would have to decline, in order to preserve our 
        ability to work on critical safety and security cases. 
        Unfortunately, this reduced capacity for fraud investigations 
        would likely end in greater cash losses to the Federal 
        Government than are saved by the cuts to OIG.
    It is to avoid further limitations on OIG's ability to provide 
independent, effective audit and investigations coverage to USDA 
programs and operations that we are asking for your support of the 
President's Budget Request for fiscal year 2009 for OIG.
    This concludes my statement. I again want to thank the leadership 
of the subcommittee for the opportunity to submit testimony to you. I 
hope you will not hesitate to contact me should you have any questions 
or desire additional information.
                                 ______
                                 

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

    Mr. Chairman, members of the subcommittee, I am Nancy C. Pellett, 
Chairman and Chief Executive Officer of the Farm Credit Administration 
(FCA or Agency). On behalf of my colleagues on the FCA Board, Dallas 
Tonsager of South Dakota and Leland Strom of Illinois, and all the 
dedicated men and women of the Agency, I am pleased and honored to 
provide this testimony to the subcommittee.
    I would like to thank the subcommittee staff for its assistance 
during the budget process, and before I discuss the role and 
responsibility of the Farm Credit Administration and our budget 
request, I would respectfully bring to the subcommittee's attention 
that FCA's administrative expenses are paid for by the institutions 
that we regulate and examine. In other words, FCA does not receive a 
Federal appropriation but is funded through annual assessments of Farm 
Credit System (FCS or System) institutions and the Federal Agricultural 
Mortgage Corporation (Farmer Mac). Earlier this fiscal year, the Agency 
submitted a proposed total budget request of $49,640,147 for fiscal 
year 2009. The Agency's proposed budget for fiscal year 2009 includes 
funding from current and prior assessments of $49,000,000 on System 
institutions, including Farmer Mac. Almost all this amount 
(approximately 82 percent) goes for salaries, benefits, and related 
costs.
               mission of the farm credit administration
    As directed by Congress, FCA's mission is to ensure a safe, sound, 
and dependable source of credit and related services for agriculture 
and rural America. The Agency accomplishes its mission in two important 
ways.
    First, FCA ensures that the System and Farmer Mac remain safe and 
sound and comply with the applicable law and regulations. Specifically, 
our risk-based examinations and oversight strategies focus on an 
institution's financial condition and any material existing or 
potential risk, as well as on the ability of its board and management 
to direct its operations. Our oversight and examination strategies also 
evaluate each institution's efforts to serve all eligible borrowers, 
including young, beginning, and small farmers and ranchers.
    Secondly, FCA approves corporate charter changes and researches, 
develops, and adopts regulations and policies that govern how System 
institutions conduct their business and interact with their customers. 
If a System institution violates a law or regulation or operates in an 
unsafe or unsound manner, we use our supervisory and enforcement 
authorities to ensure appropriate corrective action.
                    fiscal year 2007 accomplishments
    In fiscal year 2007 we continued our efforts to achieve our 
Agency's strategic goals through (1) effective risk identification and 
corrective action and (2) responsible regulation and public 
policymaking. FCA has worked hard to maintain the System's safety and 
soundness. We also continually explore ways to reduce regulatory burden 
on the FCS and to ensure that all System institutions are able to 
provide agriculture and rural America with continuous access to credit 
and related services.
          examination programs for fcs banks and associations
    The Agency's highest priority is to maintain appropriate efficient 
and effective risk-based oversight and examination programs. Our 
examination programs and practices have worked well over the years and 
have contributed to the present overall safe and sound condition of the 
System, but we must continue to evolve and prepare for the increasingly 
complex nature of financing agriculture and rural America.
    With the changes in the System and our human capital challenges 
within the Agency (i.e., pending retirements, normal attrition of 
staff, and the ever-increasing need for more sophisticated skills in 
the financial sector), we have undertaken a number of initiatives to 
enhance our skills and expertise in key examination functions. We have 
also realigned our organizational structure to make the best use of our 
resources. Our Office of Examination has completed its transition from 
a regionally-based field office structure to divisions of nationally-
based examination teams. Office locations have been retained, but the 
examination programs are now managed nationally to better manage 
strategic risks faced by the FCS institutions.
    On a national level, we actively monitor risks that may affect 
groups of System institutions or the entire System, including risks 
that may arise from the agricultural, financial, and economic 
environment in which the System institutions operate. Examiners use a 
risk-based examination and supervision program to differentiate the 
risks and develop individual oversight plans for each FCS institution. 
For example, the System has been a leader in lending to the ethanol 
industry from its infancy and continues to support this rapidly 
evolving sector. Our examiners watch the concentration risk in this and 
other areas to make certain lending is done in a safe and sound manner.
    We set the scope and frequency of each examination based on the 
level of risk in the institution. Examiners base the scope of their 
oversight and examination activities on their assessment of an 
institution's internal controls environment and the ability of the 
institution's board and management to manage risks. Our regulations 
require FCS institutions to have prudent loan underwriting and loan 
administration processes, to maintain strong asset-liability management 
capabilities, and to establish high standards for governance and 
transparent shareholder disclosures. The frequency and depth of our 
examination activities may vary, but each institution is provided a 
summary of our activities and a report on its overall condition at 
least every 18 months as required by the Farm Credit Act. Most issues 
are resolved through corrective actions established in the Report of 
Examination or other communications. In extreme cases, FCA will use its 
enforcement powers to effect changes in the institution's policies and 
practices to correct unsafe or unsound conditions or violations of law 
or regulations.
    As part of our ongoing efforts, we evaluate each institution's risk 
profile. The Financial Institution Rating System (FIRS) is the primary 
risk categorization and rating tool used by examiners to indicate the 
safety and soundness of an institution. FIRS ratings range from 1 (for 
a sound institution) to 5 (for an institution that is likely to fail). 
As of December 31, 2007, FIRS ratings as a whole continued to reflect 
the stable financial condition of the FCS: 83 institutions were rated 
1, 14 institutions were rated 2, and three institutions were rated 3. 
Importantly, there were no institutions rated 4 or 5. In addition, no 
FCS institutions are under enforcement action and no FCS institution is 
in receivership. The overall financial strength maintained by the 
System remains strong and does not pose material risk to investors in 
FCS debt, the Farm Credit System Insurance Corporation (FCSIC), or FCS 
institution stockholders.
    During fiscal year 2007, FCA also performed various examination and 
other services for the Small Business Administration, the U.S. 
Department of Agriculture, FCSIC, and the National Consumer Cooperative 
Bank. Each of these entities reimbursed FCA for its services.
                          regulatory activity
    Congress has given the FCA Board statutory authority to establish 
policy and prescribe regulations necessary to ensure that FCS 
institutions comply with the law and operate in a safe and sound 
manner. The Agency's regulatory philosophy articulates our commitment 
to establishing a flexible regulatory environment that enables the 
System, consistent with statutory authority, to offer high-quality, 
reasonably priced credit to farmers and ranchers, their cooperatives, 
rural residents, and other entities on which farming operations depend. 
This focuses our efforts on developing balanced, well-reasoned, 
flexible, and legally sound regulations. We strive to ensure that the 
benefits of regulations outweigh the costs; to maintain the System's 
relevance in the marketplace and rural America; and to ensure that 
FCA's policy actions encourage member-borrowers to participate in the 
management, control, and ownership of their Government-sponsored 
enterprise (GSE) institutions. For fiscal year 2007, the Agency's 
regulatory and policy projects included the following:
  --Young, Beginning and Small Farmers (YBS).--The Board acted to 
        ensure that all System institutions assist YBS farmers to 
        enter, grow, or remain in agricultural or aquaculture 
        production. A revised Bookletter, issued in August, provides 
        guidance to all FCS institutions on interpreting the phrase 
        ``sound and constructive credit'' when applied to YBS farmers 
        and ranchers and on extending credit to part-time YBS farmers 
        who demonstrate a commitment to be full-time agricultural 
        producers. The Bookletter further encourages System lenders to 
        provide credit enhancements so that YBS farmers can qualify for 
        financing, and it encourages System lenders to mitigate the 
        risk of lending to YBS farmers by increasing coordination with 
        other lending entities and sharing best practices.
  --Policy Guidance Provided on Rural Housing Lending.--FCS 
        institutions are authorized to provide rural housing financing 
        for single-family, owner-occupied, and moderately priced 
        dwellings, but System institutions had reported difficulties in 
        applying the regulatory definition of a ``moderately priced'' 
        rural home. In response, the Agency issued an Informational 
        Memorandum providing answers about the regulatory definition of 
        moderately priced housing, what is necessary to identify 
        moderately priced housing values, and what data are acceptable 
        to establish those values.
  --Disclosure and Reporting Final Rule.--The Agency issued a final 
        rule amending existing disclosure requirements for reports to 
        System shareholders and investors. These amendments ensure that 
        the System's disclosures and financial reporting keep pace with 
        recent changes in industry practices, Securities and Exchange 
        Commission regulations implementing the Sarbanes-Oxley Act of 
        2002, and Public Company Accounting Oversight Board auditing 
        standards.
  --Final and Proposed Rule Updating the Farmer Mac Risk-Based Capital 
        (RBC) Stress Test.--We amended the RBC regulations in response 
        to changing financial markets, new business practices, and the 
        evolution of the loan portfolio at Farmer Mac, as well as 
        continued development of industry best practices among leading 
        financial institutions. The RBC is used to calculate Farmer 
        Mac's regulatory minimum risk-based capital level. The rule is 
        intended to improve the model's output by more accurately 
        reflecting risk. In addition, we also proposed to further amend 
        RBC regulations to update the recent additions to Farmer Mac's 
        program operations, to address assumptions on the carrying 
        costs of nonperforming loans, and recognize counterparty risks 
        on nonprogram investments. The FCA Board is expected to act on 
        this final rule in 2008.
  --Advance Notice of Proposed Rulemaking (ANPR) on Capital Adequacy.--
        We issued an ANPR to solicit public input on appropriate 
        changes to FCA's capital adequacy requirements for the System 
        in light of Basel II proposals by the other Federal banking 
        agencies.
    The Agency has also adopted an ambitious regulatory and policy 
agenda for fiscal year 2008. The agenda includes the following goals:
  --Finalizing a proposed rule to change the requirement for 
        determining the eligibility of processing and marketing 
        entities for System funding.
  --Developing a proposed rule to describe how System partnerships and 
        investments can increase the availability of funds to help 
        stimulate economic growth and development in rural America. The 
        System began using such partnerships and investments under a 
        pilot program initiated during fiscal year 2005.
  --Continuing to review current regulatory requirements governing 
        eligibility and scope of lending to determine if these 
        requirements are reasonable in light of agriculture's changing 
        landscape. Agency staff will identify issues and explore 
        options for the Board's consideration.
                          corporate activities
    The pace of System restructuring remained slow in fiscal year 2007. 
Only one corporate application was submitted for FCA Board review and 
approval during fiscal year 2007, compared with four applications the 
prior year. As of January 1, 2008, the System had 94 direct-lender 
associations and five banks for a total of 99 banks and associations. 
Seven service corporations and special-purpose entities brought the 
total number of FCS institutions to 106 entities. Through mergers, the 
number of FCS associations has declined slightly more than 45 percent 
since 2000, and the number of FCS banks has decreased almost 30 
percent.
                  condition of the farm credit system
    As noted previously, the System's overall condition and performance 
remained strong throughout 2007. The FCS is fundamentally sound in all 
material aspects, and it continues to be a financially strong, reliable 
source of affordable credit to agriculture and rural America. Capital 
levels continued to be strong, especially in consideration of the 
System's risk profile. Asset quality remained high, loan volume growth 
was strong, and the System earned $2.7 billion in 2007, a 13.8 percent 
increase from 2006.
    Gross loans grew by 15.8 percent in 2007, compared with 16.2 
percent the previous year. Nonperforming loans increased by $6 million 
to $621 million as of December 31, 2007. However, nonperforming loans 
represented just 2.35 percent of total capital by the end of 2007, down 
from 2.52 percent at the end of 2006. The System has earned more than 
$1 billion consistently each year since the early 1 990s; as a result, 
capital remains strong and is made up largely of earned surplus, the 
most stable form of capital. A strong capital position will help the 
System remain a viable, dependable, and competitive lender to 
agriculture and rural America during any near-term downturns in the 
agricultural economy.
               federal agricultural mortgage corporation
    FCA also has oversight, examination, and regulatory responsibility 
for the Federal Agricultural Mortgage Corporation, which is commonly 
known as Farmer Mac. Congress established Farmer Mac in 1988 to provide 
secondary market arrangements for agricultural mortgage and rural home 
loans. In this capacity, Farmer Mac creates and guarantees securities 
and other secondary market products that are backed by mortgages on 
farms and rural homes. Through a separate office required by statute 
(Office of Secondary Market Oversight), the Agency examines, regulates, 
and monitors Farmer Mac's disclosures, financial condition, and 
operations on an ongoing basis and provides periodic reports to 
Congress.
    Like the Farm Credit System, Farmer Mac is a GSE devoted to 
agriculture and rural America. FCA and the financial markets recognize 
Farmer Mac as a separate GSE from the System's banks and associations. 
Farmer Mac is not subject to any intra-System agreements or to the 
joint and several liability of the FCS banks, nor does the Farm Credit 
System Insurance Fund back Farmer Mac's securities. However, by 
statute, in extreme circumstances Farmer Mac may issue obligations to 
the U.S. Treasury Department to fulfill the guarantee obligations of 
Farmer Mac Guaranteed Securities.
                               conclusion
    In conclusion, we at FCA remain vigilant in our efforts to ensure 
that the Farm Credit System and Farmer Mac remain financially strong 
and focused on serving agriculture and rural America. It is our intent 
to stay within the constraints of our fiscal year 2009 budget as 
presented, and we continue our efforts to be good stewards of the 
resources entrusted to us in order to meet our responsibilities. While 
we are proud of our record and accomplishments, I assure you that the 
Agency will continue its commitment to excellence, effectiveness, and 
cost efficiency and will remain focused on our mission of ensuring a 
safe, sound, and dependable source of credit for agriculture and rural 
America. On behalf of my colleagues on the FCA Board and at the Agency, 
this concludes my statement and I thank you for the opportunity to 
share this information.

                       AUDITS OF SLAUGHTER PLANTS

    Senator Kohl. Thank you very much, Mr. Secretary.
    We would like to thank you again for testifying last month 
about the Westland/Hallmark beef recall. I believe that was a 
productive hearing. We have been following up with your staff 
since then. We are drafting a bill that gets at this issue from 
several angles, which will include a potential downer ban. I 
believe we need to continue working on this and I am hopeful we 
can achieve an accord.
    Yesterday, Mr. Secretary, I received the results of the 
audits of slaughter plants under contract with USDA for 
nutrition programs, to which you referred. As you said, you 
audited 18 plants. If you add in the plant at Chino, there are 
19 total plants actively participating in the Federal nutrition 
programs. Of these, two had offenses serious enough to require 
a notice of suspension. While it is just two, it is over 10 
percent of the total that were audited.
    In early March, the Las Vegas Sun quoted you as saying that 
you would not be surprised if there were more plants like the 
one in Chino out there and that hiring additional inspectors 
will not help because ``if they're going to break the rules, 
then they're going to break the rules.'' These remarks did 
trouble me a bit, especially if 10 percent of the plants have 
serious problems, because they suggest that perhaps USDA has 
reached a limit in what it can do to improve food safety.
    So we would like to give you a chance to elaborate and 
clarify. Do you really think that USDA cannot do a better job? 
And what action has USDA taken since our hearing and what 
action is planned?
    Secretary Schafer. Thank you, Mr. Chairman. As we did point 
out in the letter to you yesterday, we have done audits at 18 
facilities. I appreciate you bringing up the Hallmark/Westland 
plant as number 19, but as you know, that is not operating. It 
is in suspension.
    The three issues where we found problems in humane 
treatment of animals were not on a downer cow situation. They 
were things like crowding in the pens. It was bunching up of 
cattle going into the stunning operation and excessive use of 
stunning sticks or the prodders. Those facilities have been 
corrected.
    As we look at this, we are confident that USDA can do a 
better job. We have redirected our inspectors. We are rotating 
the inspectors, the time they are coming in and out of the 
facilities. As you know, the plants cannot operate unless the 
inspector is in place, as we do a carcass-by-carcass inspection 
of every cow that goes through the process.
    As we have looked at the inhumane treatment of animals, you 
will also notice in the investigation that we sent you 
yesterday that all facilities have cameras and surveillance in 
some portions. Many of them have them in the stunning area and 
in the pens as well. So we are looking at ways that we can 
better observe. We have helped train our inspectors to observe 
while being unobserved so that they can properly watch over the 
system. And I do believe that the result of our investigations, 
when we get completed, will allow us to make some further 
changes to enhance the process. But we believe that the USDA 
inspectors and veterinarians are capable, are hard-working and 
committed to their jobs, and we think we can direct them in the 
proper place so that this does not take place again.

                               OIG REPORT

    Senator Kohl. In your statement, you talked about the OIG 
report. Can you estimate when that report will be complete?
    Secretary Schafer. I cannot, Mr. Chairman. I met with the 
OIG officer a few days ago, and as you know, that is an 
independent investigation arm and we do not have the legal 
relationship for them to include us in the timing and the depth 
of the investigation. But we were urging them to get it done as 
soon as possible because we are working on efforts to assure 
the people of the United States that we have a safe food supply 
out there, and as we start enhancing the message on safe food, 
we want to make sure that we incorporate the results of the 
investigation.

                             RECALLED MEAT

    Senator Kohl. Can you tell us whether all of the recalled 
meat from the school lunch program has been identified, 
collected, and destroyed?
    Secretary Schafer. Sir, I think all of the meat has been 
identified. It has been contained. Most of it has been 
destroyed. All of it has not.
    Senator Kohl. What do you want us to take from that 
statement, or what would you want the public to take from that 
statement?
    Secretary Schafer. It was put on hold. Once we started the 
recall, all meat that went into the school lunch program was 
identified. It was contained. We purchased meat to replace 
product taken from the schools. And so as we are going through 
that process, we are destroying that meat as we go. We are not 
complete with that process, so I know there is still some that 
is contained, identified, but not totally destroyed. And we are 
reimbursing those schools for the costs in doing so.
    Senator Kohl. All right.

                              WIC PROGRAM

    Before I turn it over to Senator Bennett, I would like to 
discuss WIC with you a bit. As you know, we need to start 
talking about WIC immediately. The President's request last 
year was $633 million short of what was ultimately needed. We 
had to come up with the difference and we were forced to do it 
without any input from USDA. We do not want to repeat that 
situation, I think we could agree. So we have asked USDA for 
monthly reports on participation and food cost estimates.
    We did receive the second of these reports yesterday, and 
in a nutshell, in the current fiscal year will be short 
somewhere between $65 million and $100 million, even after 
releasing the entire contingency fund. The report says that you 
are looking at available options to address this problem.
    What options are you considering? As you know, we are 
currently working on a supplemental appropriations bill.
    Secretary Schafer. Maybe I could get the best answer from 
Scott for you, as we look at these dollars. As we looked at the 
budget, we planned on an 8.6 million participation level and 
also increased the budget based on current food costs and 
estimated food costs. We think that the budget does reflect the 
proper dollars for the participation and cost level. But maybe 
Scott could give us a few more details.
    Mr. Steele. Yes, thank you, Mr. Secretary.
    Mr. Chairman, the shortfall that was identified in Under 
Secretary Johner's letter to you identified a shortfall for 
2008, the current fiscal year at somewhere between $65 million 
and $100 million.
    There are some options we are looking at. We have used the 
Secretary's interchange authority in prior years and we are 
looking at that option as a possibility. We are in discussions 
with OMB on that. We have not yet defined exactly what we are 
going to do.
    We have yet some more time here in April and maybe part of 
May to figure out a solution to that problem. We certainly will 
be in touch with the committee in terms of how we are going to 
resolve that and whether we need to discuss some options with 
you in terms of resolving it.
    For 2009, we are still staying with our current 
participation estimate, as the Secretary just indicated, the 
8.6 million. We are looking at that estimate, obviously, on a 
monthly basis. We will be doing our mid-session review estimate 
in July, which would be an official estimate by the executive 
branch. OMB would be clearing off on that. A revised estimate 
would come to Congress in July.
    But as you say, we are on an ongoing basis, looking at 
this, submitting our monthly reports to you, and we will try to 
keep abreast of it and identify problems that we see coming 
forward.
    It is our biggest discretionary program, as you know. It is 
over $6 billion a year. It is rising rapidly. As the Budget 
Officer of the USDA, I am concerned about the funding for the 
program given it is a discretionary program. So we are going to 
have to work closely together to try to resolve this.
    Thank you.
    Senator Kohl. Thank you. I think we can all agree that it 
is something that needs to be monitored, as you have suggested, 
very, very closely. WIC needs to be funded. It is really not 
something that we have discretion in terms of whether we will 
or will not. We know we are going to have to fund WIC. And if 
we do not work very closely, then we will be caught in a very 
serious situation, and I think collectively we do not want that 
to happen. So we do look forward to working with you in an 
honest, forthcoming, and timely manner on WIC.
    Senator Bennett.
    Senator Bennett. Thank you very much, Mr. Chairman.

                     PUBLIC LAW 480 TITLE II GRANTS

    Secretary Schafer, the supplemental request from the 
President contains a request from you for additional funding 
for Public Law 480 Title II grants of $350 million. The 
supplemental last year contained a request for $350 million. 
The supplemental for the year before that contained a request 
for $350 million.
    This is a pretty strong coincidence, that for 3 years in a 
row, you have asked for an additional $350 million and it 
raises the question, why do you not just put $350 million in 
the regular budget and be done with it? Is this request really 
based on unanticipated needs and is it just a coincidence? Help 
us understand why there is not something in the regular budget 
for this.
    Secretary Schafer. Well, we think that the budget reflects 
a prioritization among the competing demands for international 
humanitarian assistance. This budget request really addresses 
the most severe and critical emergency food and needs overseas.
    As far as the specifics, I will turn to our Budget Officer, 
Scott Steele, for information on the specific programs.
    Mr. Steele. Thank you, Mr. Secretary.
    Mr. Bennett, yes, the Department of Agriculture does not 
unilaterally decide on the level for Public Law 480, Title II 
assistance. As you well know, the Title II program is operated 
by USAID.
    Senator Bennett. Right.
    Mr. Steele. And they have people in the field. As you know 
as well, the foreign assistance situation is a very dynamic 
situation right now, and we have the issues in Darfur in Sudan 
and other places that are----
    Senator Bennett. I am not questioning the need for it.
    Mr. Steele. Yes, I understand what you are saying. It has 
gone on repeatedly and we do have other options to consider as 
well. We have the Emerson Trust as something that could come 
into play here at some point as well.
    I do not have a good answer for you in terms of why the 
Department's budget did not reflect the additional $350 million 
in terms of a request. You are right. It continues on as a 
major problem in funding food assistance. We will try to 
provide more information for the record, if that is okay.
    [The information follows:]
                 Public Law 480 Title II Budget Request
    International emergency food assistance needs have been unusually 
high in recent years due to a variety of causes, both man-made and 
natural. The United States has continued to demonstrate leadership in 
responding to those needs, including through the provision of food aid 
commodities under the Public Law 480 Title II program. In order to do 
so, in certain years supplemental appropriations have been requested 
for the Title II program to meet the extraordinary levels of emergency 
need.
    Many factors are considered in developing the annual budget request 
for the Public Law 480 Title II program, including what level of 
funding should be included for emergency programming. This effort is 
complicated because development of the annual budget submission begins 
more than a year before the start of the fiscal year. That time frame 
makes it difficult to project with accuracy what the level of emergency 
needs will be during the course of the year and, therefore, difficult 
to budget for them with certainty. As a result, there may be years when 
emergency needs exceed the level provided through the annual 
appropriations, and the administration will need to consider what steps 
are necessary to ensure the United States can respond to extraordinary 
emergencies. One option for doing so is to request supplemental 
appropriations.
    However, in responding to unanticipated emergencies there are 
alternatives to a supplemental appropriations request. For example, one 
option is authorizing a release of commodities or funds from the Bill 
Emerson Humanitarian Trust. The Trust specifically provides for the 
commodities to be programmed through Title II to provide a humanitarian 
response to unanticipated, emergency food aid needs. On April 14, 2008, 
the President directed the Secretary of Agriculture to release 
commodities from the Trust to meet emergency food aid needs abroad this 
year; this action is expected to provide an additional $200 million of 
assistance.
    In addition, in recent years the President's budgets have included 
a request for authority for the Administrator of AID to use up to 25 
percent of annual Public Law 480 Title II funding to purchase 
commodities in countries closer to where they are to be donated. This 
authority would facilitate the donation of a higher level of 
commodities as savings achieved in transportation and distribution 
costs would be available for additional commodity purchases. 
Approximately 60 percent of annual Title II funding is used for non-
commodity costs for the program, which includes ocean freight 
expenditures. Consequently, the savings achieved through enactment of 
this proposal could be substantial, and those savings would be 
extremely helpful in responding to unanticipated emergency situations.
    All of these factors--the uncertainties inherent in projecting 
emergency response needs, the availability of the Bill Emerson 
Humanitarian Trust, and the proposal for overseas purchases--were 
considered in developing the President's budget request for the Public 
Law 480 Title II program for 2009. At the same time, the resource 
requirements for Title II had to be weighed against competing claims 
for funding from many other worthy programs that assist the American 
public, including through agriculture, rural development, and food and 
nutrition programs.

    Senator Bennett. Yes, that will be fine. But give some 
serious consideration to building it into your regular budget 
because every spring there is a supplemental and every spring 
it is for $350 million. It appears to say that amount regular 
budgeting procedures ought to be able to anticipate that amount 
and put that in the annual budget.

                            COMMODITY PRICES

    Let me go to the issue that I mentioned in my opening 
statement, which is commodity prices. They have shown a drastic 
increase both in the cash prices and in the future market and 
have had a drastic ripple effect across all areas of 
agriculture. The rising prices have made it more expensive to 
feed a family, but it has also driven up the participation 
rates of the various programs that are involved in this, WIC, 
food stamps, et cetera. There are States now where one in six 
people are on food stamps, which is not what we had 
anticipated.
    How is the Department dealing with the unpredictability of 
the costs and the subsequent unpredictability of the 
participation in these programs? And, Dr. Glauber, I would be 
interested in having your take on what the primary cause of 
these increases would be.
    Dr. Glauber. In terms of the underlying cause, there is no 
question there is a number of things going on in world markets. 
People point, one, to the rapid expansion of area devoted to 
biofuel production. That is certainly important.
    But I think in looking at the overall food price picture 
certainly in the United States, there is a number of other 
things to consider. Dairy prices. We have seen very, very high 
dairy prices. Of course, dairy products figure heavily in a 
number of budgets, of food aid program budgets. Most of that 
increase I think could be attributed to declining milk 
production in New Zealand and Australia. They have had very 
serious droughts over the last couple years. World dairy prices 
have been very high as a result.
    So I would attribute that less to sort of high corn prices, 
although there is no question that the sectors themselves are 
feeling the pinch of higher feed prices.
    The other big thing, of course, in a very visible price 
increase both on futures markets but also at the grocery store, 
has been bakery products. There have been underlying wheat 
problems. That too is largely a problem of overseas production. 
There was also a very short crop in Australia. There was also a 
poor crop in Canada this year. There was a poor crop in Europe 
this past year. They are all expected to rebound production, 
but in the meantime, we saw futures prices hit as high as 20 
percent, and not surprisingly, that is being reflected in 
bakery products and other cereals and other sorts of things.
    Now, this past year 2007, we saw inflation, CPI for food, 
around 4 percent, which is certainly higher than the 2.5 
percent or so that we have averaged for a long time over the 
past 5-7 years. This year we are seeing slightly higher 
increases. We are thinking somewhere between 3.5 to 4.5 
percent. Some of that is largely because big components of the 
food price bill are meats. We are seeing flat meat prices. In 
fact, in some cases for pork, we have seen some decline in 
prices.
    Senator Bennett. People in WIC usually do not eat that much 
meat.
    Dr. Glauber. No. That is right.
    Senator Bennett. The grain situation----
    Dr. Glauber. No. You are absolutely right.
    Senator Bennett [continuing]. Hurts them far more.
    Dr. Glauber. That is right.
    So if you focus on individual components, dairy, for 
example, is big. Again, I think that we are seeing dairy prices 
come down and we are likely to see some decline in dairy prices 
this year.
    So you are absolutely right, and that is part of the 
previous question, of course, on food aid overseas. That is 
also a big component there where, certainly in lower income 
countries, the price of the underlying commodity as a 
proportion of the overall price that consumers pay is much, 
much higher than it is in the United States.
    Senator Bennett. Are you anticipating that the price will 
come down? The President's budget projects an increase of 2.3 
percent, which is in line with what you have just said. Are 
conditions in Australia and New Zealand and Europe----
    Dr. Glauber. Yes. We are expecting production to snap back 
in that region. They had 2 years of back-to-back droughts, and 
it looks like conditions are returning more to normal there. We 
are expecting a better crop in Europe.
    But it is important to understand that on the other hand, 
we are looking at a very, very low stock situation, and I do 
not want to minimize that. We have very low wheat stocks. We 
have very low corn stocks, both near historic lows, given the 
size of the economy now compared to, say, 50 years ago, very, 
very low stocks-to-use ratio, which is a critical factor when 
we look at price projections.
    And for that reason, I think the markets will be focused 
very much on weather this year, and what we see in terms of the 
crop progress over the next 4 or 5 months I think will be very 
critical.
    Senator Bennett. So you talk about the wheat price. Is that 
driven in part by the desire to plant more corn and thus take 
up acreage that would otherwise be planted in wheat? We hear 
that theory.
    Dr. Glauber. I would say maybe to a limited degree. There 
is competition there. Understand that a lot of the area that is 
planted to wheat in a lot of the areas is less suitable for 
corn. Now, when corn gets to be $5 to $6 a bushel, a lot of 
areas look a lot better than they might have when corn was 
going at $2. But I think----
    Senator Bennett. Just like oil.
    Dr. Glauber. Yes, that is right.
    But we do expect wheat prices to come down as the world 
crop comes on. Again, I think that a lot will depend on the 
size of the northern hemisphere crop this summer. Our plantings 
are actually up this year for wheat. So people were able to 
plant more wheat despite the competition with corn and very, 
very high soybean prices.
    Senator Bennett. Thank you. That was helpful.

                        AFRICAN WHEAT STEM RUST

    I understand, Mr. Secretary, that you need to do what you 
can to deal with the President's desire to balance the budget 
overall, and I also understand how OMB sometimes can be less 
sympathetic to programs that the Department might think makes 
some sense. I am not going to put you in the position of having 
to argue with OMB, but let me point out one thing to you.
    In the November-December issue of Agriculture Research, 
which is the science magazine that is published by USDA, there 
was an article entitled ``World Wheat Supply Threatened!'' 
Whenever a scientific journal uses an exclamation point you 
know they probably mean it. It was about the Department's 
efforts to combat African stem rust with the very interesting 
numerical designation, UG99. It sounds like a really weird Web 
site. But this is a highly virulent and aggressive stem rust. 
It spread rapidly throughout Africa and into the Middle East, 
threatens world barley, wheat production and food security. And 
coming after the answer we have just gotten from Dr. Glauber as 
to the importance of what is happening in the rest of the world 
with wheat production, you would think this is a very big deal.
    Most experts believe it will eventually reach the United 
States where both barley and wheat varieties are highly 
susceptible. And your budget proposes eliminating the funding 
of research at St. Paul, Minnesota that supports the agency's 
lead scientists working on African stem rust. It is not a big 
amount of money. It is $308,000.
    I will not ask the question of whether this is something 
that ended up on the cutting room floor at OMB and that you 
proposed. Deputy Secretary Conner, be careful about your nods. 
They might get noticed somewhere.
    But I simply make the point that I would hope we can find 
that $308,000 and maybe a little more because, again, given the 
answer we got from Dr. Glauber, we could end up spending 
millions, if not billions, if this particular disease gets into 
the American production pattern. And a few hundred thousand 
right now might make some sense.
    Secretary Schafer. Yes, Senator. We estimate that 75 
percent of the wheat strains in the United States are 
susceptible to that rust. Maybe our Deputy Secretary could 
outline the reasons that were taken here and also the approach 
we are taking to consider this issue and its impact on the 
wheat supply in the United States.
    Senator Bennett. I do not need to take any more time of my 
colleagues. You can supply that for the record.
    Secretary Schafer. We will.
    [The information follows:]
                           Stem Rust Research
    The Agricultural Research Service (ARS) is leading a national 
cereal rust research effort and is making key contributions to 
supporting international cooperative efforts through the Global Rust 
Initiative to address the new African wheat stem rust. Fiscal year 2008 
ARS wheat stem rust funding is $1.1 million. ARS scientists are 
developing diagnostic tests for rapid identification of the disease 
should it enter the United States and are contributing to monitoring 
and surveillance. Additionally, ARS is also developing and testing 
several new techniques that show promise in monitoring of wheat stem 
rust epidemics and for characterizing new races of cereal rust 
pathogens. A set of microsatellite DNA markers for the stem rust fungus 
has been developed; these workers are useful in tracing the 
geographical origins of new races of stem rust. Seedling evaluations 
are being conducted against African stem rust races to test the 
susceptibility of U.S. wheat varieties. ARS funding for wheat stem rust 
in fiscal year 2009 is estimated to be $944,000. The 2009 Budget 
proposes to eliminate all ARS earmarked funding, including $308,000 at 
the Cereal Disease Laboratory at St. Paul, Minnesota.
    In fiscal year 2008, the Cooperative State Research, Education and 
Extension Service (CSREES) plans to fund 1-2 competitive grants 
totaling $248,000 for aerobiology modeling of Ug99 for assessing 
potential pathways, timing of incursion and to support rust 
surveillance. An additional $20,000 in Hatch Act funds will support 
wheat stem rust research. In fiscal year 2009, CSREES estimates $20,000 
in Hatch Act funds will support wheat stem rust research.

    Senator Bennett. I will simply indicate that as far as I am 
concerned, I would like the committee to put that $308,000 back 
and help you out.

                       FOOD COSTS FOR WIC PROGRAM

    Finally, let us talk about WIC some more. The food costs 
have increased enormously. Participation has gone up, 
demonstrating the inability of people to find the necessary 
food on the basis of their own salaries. As these costs go up 
along with the signs of the weakening economy, people need help 
with food.
    We have asked for a report from the Department. In the 
report accompanying our fiscal year 2008 appropriations bill, 
we requested monthly reports on amounts necessary to fund WIC 
in fiscal year 2009. We were hoping to avoid the situation we 
had in fiscal year 2008 where the subcommittee had to provide 
$633 million above the President's request when we had not 
previously heard any information from the Department that WIC 
needs had increased. So the $633 million was a surprise.
    The reports were to include projections for food costs and 
participation and clearly explain how those projections 
differed from the assumptions made in the budget request and 
how they would impact the WIC program in 2009.
    Well, we got the first report. It was 2 months late, and 
unfortunately, it was inadequate. The second report was 
significantly better, but still did not provide an assessment 
for what the current participation trends and food costs mean 
for the fiscal year 2009 budget. And I would like to know why 
the report has been delayed, and do you think the level of 
detail in future reports can be adequate to the needs that we 
have talked about?
    Secretary Schafer. Thank you, Mr. Chairman. I would note--
--
    Senator Bennett. You are promoting me. The chairman is to 
my right.
    Secretary Schafer. I am sorry, Senator Bennett.
    I appreciate all of your concerns about this WIC issue. We 
do use our best estimate of participation of 8.6 million 
participants in this program for the 2009 budget.
    As for the reports, I am going to ask the Deputy Secretary 
to talk about the process of getting you more timely reports 
with the information you need.
    Mr. Conner. Senator Bennett, it is certainly our full 
intention to comply with those monthly requests. Again, I think 
we would acknowledge the first report--, we were ironing out 
some of the kinks, and I think the one we got to you recently, 
I think late last week, I believe is much more in line with 
what the committee has in mind to monitor this.
    We have a little bit of a problem here, as you know, 
Senator Bennett, the development of a Federal budget is a 7-
month process that we will begin again around the first of 
August for next year's budget. In this last budget, I will tell 
you that during the course of time that we were developing our 
budget, the numbers were changing on WIC pretty substantially 
and we were chasing that number a little bit, if you will. 
There is a 3-month delay in the data in terms of it coming in, 
and so it requires a little bit of time to filter that into the 
process.
    We are going to get you the absolute best data that we have 
got as quickly as we have it available. You do not need bad 
data from us, and obviously, we do not want to give you bad 
data. But as soon as those numbers become available, we are 
going to get that information to you. We want to work with this 
committee. And I will tell you OMB wants to work with this 
committee as well.
    We had excellent cooperation with them in the development 
of this year's budget in that, late in the game, we came in and 
said our numbers show the need for more for WIC. They gave that 
to us, frankly, without asking us to take it out of anywhere 
else. And so we have had good cooperation.
    This is one of those unfortunate circumstances where the 
numbers are changing quicker than what our system oftentimes is 
prepared to deal with. But I think between your work and the 
information we provide, we will get through this and get you 
the information you need to make the right decisions here.
    Senator Bennett. Thank you very much, and thank you, Mr. 
Chairman. You have been very generous with allowing me this 
time. I appreciate it.
    Senator Kohl. Thank you very much, Senator Bennett.
    Senator Craig.
    Senator Craig. Mr. Chairman, thank you very much.
    Mr. Secretary, gentlemen, thank you for being with us.
    Mr. Chairman, let me ask unanimous consent that any opening 
remarks that I prepared become a part of the record.
    Senator Kohl. It will be done.
    Senator Craig. Thank you.

                            COMMODITY PRICES

    Mr. Secretary, I would like to ramble a bit because, 
obviously, the chairman and the ranking member have picked up 
on rising food costs and its impact on poorer people and the 
need to fund those programs.
    Having said that, I am an unabashed supporter of high 
commodity prices because it is doing something to American 
agriculture that you and I and others have fretted and stewed 
about for decades. How do we change the aging trend in the 
American farmer? How do we change the disinvestment in the 
agricultural portfolio and see reinvestment of a kind that will 
keep agriculture modern and aggressive and ongoing?
    And the way you do that is profitability and higher 
commodity prices. For whatever reason, the last few years have 
created some of those trends. There is no doubt about it. You 
go into farm country today. You walk across it. You hear a dad 
saying, you know, my son has just decided to come home and farm 
with me or my daughter has. And 5 years ago, they were not even 
talking about that. Why? Because they can come home to a 
lifestyle and a business that has some dynamics to it today. 
That is very exciting to me.
    I drove by a--I will not give the brand name--an implement 
lot recently, and there were 55 new combines sitting on the 
lot. And I asked a farmer in the area: Who is going to buy all 
those combines? And he smiled and said, Larry, they are already 
sold. There is not a combine available in the market today for 
another 6 to 8 months. The same way with tractors. Farmers are 
reinvesting in the agricultural portfolio of America because it 
is profitable. For what reason? A lot of reasons.
    I just returned from Ottawa yesterday, Mr. Chairman, from 
looking at a cellulosic ethanol plant, knowing that that is 
where we have got to go because some would argue, gee, we have 
disrupted the food chain with corn-based ethanol. And this 
Congress is now aggressively awakening to the reality that we 
have become so dependent on foreign oil, we ought to become 
independent of it. And we are working to get there now. It is a 
good deal. It is a good idea.
    At the same time, on the way back from Ottawa last night, I 
for the first time was spending more time reading the ethanol 
magazine, and I was counting the number of new plants under 
construction as we speak. That represents about 4.2 billion 
gallons annually coming into the market in the next 12 months. 
Now, that is in addition to the current 7.8 billion gallon 
capacity. All of a sudden, we are bumping the 15 billion that 
we thought would be the limit for corn-based, very, very 
quickly. That is pretty exciting. But it also demands that we 
do our part.
    And it is going to be very fascinating, Mr. Chairman, to 
see the land base shift out there and adjust. There are already 
all kinds of reactions going on about how that happens.
    So with all of this new positiveness comes a kind of a 
stress and a need for research and the types of things that 
USDA, in cooperation with its land grant universities, have 
done so very well over the years. And your budget dramatically 
reflects the opposite. And that is very frustrating to me. Yes, 
profitability brings new investment in American agriculture, 
but the kind of research that Senator Bennett was talking 
about, as it relates to that rust, the other kinds of research 
that keep pushing us to the cutting edge in technology to 
advance these causes in American agriculture today is 
phenomenally important. And I do not think your budget 
adequately reflects that.

                               FARM BILL

    Let me turn to another issue. The week before last, I spent 
a week traveling around Idaho, talking to farmers and ranchers, 
mostly regarding agricultural issues. All are very frustrated 
that we cannot work out this farm bill issue. It is a symbol of 
the inability of a government to function and function in a 
timely and responsible manner. And you can and I can make all 
of the excuses, and it really does not quite fit. It speaks to 
our collective dysfunctionality. And so we ought to really work 
to get it done and not extend it for another period of time in 
my opinion and I think the opinion of American agriculture. I 
think I am reasonably reflective of that.
    We are going to become the third largest dairy State in the 
Nation. We have got about 560,000 cows milking in Idaho right 
now. So we are going to break those numbers very quickly, and 
that brings both opportunity and problems. Research again 
becomes very, very important to us, how you manage large herds 
and how you manage waste and all of that. That is in 
cooperation.
    But the biggest issue that is not, nor can it be, reflected 
by this budget--but I would hope that it would become reflected 
by your rhetoric--is the biggest in Idaho agriculture today, 
and it has been a long time coming because they have been 
hiding behind their combines or hiding behind their cows 
because the issue was so politically charged they did not want 
to deal with it and now they have got to. And that is the hands 
to milk the cows and operate the equipment and work the rows. 
It is labor.
    American agriculture last year guesstimated--and maybe our 
economist can tell us we dropped $8 billion at the farm gate, 
rotted in the fields, could not pick it, could not deliver it, 
could not process it. I have got potato lines in our plants in 
Idaho down right now because we cannot supply them with 
workers. And it is possible, even though we have become very 
good at storing spuds, that some might rot in the cellars 
because we cannot get them into the boxes and out to the 
market. And we talk about prices going up, and yet we cannot 
deliver to the market.
    We have lost maybe a quarter of a million acres of 
vegetables in the San Joaquin Valley in this cropping season. 
It has gone to grains and hays and other things because their 
hands are not there. And those acreages have moved across the 
border into Mexico and gone on to Chile and possibly to Brazil.
    The exportation of American agriculture production today, 
because this Congress cannot get it right about immigration, is 
tragic. And there is a bit of a panic in farm country as to 
what we do because we have not done what we need to do. And our 
borders, which we should secure, are securing.
    Well, that is an extension to my opening remarks, a bit of 
a diatribe, but a very important one I think.
    Am I out of time, Mr. Chairman?
    Let me thank you, now that I have had your ear, for potato 
cyst nematodes and the resources that you have helped provide 
the potato industry in Idaho when we had an outbreak and have 
worked to contain that problem and are doing quite well by it 
now, a potentially ruinous problem to a $2.9 billion potato 
industry. And we need a little more help there. The work that 
has been done I think has been very effective in its 
eradication, at least in its containment and hopefully its 
eradication. A very little amount of money, but $1.8 million 
goes a long way because farmers and researchers know how to 
stretch it. So we cannot compromise. We have got to finish it 
and complete it. We have isolated it and we hope to have your 
help in doing so.
    Lastly, food safety issues are critically important. The 
funding of the National Veterinary Medical Services Act is 
awfully important to us.
    From those standpoints, the budget is inadequate. And I 
understand the squeezes. We will work with the chairman and the 
ranking member to resolve these issues. I did not think that a 
continuing resolution for budget purposes this year, because of 
the politics that America is in right now, would be a good idea 
because it talks about our inability to get things done. But in 
all fairness, Mr. Secretary, when I look at your budget, maybe 
it is not a bad idea, at least for the short term.

                           PREPARED STATEMENT

    I really have no questions of you. We will put the rest in 
writing. But there is a lot of good news and a lot of 
frustration out in farm country today. And I do not mind us 
moving away from a cheap food policy. We just need to simply 
make sure that those who cannot afford food are cared for at a 
time when profitability and investment are returning to the 
agricultural portfolio of America.
    Thank you.
    [The statement follows:]

               Prepared Statement of Senator Larry Craig

    Thank you for appearing before us today to discuss USDA's fiscal 
year 2009 proposed budget.
    We are in an interesting time given the current status of farm bill 
negotiations. There is a great deal of uncertainty among our Nation's 
farmers and ranchers regarding what the next 5 years of farm policy 
will look like.
    I hope that we can finalize this process and get it to the 
President--and that he will sign it--to give some much-needed certainty 
to our farmers and ranchers that are right now making planning 
decisions in the dark.
    I understand the difficulty of putting together a budget under 
these uncertain circumstances. Couple that uncertainty with an 
extremely tight budget and we have a serious challenge on our hands.
    Without spending too much time parsing over the elements of the 
Department's budget proposal with which I agree or disagree, let me 
just point out a few particular areas of concern.
    The first is in regard to agriculture research. I think we all 
agree that the current status of our domestic agriculture industry is a 
product of decades of innovation--fueled by a strong investment in 
agriculture research.
    Though I appreciate the idea of more collaboration and greater 
``efficiency'' in research, I become very concerned about the 
consequences of terminating or drastically under-funding critical areas 
of research in this country.
    One of the research units proposed for termination is the ARS Land 
Management and Water Conservation Research Unit in Pullman. This unit 
has played a leading role in the development of science-based solutions 
to agricultural and environmental problems of the Pacific Northwest.
    We must not lose sight of the value of our land grant institutions, 
and the value of the formula dollars that we direct their way. Many of 
our land grant universities--including the University of Idaho--utilize 
those formula dollars to invest in extremely valuable long term, core 
agricultural research programs that cannot be effectively managed or 
supported through multi-state or short term granting mechanisms.
    Switching gears, I believe that your dedication to the areas of 
pest and disease management is extremely vital to the health of our 
domestic agriculture industry.
    Take, for example, our collective efforts over the last year or so 
to eradicate potato cyst nematode. This pest threatened to devastate 
our State's potato industry, and that of the nation.
    Thanks to adequate funding and a rapid response, we have likely 
prevented this pest from becoming even more expensive to control, and 
more devastating to the industry. Our work there is not done yet--we 
need to continue to provide adequate funding for programs like this to 
remain effective.
    Likewise, the USDA has a significant challenge in safeguarding the 
health of our Nation's livestock--for purposes of national security, 
public health, the safety of our food supply and health of our animal 
agriculture industry.
    I am encouraged to see that USDA continues to focus on this area, 
reflected by an increase in the budget for disease monitoring, 
surveillance and response programs.
    However, I fear USDA continues to miss a key priority in bolstering 
the numbers of our ``first responders''--those large animal 
veterinarians willing to practice in rural areas; a breed that is 
largely disappearing.
    Smaller farms in rural areas of Idaho are facing significant--and 
growing--challenges in finding veterinarians to service their herds. We 
have several counties in Idaho without a single food animal 
veterinarian. Several counties have upwards of 50,000 food animals per 
food animal veterinarian. Rural, large-animal veterinarians are 
themselves becoming an endangered species, and we must do something to 
restore their ``population.'' If not, we risk losing the important 
first responders when it comes to disease threats.
    There is immeasurable value in dollars spent to find solutions to 
current and emerging animal diseases. However, if there is no one to 
identify, prevent and treat these diseases once they emerge, our money 
spent on research is much less fruitful.
    I point out only a couple of these issues to highlight the 
difficult job ahead of utilizing limited dollars wisely.
    I look forward to working with you, Mr. Secretary, as we move 
forward on our fiscal year 2009 priorities.

    Senator Kohl. Thank you, Senator Craig.
    Senator Cochran.
    Senator Cochran. Mr. Chairman.
    Thank you, Mr. Secretary, for being here and helping us 
understand the President's budget request for the Department of 
Agriculture and related agencies.
    Let me first ask unanimous consent, Mr. Chairman, that my 
prepared statement be printed in the record.
    Senator Kohl. Without objection.
    [The statement follows:]

               Prepared Statement of Senator Thad Cochran

    Mr. Chairman, thank you for holding this hearing on the fiscal year 
2009 United States Department of Agriculture budget. I welcome 
Secretary Schafer to the committee. I would also like to congratulate 
Dr. Joseph Glauber on his recent appointment to Chief Economist for the 
United States Department of Agriculture and look forward to working 
with you and your staff.
    An important aspect of the Agriculture appropriations bill is the 
funding it provides for agriculture research. This research is a 
critical part of ensuring that U.S. producers remain the leaders in 
food and fiber production. The funding this bill invests in agriculture 
research is a small sum compared to the economic benefit it has on a 
farmer's bottom line. I am concerned about the administration's 
recommendation to reduce agriculture research
    funding by $170 million from last year's enacted level. Agriculture 
Research continues to influence production agriculture by giving 
producers better varieties for quality and yield, identifying new 
methods for treatment of pests and diseases, and developing agriculture 
practices that reduce environmental effects such as sediment runoff and 
carbon release. Congress should continue to make investments in 
agriculture research.
    The requested increase of $480 million for the Women, Infants, and 
Children Program provides evidence that the rising cost of food 
continues to be a problem for both the Department and consumers. This 
problem is not limited to the United States. The United Nations' World 
Food Program announced that from October 1, 2007 through February 1, 
2008, the cost of its program rose 41 percent in that 5 month period. 
Congress has been able to allocate additional funding for the Women, 
Infants, and Children
    Program through previous emergency supplemental appropriation 
bills. It is my hope that the Department will keep the committee 
informed as to whether additional funding will be required above the 
current fiscal year 2009 request.
    Once again, I welcome the Secretary and look forward to his 
comments.

    Senator Cochran. I mention in the statement the importance 
of agriculture research and worry about the fact that the 
budget request is about $170 million below last year's enacted 
level of funding. But this is not unusual for the Department to 
submit a budget request that they know is going to be 
increased. So it will not be a shock to you. And I am proud to 
associate myself with the remarks of the Senator from Idaho 
about the importance of agriculture research. It helps improve 
our profitability in production agriculture. It helps create 
jobs in the processing and exporting industries. And these are 
big factors in our own economic well-being. And I know you 
understand that. So you will not be surprised if you see us 
increasing those numbers a little bit.
    We do need your guidance and observations about offsets 
because we do not want to overspend and injure the economy by 
running up deficits that threaten overall economic health too. 
So we know we need to work together, and I look forward to 
doing that.

                        COLOMBIA TRADE AGREEMENT

    In that connection, I think the administration deserves 
praise for negotiating trade agreements that help enable our 
producers and exporters to realize profits in the international 
marketplace. I know we have coming before the Senate a Colombia 
trade agreement. Let me ask you if the Department of 
Agriculture supports the ratification of that, and what 
comments can you make that would give us some reason to be 
strong advocates of that position?
    Secretary Schafer. We do very much support the ratification 
of the Colombia Free Trade Agreement. I was fortunate to be 
with the President yesterday when he made the announcement that 
he was sending this legislation to the Hill. And I was there 
because of the importance of free trade agreements, bilateral 
agreements and multilateral agreements, to the agriculture 
community.
    We would note that--and I mentioned it earlier--the 
agriculture sector is the positive trade balance sector of our 
economy, and we also note that last year that 40 percent of the 
GDP growth in this country was led by exports. We think exports 
are important. I can tell you from my State, North Dakota, 50 
percent of our agriculture products are exported from this 
country. And that is duplicated State after State after State.
    The issues of national security and combining with an ally 
in South America with a democratically elected government are 
strong, but the issues of agriculture, we think, are most 
important. As that country is moving away from illegal 
production and growth of drugs and crops to make drugs and 
moving into legitimate, honest, and legal products and crops, 
it is important that we support that government. As we import 
our products there, jobs are created. People have better 
opportunity. As they export their products to us, they provide 
economic opportunity for the people there.
    For the people of the United States of America, we are 
already importing 99 percent of the products from Colombia 
duty-free. On the other hand, our products that go down there 
contain levels of duty ranging from 5 percent to well into the 
70 percent range. And I would note that upon ratification of 
this treaty, 70 percent of the products that we currently ship 
to Colombia go duty-free; the rest, over time, those tariffs 
and duties disappear. That provides economic opportunity for 
our current exporting levels.
    Also, if you look at the importance of trade with the Peru 
agreement that was passed, if you add Colombia, Korea, and 
Panama, those four provide $3 billion of annual opportunity for 
agriculture exports. We think it is important for this country, 
and we urge the ratification of this legislation.
    Senator Cochran. Thank you.
    Thank you, Mr. Chairman.
    Senator Kohl. Thank you, Senator Cochran.
    Senator Specter.
    Senator Specter. Thank you, Mr. Chairman.
    Mr. Secretary, we welcome you here and note your 
distinguished record as Governor of North Dakota and thank you 
for undertaking this assignment in the last year of the 
administration.
    In reviewing the proposed budget, I am pleased to see that 
the budget fully funds the Department's three major nutrition 
assistance programs, food stamps, school lunch, and WIC. But 
the funding has been terminated for the Commodity Supplemental 
Food Program. It is a program that I have consistently 
supported, and we are going to try to find a way to put that 
$100 million back in the budget because it is an important 
program. And I would appreciate your taking a look at that.
    Food safety has an increase of $22 million at a funding 
level of $952 million, and I would appreciate it if you would 
take a look to see and give us a written response on the 
adequacy of that amount of money, considering the very serious 
problems there are.
    As you have noted, this is a very busy place. Senators come 
and go. I am due on the floor 6 minutes ago on the housing 
bill. So I am not going to be able to stay to have a dialogue. 
But if you would give an analysis to the subcommittee on that, 
I would appreciate it.

                              CONSERVATION

    With respect to conservation, I am concerned about the 15 
percent decrease from fiscal year 2008 where there is 
elimination of funding for Watershed and Flood Prevention 
Operations, Watershed Surveys and Planning, Healthy Forest 
Reserve, Resource Conservation and Development. And I would 
like your responses to the impact of that 15 percent decrease 
and your Department's analysis, your analysis, of the 
importance of those programs.
    On agriculture research, I note that the fund is down 10 
percent, or more than $100 million, from last year. And 11 labs 
are closed, including one at University Park, Pennsylvania. I 
know the important work that Penn State does. Here again, I 
would like you to give us an analysis as to whether that 
shortfall could be made up in some other way.
    You have a large budget, but you need a large budget. You 
handle a Department which has more Senator interest, I think, 
than any other Department perhaps, with the exception of the 
Department of Defense. Well, there are many Departments that 
have a lot of concerns, but the Ag bill draws more interest. 
The Department of Justice is very important. I serve as the 
ranking on Judiciary. But we legislate every 5 years on the Ag 
bill, and that draws tremendous, tremendous member interest.
    So if you would take a look at those areas and give the 
subcommittee a written response, I would very much appreciate 
it.
    Again, thank you for taking on this tough job.
    [The information follows:]

                       Food Safety Budget Request

    The President's budget request is adequate to cover the 
cost of Federal meat, poultry, and egg products inspection as 
well as Federal costs for equivalent State inspection programs. 
An increase for the FSIS inspection program is requested to 
maintain our high standards for the safety and wholesomeness of 
meat, poultry and egg products and our continued efforts to 
ensure effective inspection and policy implementation. This 
appropriation request includes funding an increase in pay and 
benefit costs, which make up approximately 80 percent of FSIS' 
budget; an increase for costs of the State Meat and Poultry 
Inspection Programs; and an increase to support Federal 
responsibilities added due to the takeover of the New Mexico 
State program.
                          conservation funding
Watershed Rehabilitation Program
    The fiscal year 2009 President's Budget proposes a reduction in 
discretionary funding for the Watershed Rehabilitation Program, 
although mandatory funding is available. The Watershed Rehabilitation 
Program addresses the problem of aging dams, especially those with a 
high risk for loss of life and property. This reduction reflects the 
administration's position that the maintenance, repair, and operation 
of these dams are primarily a local responsibility since program 
benefits are highly localized. A reduced level of discretionary funding 
will provide technical assistance to address those dams with the 
greatest potential for damage.
Watershed Operations and Small Watersheds Programs
    The fiscal year 2009 President's Budget proposes no funding for the 
Watershed Operations and Small Watersheds programs. Through the 
Watershed and Flood Prevention Operations Program, NRCS provides local 
communities with technical and financial assistance to construct flood 
prevention, water supply, and water quality improvement projects. Since 
most program benefits are highly localized, the Agency anticipates that 
those Public Law 534 and Public Law 566 projects not yet completed will 
continue to receive strong local support from project sponsors.
Watershed Surveys and Planning Program
    The fiscal year 2009 President's Budget proposes no funding for the 
Watershed Surveys and Planning Program. The Watershed Surveys and 
Planning Program authorities are directed toward assessment of natural 
resource issues and development of watershed plans to conserve and 
utilize natural resources, solve local natural resource and related 
economic problems, avoid and mitigate hazards related to flooding, and 
provide for advanced planning for local resource development. With the 
elimination of Watershed and Flood Prevention Operations, continuation 
of the planning component is no longer necessary. Since the benefits 
are highly localized, local sponsoring organizations as well as State 
and local governments are expected to assume a greater role in 
identifying and addressing water resource problems.
Resource Conservation & Development Program
    The fiscal year 2009 President's Budget proposes no funding for the 
Resource Conservation & Development (RC&D) program. The purpose of the 
RC&D Program is to encourage and improve the capabilities of State and 
local units of government, and local nonprofit organizations in rural 
areas to plan, develop, and carry out programs for resource 
conservation and economic development. The program provides technical 
assistance to local communities to develop strategic area-wide plans 
that address their locally identified natural resource and economic 
development concerns. Many RC&D councils have received Federal 
financial support for at least 20 years. At this point, most of these 
communities should have the capacity to identify, plan, and address 
their identified priorities. In addition, a Program Assessment Rating 
Tool (PART) evaluation determined that the program is duplicative. The 
PART concluded that the program duplicates other similar resource 
conservation planning, rural economic development, and community 
programs provided by other USDA agencies (such as the Forest Service 
and Rural Development) and other Federal departments (such as the 
Department of Commerce's Economic Development Administration).
Healthy Forests Reserve Program
    The fiscal year 2009 President's Budget proposes no funding for the 
Healthy Forests Reserve Program (HFRP). The HFRP assists landowners in 
restoring, enhancing and protecting forest ecosystems to promote the 
recovery of threatened and endangered species, improve biodiversity, 
and enhance carbon sequestration. The administration's farm bill 
proposal consolidates this program as part of a combined Private Lands 
Protection Program.
                      agriculture research funding
    Many difficult choices were made in developing the Department's 
fiscal year 2009 budget in order to advance the President's goal of 
achieving a balanced budget by 2012, while also encouraging economic 
growth and security.
    The reduction in research funding is primarily due to the 
termination of earmarks consistent with the administration's policy, 
and a reduction in lower priority research in favor of higher priority 
research, including bioenergy research.
    The decision to terminate or close programs and locations was based 
on specific criteria which include whether the facilities have reached 
their useful life span or have such high maintenance and operating 
costs that it is no longer feasible or possible to keep them open; 
closing these locations and moving personnel to newer facilities or to 
those that conduct related research, will enable a larger critical mass 
of Agricultural Research Service (ARS) scientists to address issues in 
a more efficient manner; and finally, some of the research is no longer 
relevant to the mission of ARS or has matured to the point that 
discontinuing it and closing the locations is the best use of limited 
resources.
    In focusing on the need to redirect and reallocate limited ARS 
resources to higher priority research initiatives and to provide 
funding that would support the administration's goal of deficit 
reduction and economic growth, programs were reviewed for relevance, 
quality, impact, and cost effectiveness.

    Senator Kohl. Thank you, Senator Specter.
    Senator Craig.

                            RESEARCH FUNDING

    Senator Craig. Again, Mr. Chairman, thank you.
    Mr. Secretary, one last thought. As we look to budgets and 
we look to consolidating resources but continuing to provide 
quality resources in a variety of areas, especially in 
research, as you know, out in Idaho and Washington we have the 
uniqueness of having two land grant universities 8 miles apart, 
Washington State University and the University of Idaho. And 
there is an increasing cooperative effort between the two as it 
relates to the land grant responsibility and the agricultural 
needs of that whole region of the country. And as a result of 
that, I think the Federal Government gets a lot more bang for 
its buck because when we deal with cold weather crops and we 
deal with large animal science, it is all the more important.
    I mentioned the growth of dairy in Idaho and that is a 
unique phenomenon of location and climate and space and the 
modernness that our dairy industry is moving into. But as a 
result of that, when you go to large, confined operations of 
5,000 and 6,000 and 8,000 and 10,000 animals, the science of it 
becomes awfully important. The health of it becomes awfully 
important.
    Idaho is preparing to invest heavily in a world-class dairy 
science center that will spread beyond that to large animal 
reviews, waste management, anaerobic digestion, a whole 
combination of things. And the State is willing to make that 
investment. ARS will be a player there. They must be a player 
there. It is too good of an opportunity to pass up for that 
kind of world-class science to be revisited and brought modern 
both with facility and location and need.
    So when I look at these research dollars and research 
budgets, whether it is the Land Management and Water 
Conservation Research Unit at Pullman, Washington, extremely 
valuable for that high production cropland in the Palouse 
country in the Pacific Northwest and the work that has been 
done there, and I look at large animal science that the 
University of Idaho in cooperation with world-class animal 
science, as the president of Washington State just spoke to 
recently, your budgets do not serve that very well.
    For example, your proposal would force the University of 
Idaho to eliminate 58 faculty or staff positions. Now, that is 
a phenomenal hit and one that I will make every effort not to 
tolerate. And I say that in a broader sense. I am going to have 
support. I am going to have the Senators from the State of 
Washington supporting me, the Senators from Montana and Oregon 
and surrounding States because the work we do is very 
transparent and very important to the agriculture of that 
region.
    And so, again, I say that--how do we justify? I guess my 
only question because I will be submitting some to you. How do 
we justify this sort of significant departure from traditional 
distribution of Hatch Act funding as it relates to these kinds 
of programs both in the long-term and short-term value that our 
land grant university research has always produced for us? 
Because it is regional. It is national. It fits the need 
locally and area-wide. What do we do?
    Secretary Schafer. Thank you for the question, Senator 
Craig, and it is an important one.
    As you know, we removed about $185 million in research 
funds from the budget in an effort to look at our limited 
resources and how they most wisely can be spent. Most of those 
were earmarks for specific facilities and specific programs.
    As we looked at the budget, recognizing that we do have 
some constraints if we are going to put us on a pathway to 
balance the budget by 2012, we wanted to make sure that we 
played our part in that.
    The administration believes and we at USDA believe that by 
competitive grant sources, we can better focus the research 
where we get the best research and the best outcome, that while 
we are requesting the removal of earmarks for facilities, we 
still have grants available. You mentioned several States, and 
it was mentioned today, closing facilities, I should point out 
that being from North Dakota, one of those facilities for 
proposed closing is in North Dakota. So I am well aware of the 
situation.
    But I think as we look at the grant opportunities, we at 
USDA are going to focus on the priorities, some of which you 
mentioned. But as we look at those priorities, we are going to 
provide the grant dollars on a competitive basis for facilities 
to do that. We think that allows us to wisely use the limited 
dollars that we have.
    Senator Craig. Well, I can appreciate the priorities and I 
can also appreciate the fiscal soundness of decisions. One of 
the great values of land grant systems spread nationwide is 
that it dealt locally and regionally in ways that became 
national in value when oftentimes not seen from the 30,000-foot 
level by USDA. And we all know that has been the case time and 
time again throughout the history of the modernizing of 
agriculture as we worked aggressively to do it over the last 
good while.
    So we will work with you and certainly with the committee 
to help establish some of these priorities.

                     ADDITIONAL COMMITTEE QUESTIONS

    I will submit the balance of my questions in writing. Thank 
you.
    Senator Kohl. Thank you very much, Senator Craig.
    And we thank you, Mr. Secretary, and your colleagues for 
being with us today.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

                            humane slaughter
    Question. Can you provide an update on what is happening with 
recalled food that wasn't part of Federal nutrition programs? How much 
is still out there, and how much do you realistically believe we will 
ever collect?
    Answer. It is the responsibility of the recalling firm, and not 
FSIS, to ensure that consignees are notified of the need to retrieve 
and control recalled products. FSIS does conduct effectiveness checks 
for all recalls, and when this case is closed, the agency will report 
to the Committee the amount of product recovered.
    Question. The FSIS budget doesn't include any increased funding, 
other than for employee pay costs and to cover the cost of the New 
Mexico program. Would additional dollars, either for more inspectors or 
more training, be beneficial?
    Answer. The President's budget request is adequate to cover the 
anticipated cost of providing Federal meat, poultry, and egg products 
inspection as well as the Federal costs for equivalent State inspection 
programs. An increase for the FSIS inspection program is requested to 
maintain our high standards for the safety and wholesomeness of meat, 
poultry and egg products and our continued efforts to ensure effective 
inspection and policy implementation.
    Question. What is the status of the proposed rule to permit FSIS to 
list in its recall press releases the names of retail consignees? 
Please provide an explanation for what types of recalls (Class I, Class 
II, etc.) will be included and excluded.
    Answer. USDA submitted a draft final rule to the Office of 
Management and Budget for review under Executive Order 12866 on April 
8, 2008. As a general rule we do not discuss draft content of rules 
currently under review. Upon completion of review, we will publish the 
final rule in the Federal Register. The preamble to the final rule will 
include an explanation of decisions made with respect to the 
rulemaking.
                      fiscal year 2008 wic budget
    Question. Mr. Secretary, does USDA still believe, as Undersecretary 
Johner stated a few weeks ago in front of the House of Representatives, 
that the fiscal year 2008 budget request for WIC was adequate?
    Answer. The information available at the time indicated that this 
was the case. More recent year-to-date WIC participation and food cost 
data suggests that program costs for fiscal year 2008 will exceed 
levels anticipated in the President's fiscal year 2009 budget and 
funded by the fiscal year 2008 Consolidated Appropriations Act. Our 
current analysis of fiscal year 2008 program performance indicates that 
without additional funding there would be a fiscal year shortfall even 
after the release of the remaining $150 million of contingency 
resources. For this reason, I am reviewing options that include 
transferring funds from the Food Stamp Program contingency reserve to 
the Special Supplemental Nutrition Program for Women, Infants and 
Children (WIC) to address funding shortfalls in that program.
    Question. How much of the contingency fund will be released in 
fiscal year 2008?
    Answer. In fiscal year 2008, $258 million of WIC contingency 
reserve funding has been made available to the States. This included 
$108 million of prior year contingency funds and $150 million provided 
by the Consolidated Appropriations Act, 2008 (Public Law 110-161).
    Question. So, all of the funding Congress provided (again, over 
$600 more than the administration requested), including the entire 
contingency fund, will be used. Will there be additional funding 
required and where will it come from?
    Answer. Yes, program data suggests that program costs for fiscal 
year 2008 will exceed levels anticipated in the President's fiscal year 
2009 budget and funded by the fiscal year 2008 Consolidated 
Appropriations Act. Our current estimate indicates that without 
additional funding there would be a shortfall even after the release of 
the remaining $150 million of contingency resources.
    For this reason, I am reviewing options that include transferring 
funds from the Food Stamp Program contingency reserve to the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC) to 
address funding shortfalls in that program.
    Question. How much is included in the budget request for the 
contingency reserve in fiscal year 2009, and how much of the 
contingency reserve does the budget assume will be needed to fund the 
participation levels estimated in the budget?
    Answer. The President's fiscal year 2009 budget request for the WIC 
Program funds the contingency reserve at $150 million. The budget 
request assumes that the entire $150 million will be needed to support 
the projected 8.6 million person average monthly participation for 
fiscal year 2009. Maintaining the WIC contingency reserve, even when 
its use is anticipated, is important because it preserves USDA's 
ability to quickly and precisely target program resources to States 
experiencing funding difficulties.
                       world/domestic food supply
    Question. Over the last year we have seen dramatic changes in the 
cost of farm commodities and the world food supply in general. There 
have been food riots in many countries, and some countries that used to 
export grains are now keeping them for their own use. Today, the ending 
U.S. stocks of wheat are the lowest in history.
    Can you or Dr. Glauber give us a good overview of the United States 
and world food situation and the implications it has on USDA policy? 
How much of this is driven by shifts to energy production? How much 
have costs increased for livestock producers as a result of rising 
grain costs?
    Answer. I have asked Dr. Glauber to respond to your questions for 
the record.
    [The information follows:]
    One way to provide you with an overview of the United States and 
world food situation is through the prices paid for food commodities. 
In general, higher food prices reflect tighter market conditions either 
through greater demand for food or higher production costs. For 
example, an increase in demand for agricultural commodities due to 
higher global income increases the prices paid for agricultural 
commodities and therefore food commodities. Similarly, higher energy 
prices increase the cost of producing and marketing food commodities. 
Higher production and marketing costs are then passed through to 
consumers in the form of higher food prices.
    Recently, both greater demand and higher production and marketing 
costs have both been working to place upward pressure on the prices 
paid for food commodities. In 2007, the Consumer Price Index (CPI) for 
food increased by 4.0 percent, up from 2.4 percent in both 2004 and 
2005. We are currently forecasting that the CPI for food will increase 
by 4.5 to 5.5 percent in 2008 and by 4 to 5 percent in 2009.
    Retail prices for fruits and vegetables increased 3.8 percent in 
2007, as fresh fruit and vegetable prices rose by 3.9 percent and 
processed fruit and vegetable prices rose by 3.6 percent. Price spikes 
in these commodities are often linked to drought or freeze damage. The 
CPI for fruits and vegetables is projected to increase by 4.5 to 5.5 
percent in 2008 and by 3.5 to 4.5 percent in 2009.
    The CPI for meat, poultry and fish increased by 3.8 percent in 2007 
and is forecast to increase by 2-3 percent in 2008 and 5-6 percent in 
2009. In 2007, prices were particularly strong for cattle and broilers. 
These strong prices generally reflected production adjustments made 
prior to the recent increase in feed costs. U.S. production of meat and 
poultry is expected to be a record 94 billion pounds in 2008. This 
large supply of meat is expected to limit gains in prices for cattle, 
hogs, broilers, and turkeys in 2008, leading to the relatively smaller 
increase in the CPI for meat, poultry and fish in 2008. In addition, 
the demand for red meat and poultry could be affected by consumers' 
economic concerns.
    The CPI for fats and oils and the CPI for cereal and bakery 
products increased by 2.9 percent and 4.4 percent, respectively, in 
2007. The CPI for fats and oils is forecast to increase by 11.5-12.5 
percent in 2008 and 3-4 percent in 2009. The CPI for cereals and bakery 
products are forecast to increase by 9-10 percent in 2008 and 3.5-4.5 
percent in 2009. The relatively large increases in the CPI for each of 
these categories reflect the relatively tight market conditions that 
existed for much of 2008. However, improved growing conditions in many 
parts of the world are expected to ease market conditions somewhat for 
2008/09. Based on the July World Agricultural Supply and Demand 
Estimates (WASDE), global 2008/09 wheat production is projected at a 
record 664 million tons, 53 million tons higher than the weather-
reduced 2007/2008 crop. Global 2008/2009 coarse grain production is 
projected at slightly over 1 billion tons, similar to the estimated 
2007/2008 crop. Global oilseed production is projected at 417 million 
tons, a 7.8 percent increase over the 2007/2008 estimate.
    Globally, there is no measure that reflects the prices paid by 
consumers for food commodities. One measure that has received 
considerable attention lately is the International Monetary Fund's 
(IMF) global food commodity price index. The IMF global food commodity 
price index includes a bundle of agricultural commodities including 
cereals such as wheat, corn (maize), rice, and barley as well as 
vegetable oils and protein meals, meat, seafood, sugar, bananas, and 
oranges. Over the past 12 months (June 2007 to June 2008), the IMF 
global food commodity price index increased by 44 percent. However, the 
increase in the food commodity price index should be viewed in 
comparison to other prices changes. The IMF overall commodity price 
index rose by 62 percent over the same 12 months while the petroleum 
price index rose by 93 percent.
    Overall, the market for most commodities remains tight by 
historical standards. However, as weather conditions improve in various 
parts of the world and oil prices ease, we would expect to see some 
moderation in the prices consumers pay for food in the next year.
    With respect to shifts in energy production based on the latest 
information prepared at USDA, the expansion in biofuel production in 
the United States would appear to be a relatively modest contributor to 
food price inflation globally and in the United States. Assuming no 
expansion in biofuel production in the United States, we estimate the 
CPI for all food would have increased by 4.55-4.60 percent during the 
first 4 months of 2008, compared with the actual increase of 4.8 
percent. Globally, we estimate the IMF global food commodity price 
index would have increased by over 40 percent from April 2007 to April 
2008, compared with the actual increase of 45 percent.
    Higher grain costs are having an impact on costs for livestock 
producers. The most recent Agricultural Prices report, released on July 
31, 2008 by the National Agricultural Statistics Service (NASS) shows 
that feed price ratios have fallen considerably since last year. The 
feed price ratios measure the pounds of feed equal to the amount of 
production for various types of livestock or livestock products in 
value terms. For example, the broiler-feed price ratio fell from 5.2 in 
July 2007 to 3.2 in July 2008. The reason for the decline is that while 
the price of broilers increased only slightly from 2007 to 2008, the 
price of corn and soybeans increased by 69 percent and 88 percent 
respectively. As listed in the table below, the effects of higher corn 
and soybean prices were reflected in lower feed price ratios across all 
types of livestock.

----------------------------------------------------------------------------------------------------------------
                        Feed Price Ratio                             July 2007       June 2008       July 2008
----------------------------------------------------------------------------------------------------------------
Broiler-Feed: Pounds of Broiler Grower Feed equal in value to 1             5.4             3.2             3.2
 pound of broiler, live weight..................................
Market Egg-Feed: Pounds of Laying Feed equal in value to 1 dozen           10.7             7.2             5.0
 eggs...........................................................
Hog-Corn: Bushels of Corn equal in value to 100 pounds of hog,             15.7             9.7             9.4
 live weight....................................................
Milk-Feed: Pounds of 16 percent Mixed Dairy Feed equal in value             3.16            1.88            1.82
 to 1 pound of Whole Milk.......................................
Steer & Heifer-Corn: Bushels of Corn equal in value to 100                 28.0            17.6            17.8
 pounds of Steer & Heifers, live weight.........................
Turkey-Feed: Pounds of Turkey Grower equal in value to 1 pound              6.6             4.3             4.2
 of Turkey, live weight.........................................
----------------------------------------------------------------------------------------------------------------

    Lower feed price ratios will cause the sector to adjust. Based on 
the July World Agricultural Supply and Demand Estimates (WASDE), poor 
producer returns for broiler and turkey producers are expected to weigh 
on the sector, and 2009 production is expected to dip below 2008. For 
2009, we expect total red meat and poultry production to decline by 
about 1.6 percent from 2008 levels.
                       world/domestic food supply
    Question. How long do you estimate that food costs in this country 
are going to continue to rise? Do you feel that the current Food Stamp 
benefit is adequate to meet the rising demand? What about other food 
assistance programs at USDA and local programs like food banks, what is 
happening there?
    Answer. In USDA's Agricultural Projections to 2017 published in 
February 2008, the Consumer Price Index (CPI) for food is projected to 
increase more than the CPI for all items in 2008 and 2009. For 2010-
2017, the CPI for food is projected to average 2.28 percent annually, 
less than the 2.5 percent CPI projected for all items.
    The Department believes the benefit levels in the Food Stamp 
Program, which are based on the ability of recipients to use their 
benefits combined with their own income to purchase a low-cost, 
nutritious diet, are adequate to meet the needs of the people that the 
program serves.
    Benefit levels for food stamps, and payments for school meals and 
WIC food packages, are adjusted annually to respond to increased costs. 
Between fiscal year 2007 and 2008, food stamp benefit levels increased 
4.6 percent; school meals reimbursements increased about 3 percent. We 
also budgeted for an 8.7 percent increase in the average cost of WIC 
food packages between fiscal year 2007 and 2008.
    The Department has tools and policies in place to respond to 
changes in projected demand and costs in the domestic nutrition 
assistance programs. Two of the major programs the Food Stamp Program 
and the Child Nutrition Programs are designed to respond automatically 
to annual increased participation when economic or other circumstances 
change. The program's entitlement structure helps to ensure that 
benefits automatically flow into communities, States, or regions of the 
country in which increased numbers of eligible people apply for 
benefits.
    While WIC, as a discretionary program, does not have this same 
structure, the Department monitors participation and food price trends 
closely to ensure that sufficient resources are available for the 
administration to maintain its long standing policy of serving all 
eligible persons seeking WIC services.
    With regard to food banks, we have heard from our cooperators and 
others that the private food bank network, which is supported in part 
by The Emergency Food Assistance Program (TEFAP), is facing increased 
demand. In addition to the $140 million provided in appropriated funds 
for the purchase of TEFAP commodities, USDA began a ``Stocks-for-Food'' 
initiative in July 2007 to barter government-owned bulk commodities 
with food processors in exchange for value-added agricultural products 
that can be distributed through USDA's nutrition assistance programs. 
We expect about $90 million in commodity foods to be distributed to 
domestic nutrition assistance programs under this initiative.
    Question. What is the outlook for the near and long term food 
situation? For example, what would happen if the drought in Australia 
continues? What happens if an exotic disease like wheat stem rust takes 
hold in this country? How is USDA preparing the Nation for continuing 
problems like these?
    Answer. USDA forecasts world production, consumption, and trade for 
the major field crops which include the major grain staples. At this 
time, world production prospects for wheat and coarse grains remain 
very favorable for 2008. Additional detail will be provided for the 
record.
    [The information follows:]
    World wheat production is expected at record level with favorable 
weather supporting fall planting and crop development in most of the 
Northern Hemisphere countries including the major producing countries 
of the European Union and Former Soviet Union, and also in India, 
China, and the United States. With higher prices, area expanded 
substantially last fall in most of these countries. Price increases 
since that time have also spurred incentives to increase spring wheat 
plantings in Canada and plantings in key southern hemisphere producers 
such as Australia. The drought in Australia appears to have been 
largely broken with significant rainfall in the eastern portions of the 
country in recent months and very timely rains ahead of 2008 crop wheat 
seeding in the southern and western growing areas more recently. At 
this point, the possibility of a third year of drought remains fairly 
low for Australia; however, even a drought as serious as those in the 
past 2 years would mean a loss of only 10-15 million tons of production 
worldwide, not enough to prevent a record world wheat crop in 2008, 
given all indications at this time.
    World coarse grains production in 2008 is expected to match or 
surpass last year's record level, despite a likely reduction in U.S. 
corn output with lower expected planted area. Although most of the 
world's coarse grains crop remains to be planted, record prices are 
encouraging increases in planted area throughout the major producing 
countries. This suggests record world production again in 2008 with 
normal weather.
    Crop production remains highly dependent on weather with additional 
risks poised by pest and disease problems. Although pests and diseases 
are a serious issue, risk of major crop failures due to these threats 
remains relatively low. USDA will continue to monitor crop health 
issues and reflect the impact of crop problems in its monthly crop 
reporting and supply and demand estimates reports. These reports 
provide the public with a reliable and timely source of information 
about crop production and use in the United States and around the 
world.
                   effect of high commodities demand
    Question. Because of the high demand for commodities, there is a 
large concern that lands that have been placed in conservation 
practices may be moved into farm production and, as a result, a lot of 
environmental benefits will be lost. Do you share that concern? What is 
USDA doing to help maintain the levels of water, soil, and wildlife 
habitat protection that conservation programs have achieved over the 
last 20 years?
    Answer. USDA approaches conservation with the objective of ensuring 
that lands can be productive in concert with a healthy environment and 
that benefits achieved can be maintained.
    For example, USDA cost share programs provide assurances that 
conservation practices are maintained and that taxpayer investments are 
protected. Each conservation practice the Department implements has a 
life span attached to it and if the landowner does not maintain the 
practice, we can recoup our costs.
    There are also pressures from a land retirement perspective that 
sensitive lands may go into production. The 1985 Farm Bill authorized 
the Conservation Reserve Program (CRP) as an option for producers with 
Highly Erodible Land (HEL). Any HEL land coming out of CRP and going 
back into production, must be farmed in accordance with an acceptable 
conservation plan/system in order to be eligible for certain USDA 
benefits.
    The Department is ready to address increased requests from 
producers with expiring CRP contracts for conservation technical and 
financial assistance (cost-sharing) through the Environmental Quality 
Incentives Program, the Conservation Security Program, the Wildlife 
Habitat Incentives Program, and other conservation programs.
    In the Administration's 2007 Farm Bill proposals, the Department 
proposed a forward looking approach in the form of a biomass reserve, 
which would have encouraged energy crop production on suitable lands 
currently enrolled in the CRP.
                 national animal identification system
    Question. Over the past several years, this Subcommittee has 
provided substantial funding to USDA for the National Animal ID 
program. However, this program is still not established in any 
meaningful way and there is a lot of frustration in the farming 
community and within Congress about the way this program has been 
managed.
    What is the current status of this ID program? Do you support a 
voluntary or mandatory program and who do you think should pay the cost 
of it? How have you spent the money that has been appropriated for it 
so far?
    Answer. A great deal of progress has been made with all three 
components of the National Animal Identification System (NAIS).
    Premises registration is the foundation of the NAIS. Progress 
continues at a steady pace. Currently, participating States and Tribes 
have registered 461,846 premises nationwide. This represents 
approximately 33 percent of the estimated national total.
    USDA wants to reach as many producers as possible. Recognizing the 
need for industry groups to be more involved in premises registration 
outreach efforts, USDA has initiated cooperative agreements with 
nonprofit organizations to advance premises registration. USDA has 
finalized eight agreements for this purpose.
    USDA has approved six manufacturers of animal identification number 
(AIN) tags to produce ten devices for official NAIS use including radio 
frequency identification (RFID) eartags that are compliant with 
standards from the International Organization for Standardization. 
Approximately 4.2 million AIN devices have been distributed.
    Last year, USDA purchased 1.5 million NAIS-compliant RFID eartags 
to be used specifically for current animal disease programs--such as 
the cooperative, State-Federal bovine tuberculosis (TB) and brucellosis 
programs. These tags will also be distributed in geographic areas that 
are at increased risk for disease outbreaks. In response to the TB 
detection in California in December 2007, 108,000 AIN tags have been 
provided to support bovine TB testing in California and Nevada. An 
additional 18,900 tags have been distributed to support disease program 
efforts in other States.
    The tracing component of the NAIS continues to advance. In 2007, 
USDA published A Business Plan to Advance Animal Disease Traceability. 
The business plan detailed strategies and actions to more fully utilize 
the NAIS standards in existing animal health programs. The plan also 
works to harmonize animal identification systems with industry 
marketing, management, and performance recording programs to improve 
the overall U.S. animal disease traceability infrastructure. Seven 
specific strategies detailed in the plan include actions that USDA can 
take immediately to make an impact on traceability. While 48-hour 
traceability is a long-term goal, USDA is working now to reduce the 
length of time it takes to conduct an animal disease investigation. 
USDA is cooperating with States, Tribes, and industry groups to 
integrate NAIS standards into existing USDA disease programs and 
further interoperability between technology systems. These short-term 
actions will help significantly in improving traceability and meeting 
our immediate goal for NAIS.
    USDA does not believe that the NAIS needs to be mandatory to be 
effective. USDA believes the goals of the system can be achieved with a 
voluntary program as a result of standard business practices. For 
example, animal identification has many ``drivers'' that provide 
marketing advantages to producers. Other ``drivers'' may become 
requirements for certain markets (e.g., age verification for the 
purposes of international trade). NAIS animal ID has been developed to 
meet the needs of various programs, including both regulatory disease 
control programs and industry programs. Participation in NAIS provides 
marketing and management benefits to producers, as well as the data 
that animal health officials need to respond quickly and effectively to 
animal disease events.
    Producers who choose to participate in NAIS will find many positive 
benefits. Contact information provided during premises registration 
allows State animal health officials to provide participating producers 
with information about disease outbreaks or incidents in their area. 
This will enable producers to rapidly protect their premises and their 
livelihood. Participating producers will also be better positioned to 
protect their market access and expand their marketing opportunities 
because their participation will provide vital information on 
identification and movement of their animals, necessary for animal 
traceability.
    Because the NAIS is a State-Federal-industry partnership, the 
program works best if there is active involvement and feedback from the 
States, industry, and producers. As the NAIS has evolved, USDA has put 
participant feedback to work to adjust the program and address their 
thoughts and concerns. USDA will continue working collaboratively to 
ensure that the NAIS is easy to use and makes sense.
    The following table shows how APHIS has obligated NAIS funding 
through April 2008:

                                NATIONAL ANIMAL IDENTIFICATION SYSTEM OBLIGATIONS
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal year
                                 -------------------------------------------------------------------------------
                                  2004 CCC funds       2005            2006            2007            2008
----------------------------------------------------------------------------------------------------------------
System funding..................          $1,813          $4,089          $2,466          $6,207          $1,412
Cooperative agreements..........          13,554          12,838           5,191          19,569           5,728
Communications and outreach.....           2,132           2,557           2,402           2,980             528
Staff and materials.............             319           3,928           6,424          14,185           3,819
                                 -------------------------------------------------------------------------------
      Total, Federal Funding              17,819          23,413          16,482          42,941          11,487
       Obligated................
----------------------------------------------------------------------------------------------------------------

    Question. What are you hearing from farmers and ranchers about this 
program?
    Answer. Overall, the feedback from producers and industry 
organizations from the commercial animal agriculture industry has been 
positive. However, some groups oppose participation in the program and 
will not register their premises. In addition, in some States (e.g., 
Missouri and South Dakota) legislation has been periodically introduced 
to restrict participation in the program at the State level. Producers 
in some areas have opted not to participate in the NAIS. However, the 
enhanced communications efforts, which began in May 2006, continue to 
address concerns.
                             emerson trust
    Question. One of the tools to fight world hunger is the Bill 
Emerson Humanitarian Trust. However, in spite of the recent rising food 
costs and urgent need for food aid in places like Sudan and Somalia, 
the Emerson Trust has not been used since 2005.
    Do you have plans to recommend any releases from the Emerson Trust 
in the near future?
    Answer. Yes, the President directed that the Bill Emerson 
Humanitarian Trust be drawn down to provide emergency food aid through 
the U.S. Agency for International Development, to meet unanticipated 
needs in Africa and elsewhere. This action will provide an estimated 
$500 million of emergency assistance this year.
    Question. Do you think the Emerson Trust plays an important role in 
fighting world hunger and can you explain what the level of commodities 
and cash in the trust are today?
    Answer. The Department of Agriculture and U.S. Agency for 
International Development (USAID) agree that the Bill Emerson 
Humanitarian Trust is an important tool in the battle against world 
hunger. It complements the traditional Public Law 480 food aid 
programs, particularly Title II, by making stocks available during 
periods of tight supply and to meet unanticipated emergency food aid 
needs. The Trust consists of 654,979 metric tons of wheat and about 
$196.4 million in cash.
    Question. Can you describe how the Trust actually works, how much 
do you spend on storage, and how do the commodities actually get from 
the storage facilities to the recipient countries?
    Answer. Bulk commodities in the Bill Emerson Humanitarian Trust 
(wheat) are generally sold to generate funds that are used to acquire 
commodities needed in the recipient country, as determined by the 
USAID. CCC purchases commodities requested by USAID with the sales 
proceeds from the wheat, and arranges for transportation from U.S. port 
locations to recipient countries. Another method is to swap CCC-owned 
wheat for the desired commodities.
    With respect to storage costs, CCC paid more than $936 million for 
wheat in the Trust from 1981 through 2007, averaging more than $34 
million per year. At the current Trust level of 654,979 metric tons, 
CCC will pay about $6.9 million per year in storage costs.
    Because of these costs and other considerations, holding cash 
rather than commodities in the Trust can be a preferred option.
                 colony collapse disorder/varroa mites
    Question. A very large segment of our food supply relies of the 
work of natural pollinators, namely bees. However, we continue to hear 
about serious problems like Colony Collapse Disorder, Varroa Mites and 
other threats to bee species and ultimately, to our food supply.
    What are you doing this year regarding these problems and what 
progress have you made?
    Answer. The Research, Education and Economics mission area reacted 
quickly to lead the Federal response with the formation of a colony 
collapse disorder (CCD) Steering Committee which developed an action 
plan to coordinate Federal research. ARS is conducting research into 
the potential causes of CCD, including pathogens, parasites, 
environmental stress (including pesticides) and management stresses, 
and the Cooperative State Research, Education, and Extension Service 
(CSREES) is coordinating Federal and land grant university efforts. The 
2009 budget requests an additional $780,000 for ARS to research the 
role of pathogens and other stress factors in CCD and develop ways to 
mitigate their effects. In 2008, ARS began a 5-year Honeybee Health 
Areawide Project funded at $1 million per year.
    CSREES awarded $4.1 million to the University of Georgia to study 
the causes of CCD and other diseases affecting bee populations.
    The Protection of Managed Bees Coordinated Agricultural Project 
aims to improve the health of managed bee populations in agricultural 
systems. The research will address genomics, breeding, pathology, 
immunology and applied ecology to explain the causes behind dwindling 
bee populations. Researchers will work closely with the extension 
community and other stakeholders to develop and implement mitigation 
strategies for CCD and other significant problems.
    The Animal and Plant Health Inspection Service (APHIS) will 
undertake a project to examine key honeybee issues. In addition to 
working with the Agricultural Research Service (ARS) on research 
regarding potential causes of Colony Collapse Disorder (CCD), APHIS is 
examining existing risk assessments for queen bees, packages, and 
germplasm from Australia, Canada, and New Zealand. Presently, importing 
bee-collected pollen and royal jelly for bee feed is prohibited. 
However, APHIS is developing a risk pathway analysis for royal jelly 
and bee pollen as bee food.
    Question. Can you describe how your research and regulatory 
agencies plan to deal with these problems in this budget?
    Answer. The 2009 budget requests an additional $780,000 for ARS to 
research the role of pathogens and other stress factors in CCD and 
develop ways to mitigate their effects. In 2008, ARS began a 5-year 
Honeybee Health Areawide Project funded at $1 million per year.
    CSREES awarded $4.1 million to the University of Georgia to study 
the causes of CCD and other diseases affecting bee populations.
    The Protection of Managed Bees Coordinated Agricultural Project 
aims to improve the health of managed bee populations in agricultural 
systems. The research will address genomics, breeding, pathology, 
immunology and applied ecology to explain the causes behind dwindling 
bee populations. Researchers will work closely with the extension 
community and other stakeholders to develop and implement mitigation 
strategies for CCD and other significant problems.
    The Animal and Plant Health Inspection Service (APHIS) will 
undertake a project to examine key honeybee issues. In addition to 
working with the Agricultural Research Service (ARS) on research 
regarding potential causes of Colony Collapse Disorder (CCD), APHIS is 
examining existing risk assessments for queen bees, packages, and 
germplasm from Australia, Canada, and New Zealand.
                              varroa mites
    Question. Senator Inouye has brought to my attention that the 
varroa mite has suddenly appeared in Hawaii and this poses a special 
threat because many of the honey colonies that are used in this country 
are actually produced in Hawaii.
    Senator Inouye has asked me to submit some questions for the record 
on his behalf, which I will, but can you tell us if you are aware of 
this problem, how serious you think it is, and what you are doing about 
it?
    Answer. Varroa mites were recently found on the island of Oahu and 
appear to be established throughout the island. But so far, there is no 
evidence that the mites are present on any of the other islands. Hawaii 
has strong intra-island quarantine regulations in place. APHIS is 
providing funding to the State to conduct a survey for a variety of 
honey bee pests and diseases, including varroa mites. The survey will 
provide information to officials to help manage the situation, although 
once they are established, it is virtually impossible to eradicate 
varroa mites. There is no record of the mite ever having been 
eradicated.
  rural development and rental assistance--absence of a sound strategy
    Question. Rental assistance provides funding to help very low 
income rural families so they don't have to spend more than 30 percent 
of their incomes on rent. Recipients are typically elderly, 
handicapped, or female-headed households, with average household 
incomes near $12,000. If this assistance is not continued, tenants will 
face rents that they cannot afford and will face eviction.
    Over the past several years this program has reduced from 5 years 
to 1 year the amount of time that families had assurances (through 
formal contracts) this assistance would continue. This reduction was 
done to provide immediate savings, help measure annual cost increases, 
and improve the ability to forecast future renewal needs. It was 
recognized that over time, there would be a large increase in annual 
program costs. That is occurring in fiscal year 2009 as program needs 
jumped from $445.8 million in fiscal year 2008 to $1.02 billion.
    The administration was well aware of this phenomenon. However, in 
spite of ample lead time the administration failed to develop an 
adequate plan. The administration's proposal is to fund these needs by 
program terminations and reductions across Rural Development.
    Besides forcing Rural Development to absorb over $500 million in 
offsets, were other options considered?
    Answer. Rural Development's first priority is to continue tenant 
protections in the form of Rental Assistance renewals. The 
administration is committed to fully meeting the need for renewals 
while meeting the President's goal of reducing spending and achieving 
balance budget. The formulation of the President's budget involved 
discussion of numerous options among multiple participants.
    Question. What were those options and why were they rejected?
    Answer. Any discussions of options are predecisional. We believe 
the fiscal year 2009 President's budget is the best course of action to 
ensure the vitality of the Rental Assistance program. It will allow us 
to be more responsive to program needs and will improve our ability to 
forecast future Rental Assistance renewals.
             rural housing and the sub-prime housing crisis
    Question. The sub-prime housing crisis has created turmoil in 
housing and financial markets nationwide. But, little attention is paid 
to impacts on rural residents. We want to ensure that rural households 
receive the support and assistance needed to weather the storm.
    How is the fallout in the sub-prime market affecting rural housing 
in general?
    Answer. Information on how rural borrowers have been affected by 
the sub-prime home mortgage crisis is limited. However, there is 
evidence that a significant amount of sub-prime lending has occurred in 
rural areas, particularly where borrowers have limited access to 
traditional credit. Some of these borrowers are likely to be having 
repayment problems. However, the adverse impacts on rural housing 
markets may not be as widespread because there is less concentration of 
housing in rural areas and home prices tend to be lower than those in 
urban areas.
    Question. What Rural Development housing programs are most impacted 
and how?
    Answer. The current situation in the subprime market has had a 
minimal impact on Rural Development's housing programs. Our single 
family housing portfolio remains strong with low delinquency and 
foreclosure rates. In ten of the last 12 months, we have experienced 
historical low delinquencies. Demand for the section 502 guaranteed 
loan program is at record levels as private sources of mortgage credit 
for first-time homebuyers have tightened dramatically.
    Our Single Family Housing programs have seen an increase in 
activity, which is common when the private sector market is 
experiencing difficulties. We have responded accordingly and have been 
able to meet current demands.
    Question. Although the Budget substantially increases the Sec. 502 
guaranteed single family housing program, the increase is coupled with 
a 50 percent fee increase. Why do you believe now is the appropriate 
time for a large fee increase?
    Answer. Most other Federal guarantee programs operate near ``budget 
neutral;'' however, the Section 502 Guaranteed loan program continues 
to require a taxpayer subsidy. By bringing the guarantee fee in line 
with other Federal guarantee programs we will be able to operate near 
budget neutral while providing a much greater amount of program level 
funding. Overall, the subsidy rate for the guarantee program will drop 
from 1.20 percent in fiscal year 2008 to 0.27 percent in fiscal year 
2009, requiring very little credit subsidy.
    Question. This Budget, again, terminates the direct Sec. 502 single 
family housing program. Without this credit source, particularly in the 
current environment, where will very low and low income rural 
households obtain funding for homeownership?
    Answer. The guaranteed program can already provide coverage for 
many of the customers that would traditionally look to the direct loan 
program for financing. In recent years, about 30 percent of USDA's 
guaranteed loans for single family housing have gone to families with 
50 to 80 percent of median family income, which is within the income 
limit for direct loans. The remaining 70 percent of these loans have 
gone to families with incomes between 80 percent and 115 percent of 
median family income. By shifting budget authority to guaranteed loans 
in fiscal year 2009 we will be able to increase program level funding 
for guaranteed lending to over $4.8 billion. Guarantees will allow us 
to leverage a much greater amount of program level funding which in 
turn allows us to assist more rural Americans. Some of the Very Low 
Income applicants, those making less than 50 percent of the Area Median 
Income, would not be served without the 502 direct loan program. 
However, these individuals may be able to qualify under the guaranteed 
program for a more modest sized home.
     farm service agency (fsa) information technology (it) problems
    Question. Last year at this hearing the USDA Secretary acknowledged 
problems with FSA's legacy IT system. The system was unstable and the 
Agency rationed access to guard against comprehensive failure. The 
Secretary promised to provide a plan to develop and implement a 
replacement for the outdated and overloaded legacy systems. Maintenance 
funding was provided in the supplemental bill for short term 
stabilization.
    One year later we remain in essentially the same situation. FSA's 
systems are one year older and availability to users is questionable at 
any time. The specter of a comprehensive system crash remains. Little 
confidence is placed on the replacement cost and scheduling estimates 
that have been provided.
    Given the damage that may result from systems failure, why are we 
not further along regarding implementing a solution?
    Answer. USDA is pleased that our business case for modernization 
has been approved by OMB and reviewed by GAO. All parties agree with 
USDA that modernizing the business delivery systems of the Commodity 
Credit Corporation is a priority. As soon as funding becomes available, 
USDA is ready to proceed.
    Question. Why does this budget not include funding to address this 
problem?
    Answer. The business case was approved by OMB in late November 
2007, by which time decisions on the fiscal year 2009 President's 
Budget had already been made. However, we have been working with the 
authorizing committees to provide for the needed funding through the 
pending Farm Bill. We have proposed amending the Commodity Credit 
Corporation Charter Act to permit the use of up to $400 million in CCC 
funds over the next 4 years, with offsets for collecting user fees.
    Question. Are negotiations underway through the Farm Bill process 
to obtain adequate funding there?
    Answer. Yes. USDA has had multiple meetings with House and Senate 
staff working on the Farm Bill negotiations. We have provided the 
authorizing committees with legislative language to amend the CCC 
Charter Act to allow for the collection of user fees to fund the 
modernization and stabilization projects.
    Question. What is the explanation for the lack of urgency displayed 
by the administration regarding this critical issue?
    Answer. USDA has been diligent in following all the necessary steps 
to gain approval of the modernization business case. OMB and GAO agree 
with USDA that modernizing the business delivery systems for the 
Commodity Credit Corporation is a priority. USDA has developed the 
MIDAS foundational requirements so that USDA is positioned to move 
forward when funding becomes available.
          resource conservation and development program (rc&d)
    Question. Mr. Secretary, the budget proposes reducing the Resource 
Conservation and Development program by nearly $51 million which 
eliminates this program.
    Will the RC&D Councils be folded into other areas of NRCS? If not, 
how many employees will be let go and have these employees been 
notified of your intentions yet?
    Answer. The proposal eliminates Federal technical assistance to the 
375 RC&D councils. As nonprofit organizations, RC&D Councils will still 
exist. At this point, most of these Councils should have the capacity 
to identify, plan, and address their identified priorities. The 
majority of the Councils have increased their partnerships and 
financial portfolios and will continue to bring resources to their 
communities.
    RC&D staffing adjustments are being considered as part of NRCS' 
human capital analysis and plan. Since NRCS is facing significant 
retirements in the future, all appropriate staffing incentives and 
adjustments are being considered. However, specific plans have not been 
finalized. Implementation of any plan for fiscal year 2009 would not be 
initiated until Congressional action on the President's Budget is known 
and necessary decisions have been made. NRCS intends to retain as many 
RC&D staff on NRCS payroll as the overall NRCS budget will support. 
Skills learned as an RC&D Coordinator serve employees well in many 
other NRCS positions. The ability to foster partnerships, collaborate, 
and plan projects is essential to all NRCS field and State level 
technical positions. Many of these employees can be placed in other 
NRCS field and State office positions such as district conservationist 
and other natural resource positions.
    Question. Has the Department ever attempted to measure the benefits 
to rural communities that specific RC&D councils have provided, and if 
so what did you learn?
    Answer. Although no studies to measure the benefits to rural 
communities provided by specific RC&D Councils have been undertaken in 
the last 25 years, reporting provided through the NRCS Program 
Operations Tracking System (POINTS) shows that through the 
implementation of projects, Councils have brought between $6 and $8 for 
each $1.00 invested by the Federal government back to their communities 
in the form of donated materials, professional services and volunteer 
time.
                  commodity supplemental food program
    Question. Mr. Secretary, once again the administration is proposing 
to eliminate the CSFP Program. However, in the budget, the inventory at 
the end of fiscal year 2008 is estimated to be $36,239,000 which is 
$6,065,000 higher than the inventory at the end of fiscal year 2007.
    If this program is slated for elimination, why is USDA allowing 
inventory buildup instead of using it to fund current program needs, 
especially considering that the CSFP caseload was actually decreased in 
fiscal year 2008 from the fiscal year 2007 levels?
    Answer. The ending inventory is essentially a ``rolling'' figure 
that largely represents foods purchased/delivered late in the last 
quarter of one fiscal year for distribution in the first quarter of the 
following fiscal year. This practice is necessary to ensure continuity 
of service to participants as we transition across fiscal years. Until 
such time as the Congress adopts the President's proposal to cease 
program operations in 2009, we plan to carry over sufficient inventory 
from fiscal year 2008 to assure service continuity in fiscal year 2009. 
The increase in the dollar value of projected fiscal year 2008 ending 
inventory is a function of rising food costs and the need to meet 
anticipated delivery demand.
    With the exception of a small volume of foods that are purchased 
for the program through a single annual procurement, there is no 
significant undistributed program inventory held at the Federal level 
at any time during the program year.
    Question. What does USDA intend to do the $36,239,000 at the end of 
fiscal year 2008 if Congress agrees with the administration's proposal 
to eliminate CSFP?
    Answer. Should Congress choose to adopt the President's fiscal year 
2009 budget request, commodities remaining in CSFP inventories next 
fiscal year will be re-donated for use in other domestic nutrition 
assistance programs, including the Emergency Food Assistance Program 
(TEFAP).
                  dairy prices and nutrition programs
    Question. Over a year ago, I wrote USDA out of concern for a 
pending Federal milk marketing order proposal which would raise fluid, 
or Class I milk prices. In that letter I explained how this decision 
would disadvantage dairy farmers in the Upper Midwest, and attached 
documentation showing that the proposal was inconsistent with previous 
department Federal order policies.
    It has been almost 18 months since USDA held an ``emergency 
hearing'' on this issue, and I presume that you must be close to a 
decision. Before you make that decision; however, I would like you to 
advise the subcommittee of any impact your proposed decision would have 
on the costs of the WIC program. I would also like you to consult with 
the Congressional Budget Office on how you estimate the impact of your 
decision on the WIC program, and other USDA nutrition programs, 
including the School Lunch program. I am interested to know if the 
pending decision would add to these costs by arbitrarily increasing the 
Class I differentials throughout the country.
    It is my understanding that, under OMB internal guidance to all 
Federal agencies, any administrative decision that raises outlays or 
the cost of another Federal program must be offset by a reduction 
elsewhere. If you make this decision to raise milk costs, please also 
advise this subcommittee on how you will be offsetting the increased 
costs to WIC and other impacted nutrition programs.
    Answer. OMB does not require offsets for impacts on discretionary 
programs. However, OMB may require an offset for the impact of the 
increase on the Food Stamp Program and other mandatory programs.
                             tart cherries
    Question. On January 8 USDA announced its intention to purchase up 
to 8.1 million pounds of tart red cherries. This is a matter of some 
importance to producers in my State and others. They point out that 
weather conditions in cherry growing regions have been ideal for a 
large crop this coming year. They fear an unmanageable carryover stocks 
and surplus of cherries in the coming year and would like to see USDA 
take further steps under this announcement by June 2008.
    Could you give the subcommittee and update on your actions in this 
area?
    Answer. The Department will complete the entire 8.1 million pound 
bonus cherry program as announced by June 2008. Thus far, USDA has 
purchased a total of 4.7 million pounds of canned, frozen and dried 
cherries for distribution to child and domestic food assistance 
programs. At present, USDA is in the process of purchasing an 
additional 1.1 million pounds of frozen cherries and will complete the 
program with a purchase of 2.3 million pounds of dried cherries.
                            organic pasture
    Question. One of the central tenets of organically produced 
livestock and livestock products is the requirement that animals be 
given access to pasture. Current USDA National Organic Program 
Regulations require access to pasture for all ruminant animals 
(205.237, 205.239).
    However, in recent years, it has become clear that some organic 
dairies have been permitted to sell milk as ``organic'' even though 
their cows have not had access to pasture. When challenged about why 
they are permitting some dairy operations to skirt the pasture 
standards, USDA's National Organic Program has stated that the 
regulation is too vague for them to adequately enforce.
    Therefore, the agency issued an Advanced Notice of Proposed 
Rulemaking to solicit input from the public about the pasture issue. In 
order to facilitate this process, a Pasture Symposium was convened by 
USDA in April of 2006 in State College, Pennsylvania to hear from 
certifiers, farmers, consumers, and industry regarding pasture 
standards. Based on input received at the Pennsylvania Symposium and 
subsequently, USDA had indicated its intention to issue a Proposed Rule 
in 2006 to update the organic standards to make a more specific pasture 
standard for organic livestock.
    Now nearly 2 years later, no proposed rule has been issued on this 
issue. It is critical to the entire organic sector that USDA move 
forward with rulemaking to establish a strong, enforceable organic 
standard to require access to pasture for ruminant animals.
    Please provide an update on this situation, and explain the delay. 
When can we expect to see a proposed rule out to the public for 
comment?
    Answer. AMS received over 80,000 comments based on the Advanced 
Notice of Proposed Rulemaking (ANPR) issued in April 2006, most urging 
a larger role for pasture in the National Organic Program regulations. 
After analysis of all comments, a proposed rule was drafted, which is 
now in Departmental clearance. AMS plans to publish it by the end of 
this fiscal year.
                            potatoes and wic
    Question. USDA published an interim final rule that expands the 
eligibility for the WIC program to include all fresh fruits and 
vegetables with the single exception of ``white potatoes''.
    Please explain the public policy and nutritional rationale for 
excluding fresh white potatoes from the expanded WIC voucher program.
    Answer. The changes to the WIC food packages were made based on 
scientific recommendations from the National Academies' Institute of 
Medicine (IOM). The IOM was charged with reviewing the nutritional 
needs of the WIC population--low-income infants, children, and 
pregnant, postpartum and breastfeeding women who are at nutritional 
risk--and recommending changes to the WIC food packages.
    The restriction of white potatoes, as recommended by the IOM, is 
based on (1) food intake data indicating that consumption of starchy 
vegetables by the WIC-eligible population meets or exceeds the amounts 
suggested in the 2005 Dietary Guidelines for Americans for consumption 
of starchy vegetables; and (2) food intake data showing that white 
potatoes are the most widely consumed starchy vegetable.
    Question. Please provide a description of the process and an 
estimate of the cost of compliance for the exclusion of a single fruit 
or vegetable from the program.
    Answer. Generally, on an annual or biennial basis, WIC State 
agencies determine what foods to include on their State WIC food lists 
from the list of federally authorized WIC-eligible foods. In making 
their determination, State agencies consider factors such as product 
availability, participant acceptance, and costs.
    There is no compliance costs for the exclusion of a single fruit or 
vegetable from the WIC Program because it is a part of normal business 
practice for State agencies to determine which foods will be eligible 
for the State WIC program.
                           national arboretum
    Question. In reviewing the administration's budget for the U.S. 
National Arboretum, we note a proposed cut of $2 million from the 
Gardens Unit and the Education and Visitor Services Unit.
    Please explain why these cuts have been proposed.
    Answer. The reductions have been proposed to address higher 
research priorities of the administration, such as bioenergy, food 
safety, and obesity prevention.
    Question. Did the specificity of these cuts, i.e., that they must 
come from Gardens and Education and Visitor Services at the National 
Arboretum, originate from an OMB mandate to the USDA, from the senior 
administration of the Department or from within the ARS itself?
    Answer. ARS programs were reviewed for relevance, quality, impact, 
and cost effectiveness in the overall context of competing program 
priorities in the Department and the administration's goal to balance 
the Federal budget by 2012.
    Question. How do you intend to execute these cuts and maintain 
compliance with your legal obligation to provide education at the U.S. 
National Arboretum, a mandate which Congress spelled out in the 
legislation which established the National Arboretum?
    Answer. ARS would continue to provide education at the U.S. 
National Arboretum at a reduced scope.
    Question. If these cuts are implemented, what will be the impact on 
the USNA?
    Answer. The Arboretum would emphasize research activities and 
reduce funding for its non-research activities. The Gardens Unit and 
Education and Visitor Services Unit would be merged. Resources to 
maintain the gardens and plant collections would be reduced and 
educational activities and use of the arboretum by outside 
organizations would be limited.
    Question. Will there be any curtailment of days or hours of 
operation?
    Answer. Yes, public access time would most likely be reduced.
    Question. Will you be able to maintain all of the current Garden 
Displays and Plant Collections currently at the Arboretum?
    Answer. The Arboretum would most likely have to reduce in size 
several of the existing collections and no longer actively maintain 
other collections.
    Question. Will there be a reduction in the number of staff 
positions currently approved for the Arboretum and if so, how many and 
where?
    Answer. Yes, there would be a reduction in staff. The Gardens Unit 
will be reduced from the current level of 26.6 FTE to 13.5 and the 
Education and Visitor Services Unit will be reduced from 11.7 to 3.7 
FTE positions.
    Question. Do you think the ARS is still the appropriate 
administrative home for the National Arboretum in light of the 
Department's desire to focus on research and the fact that the 
Arboretum has become an increasingly popular destination for the 
general public to visit?
    Answer. USDA views the National Arboretum as a national asset and 
has taken pride in its public displays. ARS is committed to research 
supporting the floral and horticultural industries.
                national organic program reorganization
    Question. The recent announcement of a reorganization of the 
National Organic Program included information on who would head several 
branches of the program, although not the compliance and enforcement 
branch. When will you name the head of this program?
    Answer. AMS is in the midst of staffing the compliance and 
enforcement branch and plans to have it staffed by the end of fiscal 
year 2008, including the announcement of the head of the branch.
                       country of origin labeling
    Question. What steps is USDA taking to ensure that mandatory 
country of origin labeling will be in effect as required by September 
30, 2008?
    Answer. USDA is working with all parties to expedite the 
development and publication of the necessary rulemaking. The rule must 
be published in the Federal Register by July 30 to meet the September 
30, 2008, implementation date for mandatory country of origin labeling 
on all covered commodities. USDA is on-track to meet these deadlines.
    Question. How has USDA spent funds allocated for enforcement of 
existing rules for mandatory country of origin labeling for seafood 
products? What audits or other enforcement actions have been done?
    Answer. The $1.1 million in appropriated funding allocated for the 
country of origin labeling program is used for all regulatory and 
oversight activities, rulemaking, outreach, education, monitoring and 
enforcement-related activities for fish and shellfish. Surveillance 
reviews of randomly-selected retail stores began in August 2006. During 
2006, 1,159 retail surveillance reviews were performed in 19 States. 
During fiscal year 2007, AMS performed 1,657 retail surveillance 
reviews in 23 States. COOL retail surveillance activities have expanded 
to all 50 States for fiscal year 2008, increasing the number of retail 
reviews to 2,000. AMS has entered into reimbursable cooperative 
agreements with 42 States as of March 2008. USDA employees will perform 
retail surveillance in the remaining eight States.
                               ams audits
    Question. FSIS non-compliance reports can be obtained through 
Freedom of Information requests, although AMS does not make public 
audit reports issued by AMS auditors of the same facilities that sell 
meat and poultry products to the National School Lunch Program. Why is 
this?
    Answer. AMS audit reports of contractors and suppliers to Federal 
food and nutrition assistance programs are available under the Freedom 
of Information Act. However, proprietary information related to a 
firm's business and other sensitive information contained in the 
reports may be withheld, if deemed appropriate by the Agency.
    Question. How often do AMS auditors visit food establishments that 
sell products to USDA feeding programs?
    Answer. An AMS meat grader is present at the facility when ground 
beef is being processed for delivery under Federal contracts. 
Additionally, an AMS auditor performs an unscheduled audit of the 
grinding and slaughter processes once per month (or contract) while the 
facility is producing AMS purchased product. Additionally, AMS is 
cooperatively working with FSIS on cross-utilizing AMS employees to 
provide an enhanced surveillance program for the livestock holding and 
movement areas of slaughter establishments that provide raw materials.
                         risk based inspection
    Question. At the February 5, 2008, meeting of the National Advisory 
Committee on Meat and Poultry Inspection, FSIS distributed a document 
entitled, ``Timeline for Development and Implementation of the Proposed 
Public Health Risk-Based Inspection System, Public Health Information 
System and Poultry Slaughter Rule.'' Please provide a copy of the 
timeline and explain how it was developed.
    Answer. The draft timeline was developed based on the agency's plan 
to strengthen its infrastructure and the continued enhancement and 
evolution of inspection. The timeline was and is still considered to be 
a draft, and is subject to substantial revisions as the agency receives 
input from all stakeholders. The draft is provided for the record.
    [The information follows:]
  timeline for development and implementation of the proposed public 
 health risk-based inspection system, public health information system 
                       and poultry slaughter rule
    January 28, 2008.--Post the reports listed below on FSIS website 
for public comment:
  --Public Health Risk-Based Inspection Technical Report for Processing 
        and Slaughter.
  --Public Health Risk-Based Inspection Technical Report for Poultry 
        Slaughter.
    January 28, 2008.--Submit Public Health Risk-Based Inspection 
(PHRBI) reports for peer review.
    February 5-6, 2008.--NACMPI Full Committee meeting on Public Health 
Risk-Based Inspection.
    February 29, 2008.--SAIC to deliver draft requirements document to 
FSIS for Public Health. Information System (PHIS).
    March 22, 2008.--Receive NACMPI, public and peer review comments on 
Public Health Risk-Based Inspection Reports.
    March 2008.--Submit proposed rule on poultry slaughter for FSIS 
Assistant Administrator Review.
    March 31, 2008.--FSIS approves SAIC requirements document for PHIS.
    April 17, 2008.--Complete revision of PHRBI reports according to 
NACMPI, public and peer review comments.
    April 18, 2008.--Send PHBRI report to OIG.
    April 2008.--Submit proposed poultry slaughter rule to OGC for 
review.
    April--Aug. 2008.--Draft directives, notices, and other needed 
documents, based upon approved PHIS requirements.
    Spring 2008.--Submit proposed poultry slaughter rule to OMB.
    Summer 2008.--Publish proposed poultry slaughter rule.
    April-Sept. 2008.--Develop training schedule, detailed training 
plan, and logistics to deliver training to approximately 5,000 FSIS 
employees for the proposed PHRBI System and the PHIS.
    October 2008.--Develop detailed plan to implement and initiate 
training for the proposed PHRBI System and the PHIS to FSIS field 
personnel.
    January 2009.--Conduct User Acceptance Testing and begin field 
testing PHRBI system and PHIS.
    October 2009.--Deploy PHRBI system and PHIS for use in field.
                           fsis vacancy rates
    Question. Please provide a tabular report of the in-plant 
inspection personnel vacancy rate broken down by job title and FSIS 
district for each of the past 6 months.
    Answer. I will provide, for the record, a FSIS in-plant inspection 
personnel report that displays permanent full-time positions for each 
of the past 6 months (using data from the end of the pay-period closest 
to the end of the month).
    [The information follows:]

                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                    [As of October 27, 2007]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            NON-INPLANT                               INPLANT                           FISCAL             FISCAL             OPT USAGE
                                                     --------------------------------------------------------------------------------    YEAR            YEAR 2007 -----------------------------
                      DISTRICT                         DIST                                                                           ALLOCS 4/  DIFFER  ALLOCS 4/               YTD
                                                        OFC     FLS    TOTAL    EGG     VMS     VMO     FI      CSI    EIAO    TOTAL    11/07              11/07     PP USAGE   USAGE    AVAIL
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALAMEDA.............................................      13      14      27       6  ......      34     132     235      11     418        427      -9       9.00     0.2034    0.37       8.63
DENVER..............................................      11      12      23       7       1      45     120     246      17     436        437      -1       6.00     0.1582    0.29       5.71
MINNEAPOLIS.........................................      13       7      20      10       1      44      93     149      11     308        326     -18       6.00     0.2478    0.55       5.45
DES MOINES..........................................      11      11      22      29       1      63     299     198      11     601        615     -14      18.00     0.3485    0.69      17.31
LAWRENCE............................................      12       8      20       5       1      52     258     201      10     527        520       7      16.00     0.4549    0.89      15.11
SPRINGDALE..........................................      14      10      24       2       1      71     320     297      10     701        713     -12      60.00     1.9458    3.68      56.32
DALLAS..............................................     113       9      22       2       1      54     257     193       9     516        515       1      35.00     0.9899    1.97      33.03
MADISON.............................................      12       7      19       7       1      31      65     127       8     239        240      -1       5.00     0.1392    0.32       4.68
CHICAGO.............................................      12      13      25      12       1      42     104     229      20     408        400       8      11.00     0.5672    0.91      10.09
PHILADELPHIA........................................      14      12      26       8       1      39      78     242      15     383        400     -17       7.00     0.2790    0.49       6.51
ALBANY..............................................      13      11      24       4       1      15       5     194      12     231        250     -19       2.00     0.0728    0.12       1.88
BELTSVILLE..........................................      11       7      18  ......       1      42     201     163       9     416        432     -16      20.00     0.5906    1.12      18.88
RALEIGH.............................................      10      10      20  ......       1      66     393     229      11     700        670      30      52.00     1.9352    3.60      48.40
ATLANTA.............................................      12      14      26       3       1      69     399     393      15     779        765      14      33.00     1.1123    2.05      30.95
JACKSON.............................................      14      10      24       2       1      92     426     317      13     851        855      -4      80.00     2.8497    5.53      74.47
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL.........................................     185     155     340      97      14     759    3150    3312     182    7514       7565     -51     360.00    11.8945   22.57     337.43
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector


                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                    [As of November 24, 2007]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            NON-INPLANT                               INPLANT                           FISCAL             FISCAL             OPT USAGE
                                                     --------------------------------------------------------------------------------    YEAR            YEAR 2007 -----------------------------
                      DISTRICT                         DIST                                                                           ALLOCS 4/  DIFFER  ALLOCS 4/               YTD
                                                        OFC     FLS    TOTAL    EGG     VMS     VMO     FI      CSI    EIAO    TOTAL    11/07              11/07     PP USAGE   USAGE    AVAIL
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALAMEDA.............................................      13      14      27       8  ......      34     132     231      10     415        427     -12       9.00     O.1835    0.81       8.19
DENVER..............................................      12      12      24       7       1      45     126     246      17     442        437       5       6.00     O.1129    0.55       5.45
MINNEAPOLIS.........................................      13       7      20      10       1      43      92     151      11     308        326     -18       6.00     O.1961    1.02       4.98
DES MOINES..........................................      12      11      23      29       1      63     301     200      11     605        615     -10      18.00     0.3691    1.36      16.64
LAWRENCE............................................      12       8      20       5       1      52     258     203      10     529        520       9      16.00     0.5773    1.99      14.01
SPRINGDALE..........................................      14      10      24       2       1      71     320     296      10     700        713     -13      60.00     2.0607    7.55      52.45
DALLAS..............................................      13       9      22       2       1      53     253     194       9     512        515      -3      35.00     0.9025    3.87      31.13
MADISON.............................................      12       7      19       7       1      30      68     127       8     241        240       1       5.00     0.0805    0.50       4.50
CHICAGO.............................................      13      13      26      12       1      41     103     231      21     409        400       9      11.00     0.4083    1.82       9.18
PHILADELPHIA........................................      14      12      26       8       1      39      78     242      15     383        400     -17       7.00     0.2455    1.01       5.99
ALBANY..............................................      13      11      24       4       1      15       5     193      12     230        250     -20       2.00     0.0536    0.25       1.75
BELTSVILLE..........................................      11       7      18  ......       1      41     200     163       9     414        432     -18      20.00     0.5407    2.26      17.74
RALEIGH.............................................      10       9      19  ......       1      65     397     229      12     704        670      34      52.00     1.7605    7.03      44.97
ATLANTA.............................................      13      14      27       3       1      69     398     292      16     779        765      14      33.00     0.8834    3.91      29.09
JACKSON.............................................      14      10      24       2       1      95     431     317      13     859        855       4      80.00     2.4688   10.81      69.19
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL.........................................     189     154     343      99      14     756    3162    3315     184    7530       7565     -35     360.00    10.8434   44.73     315.27
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector


                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                     [As of January 5, 2008]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            NON-INPLANT                               INPLANT                           FISCAL             FISCAL             OPT USAGE
                                                     --------------------------------------------------------------------------------    YEAR            YEAR 2007 -----------------------------
                      DISTRICT                         DIST                                                                           ALLOCS 4/  DIFFER  ALLOCS 4/               YTD
                                                        OFC     FLS    TOTAL    EGG     VMS     VMO     FI      CSI    EIAO    TOTAL    11/07              11/07     PP USAGE   USAGE    AVAIL
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Headquarters........................................      36  ......      36  ......  ......  ......  ......  ......  ......  ......  .........  ......  .........  .........  ......  .........
ALAMEDA.............................................      13      14      27       8       1      33     131     235      10     418        427      -9       9.00     0.2545    1.53       7.47
DENVER..............................................      12      12      24       7       1      43     128     243      17     439        437       2       6.00     0.1638    1.14       4.86
MINNEAPOLIS.........................................      13       7      20       9       1      43      83     162      10     308        326     -18       6.00     0.1851    1.64       4.36
DES MOINES..........................................      10      11      21      29       1      60     301     199      11     601        615     -14      18.00     0.2692    2.18      15.82
LAWRENCE............................................      12       8      20       5       1      52     254     206      10     528        520       8      16.00     0.5024    3.52      12.48
SPRINGDALE..........................................      13      10      23       2       1      69     307     312      10     701        713     -12      60.00     1.5733   13.52      46.48
DALLAS..............................................      13       9      22       2       1      55     250     196       9     513        515      -2      35.00     0.9564    6.94      28.06
MADISON.............................................      12       7      19       7       1      30      63     132       8     241        240       1       5.00     0.1073    0.81       4.19
CHICAGO.............................................      13      13      26      12       1      43      97     238      21     412        400      12      11.00     0.3399    3.03       7.97
PHILADELPHIA........................................      14      12      26       8       1      39      71     250      15     384        400     -16       7.00     0.1529    1.70       5.30
ALBANY..............................................      12      11      23       4       1      16       5     196      12     234        250     -16       2.00     0.0383    0.38       1.62
BELTSVILLE..........................................      11       7      18  ......       1      41     198     166       9     415        432     -17      20.00     0.6036    4.17      15.83
RALEIGH.............................................      10       9      19  ......       1      63     400     228      12     704        670      34      52.00     1.4529   11.71      40.29
ATLANTA.............................................      14      14      28       3       1      67     390     300      16     777        765      12      33.00     0.7375    6.27      26.73
JACKSON.............................................      14      11      25       2       1      94     429     313      12     851        855      -4      80.00     2.4978   19.40      60.60
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL.........................................     222     155     377      98      15     748    3107    3376     182    7526       7565     -39     360.00     9.8349   77.95     282.05
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector


                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                    [As of February 2, 2008]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            NON-INPLANT                               INPLANT                           FISCAL             FISCAL             OPT USAGE
                                                     --------------------------------------------------------------------------------    YEAR            YEAR 2007 -----------------------------
                      DISTRICT                         DIST                                                                           ALLOCS 4/  DIFFER  ALLOCS 4/               YTD
                                                        OFC     FLS    TOTAL    EGG     VMS     VMO     FI      CSI    EIAO    TOTAL    11/07              11/07     PP USAGE   USAGE    AVAIL
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALAMEDA.............................................      13      13      26       7       1      35     144     222      10     419        427      -8       9.00     0.2198    2.11       6.89
DENVER..............................................      12      10      22       7       1      43     127     240      16     434        437      -3       6.00     0.2027    1.51       4.49
MINNEAPOLIS.........................................      13       6      19       9       1      42      95     149      10     306        326     -20       6.00     0.1040    1.89       4.11
DES MOINES..........................................      11      11      22      28       1      62     301     199      11     602        615     -13      18.00     0.2107    2.58      15.42
LAWRENCE............................................      11       8      19       5       1      52     256     203      10     527        520       7      16.00     0.4594    4.64      11.36
SPRINGDALE..........................................      11      10      21       2       1      69     358     260      10     700        713     -13      60.00     1.9725   17.89      42.11
DALLAS..............................................      12       9      21       2       1      56     256     193       9     517        515       2      35.00     0.9389    8.82      26.18
MADISON.............................................      12       7      19       7       1      31      66     128       8     241        240       1       5.00     0.0966    1.00       4.00
CHICAGO.............................................      13      13      26      12       1      41     107     227      21     409        400       9      11.00     0.2597    3.62       7.38
PHILADELPHIA........................................      13      12      25       8       1      39      82     241      15     386        400     -14       7.00     0.1291    2.01       4.99
ALBANY..............................................      11      11      22       4       1      16       6     193      10     230        250     -20       2.00     0.0383    0.46       1.54
BELTSVILLE..........................................      11       7      18  ......       1      41     205     154       9     410        432     -22      20.00     0.6251    5.45      14.55
RALEIGH.............................................      10       9      19  ......       1      61     400     228       9     699        670      29      52.00     1.4623   14.48      37.52
ATLANTA.............................................      12      14      26       3       1      67     405     236      15     777        765      12      32.00     0.7252    7.75      25.25
JACKSON.............................................      13       9      22       2       1      94     473     263      11     844        855     -11      80.00     2.9460   25.41      54.59
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL.........................................     178     149     327      96      15     749    3281    3186     174    7501       7565     -64     360.00    10.3903   99.63     260.37
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector


                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                      [As of March 1, 2008]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                             NON-INPLANT                                   INPLANT                                                                          OPT USAGE
                                          ----------------        --------------------------------------------------------           FISCAL             FISCAL  --------------------------------
                                                                                     Inplant Inspection                               YEAR            YEAR 2007
                 DISTRICT                   DIST            TOTAL --------------------------------------------------------  TOTAL  ALLOCS 4/  DIFFER  ALLOCS 4/
                                             OFC     FLS                                           CSI 8-                            11/07              11/07     PP USAGE  YTD USAGE    AVAIL
                                                                     VMO    FI-7    CSI-7    EGG     10      VMS    EIAO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALAMEDA..................................      13      11      24      35     128      19       7     221       1      10     421        427      -6       9.00     0.1674       2.45       6.55
DENVER...................................      12       9      21      44     127  ......       7     241       1      16     436        437      -1       6.00     0.2998       2.05       3.95
MINNEAPOLIS..............................      13       7      20      43      87      10       9     148       1       8     306        326     -20       6.00     0.1287       2.17       3.83
DES MOINES...............................      11      12      23      61     299  ......      30     198       1      11     600        615     -15      18.00     0.2955       3.10      14.90
LAWRENCE.................................      11       8      19      53     256  ......       5     206       1      10     531        520      11      16.00     0.5001       5.66      10.34
SPRINGDALE...............................      12      10      22      70     288      69       2     257       1       9     696        713     -17      60.00     2.0443      21.93      38.07
DALLAS...................................      12       9      21      54     249       3       2     194       1       9     512        515      -3      35.00     1.0341      10.92      24.08
MADISON..................................      12       8      20      32      59       9       7     130       1       7     245        240       5       5.00     0.0830       1.12       3.88
CHICAGO..................................      13      13      26      41      96      10      12     230       1      20     410        400      10      11.00     0.3867       4.39       6.61
PHILADELPHIA.............................      14      11      25      40      76       9       8     240       1      15     389        400     -11       7.00     0.1190       2.29       4.71
ALBANY...................................      11      11      22      15       4       2       4     194       1      10     230        250     -20       2.00     0.0517       0.58       1.42
BELTSVILLE...............................      10       7      17      40     196       7  ......     155       1       8     407        432     -25      20.00     0.7408       6.92      13.08
RALEIGH..................................      11      10      21      61     400       2  ......     228       1      12     704        670      34      52.00     1.7305      17.89      34.11
ATLANTA..................................      12      14      26      66     392      12       3     284       1      16     774        765       9      33.00     1.0065       9.66      23.34
JACKSON..................................      13       9      22      94     428      53       2     268       1      11     857        855       2      80.00     3.1773      31.76      48.24
                                          ------------------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL..............................     180  ......     329     749    3085     205      98    3194      15     172    7518       7565     -47     360.00    11.7654     122.88     237.12
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector


                                                                              DISTRICT PFT EMPLOYMENT AND OTP USAGE
                                                                                     [As of March 29, 2008]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                             NON-INPLANT                                   INPLANT                                                                          OPT USAGE
                                          ----------------        --------------------------------------------------------           FISCAL             FISCAL  --------------------------------
                                                                                     Inplant Inspection                               YEAR            YEAR 2007
                 DISTRICT                   DIST            TOTAL --------------------------------------------------------  TOTAL  ALLOCS 4/  DIFFER  ALLOCS 4/
                                             OFC     FLS                                           CSI 8-                            11/07              11/07     PP USAGE  YTD USAGE    AVAIL
                                                                     VMO    FI-7    CSI-7    EGG     10      VMS    EIAO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALAMEDA..................................      13      11      24      33     128      19       7     228       1      11     427        427  ......       9.00     0.1678       2.75       6.25
DENVER...................................      13       9      22      44     125  ......       7     241       1      15     433        437      -4       6.00     0.2657       2.58       3.42
MINNEAPOLIS..............................      13       7      20      42      85      10      10     150       1       8     306        326     -20       6.00     0.1821       2.48       3.52
DES MOINES...............................      12      12      24      60     304  ......      30     198       1      11     604        615     -11      18.00     0.4101       3.94      14.06
LAWRENCE.................................      11       8      19      52     251  ......       5     204       1      10     523        520       3      16.00     0.5708       6.70       9.30
SPRINGDALE...............................      12      10      22      71     288      70       2     257       1       9     698        713     -15      60.00     2.3359      26.20      33.80
DALLAS...................................      12       9      21      55     248       3       2     195       1       9     513        515      -2      35.00     1.1638      13.19      21.81
MADISON..................................      12       7      19      32      59      10       7     130       1       8     247        240       7       5.00     0.1060       1.31       3.69
CHICAGO..................................      13      12      25      41      90      16      12     228       1      20     408        400       8      11.00     0.3551       5.23       5.77
PHILADELPHIA.............................      14      12      26      42      73      10       8     243       1      14     391        400      -9       7.00     0.0584       2.51       4.50
ALBANY...................................      11      11      22      14       4       2       4     194       1      10     229        250     -21       2.00     0.0496       0.68       1.32
BELTSVILLE...............................      11       7      18      39     182      18  ......     157       1       8     405        432     -27      20.00     0.7300       8.32      11.68
RALEIGH..................................      10       9      19      61     384      13  ......     231       1      12     702        670      32      52.00     1.9361      21.49      30.51
ATLANTA..................................      12      14      26      66     388      12       3     287       1      16     773        765       8      33.00     0.9165      11.39      21.61
JACKSON..................................      13      11      24      93     427      52       2     267       1      12     854        855      -1      80.00     3.0898      37.90      42.10
                                          ------------------------------------------------------------------------------------------------------------------------------------------------------
      TOTAL..............................     182     149     331     745    3036     235      99    3210      15     173    7513       7565     -52     360.00     12.338     146.66     213.34
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KEY:
  FLS--Frontline Supervisor
  EGG--Egg Inspection
  VMS--Veterinary Medical Specialist (Humane Slaughter)
  VMO--Public Health Veterinary
  FI--Food Inspector
  EIAO--Enforcement Invest. & Analysis Officer
  CSI--Consumer Safety Inspector

                                 ______
                                 

            Questions Submitted by Senator Daniel K. Inouye

                        colony collapse disorder
    Question. How are Colony Collapse Disorder (CCD) and other pests 
and diseases such as Varroa mites affecting domestic honeybee 
beekeepers and the pollination capacity of U.S. agriculture?
    Answer. CCD is a syndrome of honey bees that strikes colonies in 
fall, winter and early spring, when they are weakest. Forager bees 
leave the hive and do not return. However, CCD is only one of many 
problems beekeepers face in maintaining healthy hives. Surveys of bee 
colony losses over the past 2 years estimated that beekeepers in the 
U.S. lost 31 percent and 37 percent of their colonies in 2006 and 2007, 
respectively. This rate of colony loss is not sustainable for 
beekeepers, and while we are not in a pollination crisis, our ability 
to meet increasing pollination needs in almonds and other crops is 
surely threatened.
    Question. If pollination capacity is seriously compromised, is our 
food security seriously threatened and would this constitute a 
national, if not global, crisis?
    Answer. Bees are responsible for $15 billion in added crop value 
and are as essential to plant reproduction and fruit production as soil 
and water are to plant growth. Due to invasive pests such as mites, 
honey bees were already under tremendous stress even before the 
appearance of CCD. The bee industry and growers cannot absorb yet 
another major cause of bee loss, particularly with demand for honey 
bees continuing to increase dramatically due to increased almond 
acreage, requiring half of the Nation's 2.4 million colonies. Colony 
rental costs have doubled for almond and blueberry producers. Other 
crops with heavy reliance on honey bees include alfalfa (for dairy and 
beef cattle), apples in the East and West, cranberries in the North, 
and citrus and vegetables throughout the South. If bee colony losses 
continue or increase, our ability to produce fruits, vegetables and 
nuts in the United States could indeed be threatened. Similar honey bee 
losses are occurring around the world and many of these losses are as 
yet unexplained.
    Question. As hives are depleted, what is the Department doing to 
assist bee keepers with hive restorations? More specifically, what is 
the Department doing to ensure a long-term supply of queen bees that 
are free of major pests and diseases such as Varroa mites?
    Answer. USDA's-Agricultural Research Service (ARS) is working on 
means to improve colony survival by testing means to recycle beekeeping 
equipment from dead hives including beeswax comb fumigation and 
irradiation to kill pathogens. To insure disease-free queens the 
Department is working with the queen breeding industry to find means of 
queen production that consistently produce quality queens that are long 
lived.
    Question. Are there sources of queen bees free of Varroa mites that 
will play pivotal roles in the restoration of hives and ultimately 
pollination capacity in the United States? What steps need to be taken 
to assure preservation of these supplies of queen bees.
    Answer. The Hawaiian Islands, particularly Kona on the Big Island 
(Hawaii), have represented one of only two locations in the world where 
queens could be produced without the impacts of parasitic varroa and 
tracheal mites, the other being Australia. Thus, the unique pest-free 
nature of the Big Island represents a valuable source of quality 
queens. This is now threatened by the arrival of the varroa mite on 
Oahu. APHIS is working with the Hawaiian Department of Agriculture to 
determine what eradication or management options are feasible for 
limiting the spread of varroa between these islands.
                                 ______
                                 

             Question Submitted by Senator Dianne Feinstein

                            humane slaughter
    Question. Secretary Schafer, over the last 4 months, I have written 
you three letters expressing my concerns about food safety related to 
the incidents exposed at the Hallmark/Westland slaughter facility in 
Chino, California and I also submitted questions for the February 28 
subcommittee hearing. I have not received any satisfactory answers to 
my inquiries.
    As you know, I have introduced bipartisan legislation that will 
establish penalties for those who slaughter or attempt to slaughter 
nonambulatory animals and will require the release of the names of 
establishments where recalled meats are sold or served.
    Mr. Secretary, could you tell me why you have not used the 
authorities Congress gave you in the Farm Security and Rural Investment 
Act Sections 10414 and 10815 to punish violators who treat animals 
inhumanely and process nonambulatory animals outside of regulation for 
human consumption?
    Answer. USDA has used its existing authority, when appropriate, to 
ensure animals are treated humanely. Since January 2004, non-ambulatory 
disabled cattle have been prohibited from the food supply. In July 
2007, FSIS issued a final rule, ``Prohibition of the Use of Specified 
Risk Materials for Human Food and Requirements for the Disposition of 
Non-Ambulatory Disabled Cattle,'' which confirmed this policy and 
stated that such cattle would not pass ante-mortem inspection. However, 
under this rule, if an animal passes ante-mortem inspection and 
subsequently becomes non-ambulatory before slaughter, the FSIS Public 
Health Veterinarian must immediately be notified and will determine, on 
a case-by-case basis, whether the animal was unable to walk due to an 
acute injury, such as a broken leg. In that case, the animal would be 
eligible to move on to slaughter operations as a ``U.S. Suspect.'' Such 
animals are slaughtered separately and receive careful examination and 
inspection by the FSIS Public Health Veterinarian after slaughter. The 
Agricultural Marketing Service has longstanding specification 
requirements for foods purchased for Federal nutrition programs that 
preclude the use of meat and meat products derived from non-ambulatory 
disabled livestock.
            penalties for slaughter of nonambulatory animals
    Question. Could you tell me why you have not finalized regulations 
that require the release of the names of establishments where recalled 
meats are sold or served?
    Answer. The Department is in the process of finalizing the rule.
                        commodity crop payments
    Question. I agree with the position of the United States Department 
of Agriculture that the Federal Government should not give commodity 
crop payments to America's wealthiest people. In recent years, the 
largest recipient of Farm Bill Commodity Payments in California lived 
in San Francisco, demonstrating that the program does not currently 
help the small family farmer it was designed to assist. For this 
reason, I supported reform efforts during consideration of the Farm 
Bill that would have limited payments to individuals with high incomes.
    Efforts to impose an income cap failed because members of the 
Senate believed that reform provisions included in the committee-passed 
bill would address this problem, but I am concerned that America's 
wealthiest people may still receive payments after these reforms are 
adopted.
    Please provide the USDA's best estimate of how many individuals 
with adjusted gross incomes above $250,000 per year will qualify for 
commodity payments under your farm bill proposal.
    Answer. A September 2007 USDA study found that 25,191 farm 
operators and 12,906 share landlords had an adjusted gross income (AGI) 
greater than $200,000 in 2004. In this analysis, no exemption was 
allowed for those with farm related income making up 75 percent or more 
of AGI as is done under current legislation. We have no analysis on a 
cutoff of $250,000 but the USDA study results for $200,000 should be 
quite similar.
    Question. Please compare this to the number of individuals that 
would qualify under an extension of the current Farm Bill.
    Answer. The current AGI cutoff, $2.5 million with an exemption for 
those with 75 percent or more of their AGI stemming from farm-related 
income, likely only affects a few hundred producers each year.
    Question. Please estimate how much money is saved by adopting the 
reform proposals in the Senate and House bills, respectively, as it 
pertains to the adjusted gross income thresholds.
    Answer. USDA has no specific analysis of various AGI cutoffs 
proposed by the House and Senate. The September 2007 USDA study found 
that, in 2004, farmers and share landlords with an AGI of greater than 
$200,000 earned close to $400 million in farm payments. Not all of that 
$400 million should be counted as potential savings as a portion of it 
was conservation payments which likely will not be subject to a 
tightened AGI limit.
    Question. Please estimate how much money would be saved by reducing 
the adjusted gross income limits to $500,000; $400,000; $300,000; and 
$200,000 for farmers regardless of income source.
    Answer. The USDA analysis did not include projected savings for 
limits other than $200,000. Of course, as the limit is raised, fewer 
farmers would be affected. As only a small percentage of farmers are 
affected by the $200,000 limit, the higher limits would be expected to 
have small impacts.
    Question. Please also estimate how much money would be saved if 
Congress exempted farmers from these caps if a certain percentage of 
income is derived from on-farm income.
    Answer. The USDA study found that exempting farmers with 75 percent 
or more of total income from farming and ranching would reduce savings 
from the AGI criteria by about 40 percent.
    Question. As Secretary of Agriculture, can you think of any reason 
why government revenues--collected from the incomes of every American--
should be spent on commodity payments to Americans whose incomes are in 
the top 1 percent of all Americans?
    Answer. Current commodity program legislation does not contain 
income targeting other than the $2.5 million AGI cutoff. USDA data 
indicate that most payments go to farm households that have large 
incomes compared with other farms and compared with the U.S. average 
household. Payment eligibility limits based on lower AGI levels would 
better help ensure equity among farmers.
    Question. What percentage of America's farmers have an adjusted 
gross income exceeding $200,000? Last year, what percent of total Farm 
Bill spending went to individuals with incomes exceeding $200,000?
    Answer. The USDA study found that 1.2 percent of sole proprietors 
and 2.0 percent of share landlords had AGIs greater than $200,000 in 
2004. Together, they earned about 5 percent of payments. That 5 percent 
includes conservation payments, which likely will not be subject to the 
AGI limit.
    Question. Finally, do Americans in the top income bracket who 
receive commodity payments pay income taxes on their payments?
    Answer. Commodity program payments are taxable income.
                       conservation funding cuts
    Question. California relies on USDA's conservation programs to help 
farmers meet clean air and clean water regulations while still 
producing some of the crops including fresh fruits and vegetables that 
are not produced anywhere else in the United States. The President's 
2009 budget proposes to cut discretionary funding for conservation; 
funding that will provide the needed technical resources for our 
farmers and ranchers to install conservation practices.
    Do you believe funding cuts for Farm Bill programs should come from 
conservation? To preserve conservation funding, where do you think 
funding cuts should come from?
    Answer. Increasing our commitment to conservation programs is 
important to the Department and the Farm Bill is a major vehicle for 
addressing the Nation's conservation needs. The President's budget 
request must be viewed in concert with the Administration's Farm Bill 
proposal which makes a significant investment in conservation. The 
proposal would add $775 million to Farm Bill conservation programs in 
fiscal year 2009 and provides $7.8 billion in new spending over 10 
years in the conservation title.
    In order to provide this level of investment in conservation, the 
administration will continue its efforts to reduce or eliminate 
redundant or lower priority programs and to eliminate Congressional 
earmarks. In addition, wherever possible, the administration's budget 
proposal combines and streamlines program design to improve the 
effectiveness and efficiency of program delivery making even more 
funding available for important conservation efforts.
                  commodity supplemental food program
    Question. More than 530,000 California seniors, over the age of 65, 
receive Supplemental Security Income, making them ineligible for Food 
Stamps. The maximum Supplemental Security Income benefit is $870 per 
month making it extremely difficult for these seniors to afford food. 
There is a significant need to expand the Commodity Supplemental Food 
Program to help more low-income seniors.
    Why did the President's budget deem the Commodity Supplemental Food 
Program as a redundant program and eliminate it in the fiscal year 2009 
proposal?
    Answer. There is significant overlap between CSFP eligible 
populations and areas of operation and those of both the WIC Program 
and the Food Stamp Program. Unlike CSFP, both of these programs are 
available in communities throughout the United States.
    In the administration's view, ensuring adequate funding for 
programs that have the scope and reach necessary to provide access to 
eligible people wherever they may reside is a better and more equitable 
use of scarce resources than to allocate them to programs that cannot 
provide access to many areas of the country. For this reason, the 
administration has placed a priority on funding food stamps, WIC, and 
other nationally-available programs, such as the administration on 
Aging programs for seniors and TEFAP, which provide benefits to 
eligible people wherever they may live, including communities currently 
served by CSFP. All seniors over age 60 are eligible for both 
congregate and home-delivered nutrition assistance provided by one of 
655 Area Agencies on Aging, which are funded through the Administration 
Aging in the Department of Health and Human Services. In addition to 
the Administration on Aging programs for seniors, low-income 
individuals of any age would have access to TEFAP.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

          resource conservation and development program (rc&d)
    Question. The RC&D program returns $7.50 to local communities for 
every dollar the Federal Government invests. At a time when we are 
looking at ways to stimulate the economy, why did you cut this program?
    Answer. The proposal eliminates Federal technical assistance to the 
375 RC&D councils. The majority of RC&D Areas have received Federal 
support for at least 10 years. As nonprofit organizations, RC&D 
councils will still exist and most of these should have the capacity to 
identify, plan, and address their identified priorities. In addition, 
the Program Assessment Rating Tool (PART) analysis found the program to 
be duplicative of other similar resource conservation planning, rural 
economic development, community programs provided by other USDA 
agencies (such as the Forest Service and Rural Development), and other 
Federal departments (such as the Department of Commerce's Economic 
Development Administration).
    Question. NRCS has established performance goals for RC&D in jobs 
and businesses created and retained. Has RC&D met those goals? Why cut 
funds for a program that helps create businesses in a time of economic 
downturn?
    Answer. RC&D has met and exceeded the established performance goals 
for jobs and businesses created and retained each year. The proposal 
eliminates Federal technical assistance to the 375 RC&D councils. RC&D 
councils will still exist as nonprofit organizations. The majority of 
RC&D areas have received Federal technical assistance support for at 
least 10 years while obtaining financial support for projects from 
other sources. They can continue to obtain support from other sources 
to provide assistance to their communities.
    Question. It is my understanding the NRCS contracted out for a 
survey to determine customer satisfaction with their programs and that 
RC&D received one of the highest scores. Why did you cut a program that 
the general public is satisfied with and delivered results? Please 
provide for the record the full results of the American Customer 
Satisfaction Index Survey and indicate the rank of RC&D compared to 
other NRCS programs.
    Answer. The American Customer Satisfaction Index (ACSI) is the 
national indicator of customer evaluations of the quality of goods and 
services available to U.S. residents. It is the only uniform, cross-
industry/government measure of Customer Satisfaction. The RC&D program 
received an ACSI score of 81 compared to the overall Federal Government 
score of 67.8 and the national sector score of 75.2. Although the 
program scored highly, the latest program performance review using the 
Program Assessment Rating Tool (PART) analysis found the program to be 
duplicative of other similar resource conservation planning, rural 
economic development, and community programs provided by other USDA 
agencies (such as the Forest Service and Rural Development) and other 
Federal departments (such as the Department of Commerce's Economic 
Development Administration). It is for this reason that elimination of 
funding has been proposed. The full results of the American customer 
Satisfaction Index Survey for NRCS programs are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                      Federal
                     Program                      Year Conducted       Score        Government       National
                                                                                       ACSI         Sector ACSI
----------------------------------------------------------------------------------------------------------------
Conservation Technical Assistance (CTA).........            2001              81            71.3            72.0
Environmental Quality Incentive Program (EQIP)..            2004              75            72.1            74.3
Wildlife Habitat Incentive Program (WHIP).......            2004              77            72.1            74.3
Conservation Security Program (CSP).............            2005              76            71.3            73.2
Snow Survey and Water Supply Forecasting........            2005              77            71.3            73.2
Conservation Technical Assistance (CTA).........            2007              79            67.8            75.2
National Resources Inventory (NRI)..............            2007              57            67.8            75.2
Plant Materials Center (PMC)....................            2007              83            67.8            75.2
Resource Conservation & Development (RC&D)......            2007              81            67.8            75.2
Soil Survey Program.............................            2007              79            67.8            75.2
Technical Service Providers (TSP)...............            2007              78            67.8            75.2
Wetlands Reserve Program (WRP)..................            2007              69            67.8            75.2
----------------------------------------------------------------------------------------------------------------

    Question. An earmark in the fiscal year 2008 Senate Committee 
Report for a project in Hawaii was moved by NRCS from the conservation 
operations budget to the RC&D program. The Senate committee has 
included this earmark for the project in Hawaii in the conservation 
operations budget for over 5 years. Why did you move this earmark? The 
net result is that each council nationally lost $1,800 in funding. Did 
you seek permission from the committee to move this earmark?
    Answer. The earmark for Hawaii was funded from the RC&D budget 
rather than the Conservation Operations (CO) Program in 2008 because 
the project scope and intent was more properly aligned with RC&D 
program objectives and authorities than it was with those of the CO 
Program. Conservation operations policy was revised recently to state 
that if an earmark can be appropriately funded through a program other 
than Conservation Technical Assistance (CTA), then funding from that 
program source should be used. With this shift in funds, the essence of 
the earmark (purpose, intent, objectives) did not change.
    Question. RC&D Councils are made of volunteers and the program was 
not designed to move councils to self sufficiency. RC&D Councils are 
dedicated to putting resources on the ground in communities to address 
unmet needs. Councils have prided themselves on using grants to serve 
communities--not for their own administrative costs. What sources of 
funding do you see for Councils to become self-sufficient?
    Answer. Funding needed for RC&D Councils to become self-sufficient 
would need to come from sources such as State and local governments, 
private foundations, and other Federal agencies. Councils can request 
assistance from State governments for funds that are not tied 
specifically to a project, but are used to assist the Council in 
covering other costs. A number of States have provided assistance to 
Councils in the past, such as Alabama, Arkansas, and Georgia.
    Question. The fiscal year 2008 appropriation includes a cap on 
headquarters funding. Are greenbook charges included in the 
headquarters cap? Please provide an allocation chart that includes all 
costs--headquarters, State by State, and any other costs assessed to 
the RC&D program. Please include fiscal year 2007 allocations in the 
chart for comparison purposes.
    Answer. Yes, the agency greenbook charges are included in the 
amount applied to the headquarters funding cap. In the table below, the 
greenbook allocations are considered in addition to the National 
Headquarters allocations and include agency-wide assessments 
(assessments applied at the headquarters level) and state specific 
assessment charges. The fiscal year 2007 and 2008 allocations include 
carryover funds which are considered to be outside of the cap.
    The information is provided for the record.

------------------------------------------------------------------------
                                            2007 Final     2008 Initial
                  State                     Allocations     Allocations
------------------------------------------------------------------------
Alabama.................................      $1,112,363      $1,070,781
Alaska..................................         940,158         962,592
Arizona.................................         781,445         783,509
Arkansas................................         901,283         902,792
California..............................       1,476,699       1,432,353
Colorado................................         942,084         951,806
Connecticut.............................         291,801         296,117
Delaware................................         143,105         145,222
Florida.................................       1,018,812         990,310
Georgia.................................       1,307,235       1,313,377
Hawaii..................................         595,518       1,259,387
Idaho...................................       1,064,020       1,051,130
Illinois................................       1,182,516       1,194,401
Indiana.................................       1,039,433       1,070,782
Iowa....................................       1,875,868       1,903,612
Kansas..................................       1,056,396       1,072,020
Kentucky................................       1,656,085       1,665,661
Louisiana...............................       1,021,730         919,739
Maine...................................         649,112         656,956
Maryland................................         425,494         435,666
Massachusetts...........................         422,574         435,666
Michigan................................         903,077         919,739
Minnesota...............................       1,042,830       1,051,130
Mississippi.............................       1,000,977         997,706
Montana.................................         972,773         987,160
Missouri................................       1,035,580       1,051,130
Nebraska................................       1,406,903       1,427,709
Nevada..................................         426,099         435,666
New Hampshire...........................         306,050         290,444
New Jersey..............................         286,211         290,444
New Mexico..............................         960,090         957,413
New York................................         997,135       1,000,681
North Carolina..........................       1,107,877       1,189,758
North Dakota............................         962,746         976,343
Ohio....................................       1,085,578       1,070,782
Oklahoma................................       1,098,987       1,085,964
Oregon..................................         715,527         726,110
Pennsylvania............................       1,184,056       1,070,782
Rhode Island............................         148,005         145,222
South Carolina..........................         918,864         919,739
South Dakota............................         906,334         919,739
Tennessee...............................       1,172,418       1,189,758
Texas...................................       2,608,788       2,617,467
Utah....................................       1,003,322         944,456
Vermont.................................         285,772         290,444
Virginia................................         902,960         919,739
Washington..............................         959,292       1,016,554
West Virginia...........................         718,607         729,235
Wisconsin...............................         906,334         919,739
Wyoming.................................         717,668         726,110
Pacific Basin...........................         237,569         303,582
Caribbean Basin.........................         429,316         435,666
National Headquarters...................       2,910,065       2,572,253
Centers.................................         615,516         479,402
Greenbook...............................       2,047,191         813,932
Undistributed...........................  ..............         280,621
                                         -------------------------------
      Total.............................      52,884,248      52,266,498
------------------------------------------------------------------------

    Question. Please provide for the record the number of new RC&D 
coordinators who have been hired in the last 2 years. Please provide 
for the record the number of training sessions held for new RC&D 
coordinators (RC&D concepts course and area planning course) and the 
number of new coordinators trained in the last fiscal year and 
scheduled for fiscal year 2008.
    Answer. Forty-nine new RC&D coordinators have been hired in the 
last 2 years. One RC&D concepts course and one area planning course was 
held by the NRCS National Educational Development Center (NEDC) in 
fiscal year 2006. In fiscal year 2007, training was provided by the 
national NRCS office through internet ``net meetings.'' Three internet-
based area planning courses and three internet-based concept courses 
were held. In fiscal year 2008 the NEDC plans to hold one concepts 
course and one area planning course. Twenty-seven of the 49 new 
coordinators have taken the concepts course, with 23 trained in fiscal 
year 2007 through the net meetings. Twenty-one of the 49 new 
coordinators have taken the area planning course with 19 trained in 
fiscal year 2007 through the net meetings. We do not have information 
regarding training requests for fiscal year 2008 broken down by 
position.
    Question. How many RC&D coordinators are eligible to retire in 
fiscal year 2008 and fiscal year 2009? How much does it cost to fill a 
coordinator vacancy on average?
    Answer. Sixty-eight RC&D coordinators are eligible to retire in 
fiscal year 2008 and an additional 23 will be eligible to retire in 
fiscal year 2009. On average, it costs approximately $80,000 in 
relocation costs to fill a coordinator position. This does not include 
the cost of salary, benefits, vehicle, etc.
    Question. What is the average cost to provide a full time 
coordinator to an RC&D area? What is the current level of funding 
provided to an average RC&D area in fiscal year 2008?
    Answer. The average cost to provide a full time coordinator is 
approximately $124,500 and this is the average level of funding 
provided.
    Question. Coordinators no longer serve a council full-time. On 
average how much of a coordinators time is spent on RC&D? What other 
programs are coordinators working on?
    Answer. Although we do not have a national figure for the amount of 
time a coordinator spends on RC&D Program activities at this time, we 
are in the process of obtaining the information for the record. 
Qualitative information from discussions with our State offices shows 
that most Coordinators spend the vast majority of their time on RC&D 
activities. Time spent implementing Farm Bill programs is charged as 
Technical Assistance (TA) to the appropriate Farm Bill program. Program 
and fund integrity is maintained by the agency for the RC&D program and 
all other programs. The other programs coordinators are working on 
include Conservation Technical Assistance, Watersheds and Flood 
Prevention Operations, Watershed Surveys and Planning, and other Farm 
Bill programs such as the Environmental Quality Incentives Program and 
the Conservation Security Program.
    Question. Please provide for the record the program improvements 
that have been made to address the OMB PART score concerns.
    Answer. Since 2004, significant improvements have been made and in 
2006 the program received an increased score performing at an 
``Adequate'' level. Program improvements include: developed and 
implemented annual, long-term, and efficiency measures; developed and 
implemented a more targeted allocation methodology designed to address 
priority program needs; revised the RC&D policy manual to reflect 
increased emphasis on program performance and linkages to national 
performance goals; and developed and implemented a new reporting system 
to track program performance.
    In addition, the Agency is taking the following actions to improve 
the performance of the program: developing and implementing a 5-year 
comprehensive budget and performance management strategy aligned with 
NRCS's strategic plan; continuing to streamline the program by updating 
the allocation methodology, identifying ways to increase local 
leadership capabilities, and eliminating costs such as those for 
clerical and office support that can be incurred by councils.
    Question. The budget indicates that RC&D duplicates other Federal 
programs but through its area planning it reviews resources in a 
community and assesses and addresses unmet needs. In the most rural 
areas of this country there are often no organizations to act as a 
fiscal agent and deliver Federal programs without the assistance of an 
RC&D council. How do you propose to assist these communities in the 
absence of RC&D?
    Answer. RC&D councils are established nonprofit organizations and 
will continue to play a role in assisting their communities. These 
councils have developed strategic area plans that identify, plan, and 
address their agreed priorities. They have experience in obtaining 
financial support for projects and acting as fiscal agents in their 
communities. Although the technical assistance provided by NRCS will be 
eliminated, the councils can continue to act as a fiscal agent in their 
communities.
    Question. The House report included report language that the 
Committee requests that NRCS work with the Councils to develop 
appropriate measures of effectiveness for both conservation and 
economic development. Can you give us an update on how you worked with 
councils to achieve this? We continue to hear that conservation is the 
priority--what have you done to be sure that economic development 
activities can also be provided?
    Answer. The RC&D Program's short and long-term program performance 
and efficiency measures reflect both conservation and community 
development aspects of the program. These measures were developed in 
conjunction with the National Association of Resource Conservation and 
Development Councils (NARC&DC), representing the 375 councils 
nationwide, to incorporate local council concerns identified through 
the Area Planning process.
    Conservation is a priority for NRCS, but does not exclude Councils' 
ability to continue to work on community and economic development 
projects. We have annual and long-term performance measures to capture 
the community development activities of councils. The annual 
performance measure is: local businesses created or retained in rural 
communities. A number of businesses within the agricultural and non-
agricultural sectors are eligible. Example businesses include, but are 
not limited to, manufacturing, service, value-added agriculture, 
tourism, home-based, and energy related industries. Performance is 
reported in numbers. This measure is calculated as the sum of new 
businesses created or businesses retained in the current fiscal year. 
The long-term performance measure is: Natural resource-based 
enterprises created or retained that increase employment opportunities, 
the cumulative number of jobs created and/or retained with RC&D 
assistance in natural resource-based industries for fiscal year 2005-
2010.
    NRCS works closely with local RC&D councils to help them develop 
and implement projects that support their Area and Annual plans with 
programs and services from NRCS, other USDA agencies and other private 
and public entities. By partnering with other entities, NRCS was able 
to help RC&D councils create or retain 10,723 jobs and 3,185 businesses 
in 2007.
                       country of origin labeling
    Question. With respect to Country of Origin Labeling (COOL), the 
President addressed COOL as follows in his proposed fiscal year 2009 
budget:
    Country of Origin Labeling (COOL) becomes mandatory for all covered 
commodities on September 30, 2008. Currently, AMS operates a small COOL 
enforcement program for fish and shellfish compliance (the only 
commodities for which labeling is now required). As part of the 2009 
budget, the agency will propose to charge a mandatory fee for the full 
implementation of a complete COOL enforcement program for the following 
commodities, in addition to the current fish and shellfish items: 
muscle cuts of beef (including veal), lamb, and pork; ground beef, 
ground lamb and ground pork; perishable agricultural commodities; 
peanuts and the current fish and shellfish items. Additional 
commodities may also be considered. The additional funds will be 
deposited into the agency's existing Trust account.
    If the USDA has not yet charged a user fee for the implementation 
of COOL for fish and shellfish, why is the administration now proposing 
to charge a blanket user fee for all commodities for this program?
    Answer. The expansion of mandatory labeling requirements to all 
covered commodities will greatly increase the cost of operating the 
program. USDA believes it appropriate for the regulated entities to pay 
the cost for enforcement-related activities to ensure that covered 
commodities are labeled in conformity with regulations. Approximately 
37,000 retailer locations would be assessed a fee of about $260 
annually per location to finance COOL enforcement costs of $9.6 
million. The proposed fees would be used to: finance surveillance 
reviews on all covered commodities at retail establishments on a random 
basis approximately every 7 years, plus a limited number of supplier 
trace-back audits; provide training for Federal and State employees on 
enforcement responsibilities; and develop and maintain an automated 
web-based data entry and tracking system for records management and 
violation follow-up. Appropriated funding at the current level would be 
used for regulatory and oversight activities including rulemaking, 
outreach and education for suppliers, retailers, and consumers.
    Question. What is USDA's most recent estimate for mandatory COOL's 
implementation cost, for each commodity and for the enforcement of all 
commodities, on a fiscal year basis, and what factors and expenses did 
you take into account to arrive at this conclusion?
    Answer. USDA's fiscal year 2009 budget request identifies ongoing 
appropriated funding at $1.1 million and a legislative proposal for new 
user fee funding at $9.6 million annually for a total of $10.7 million 
to implement and enforce mandatory COOL for all covered commodities. 
The user fee cost estimate was based on an expansion of current 
retailer review activities to incorporate all covered commodities at 
5,000 retailers each year at a cost of $900 per location, performed 
primarily by cooperating State agencies. It also includes more detailed 
supplier trace-back audits of 300 items each year at 100 locations that 
require 40 hours per location, at a cost of $1.3 million; Federal 
personnel to administer these enforcement activities whose salary and 
support costs total $2 million; and a tracking system with an annual 
cost of $1.8 million to handle compliance documentation on the 
approximately 37,000 retail locations.
    Question. How much money has USDA spent on implementing the 
mandatory COOL program for fish and shellfish to date, for each fiscal 
year since the program was enacted?
    Answer. Mandatory country of origin labeling for fish and shellfish 
became effective in fiscal year 2005. The COOL program was first funded 
in fiscal year 2006 at $1.05 million, funding continued at $1.05 
million in fiscal year 2007, and $1.07 million in fiscal year 2008.
    Question. Has USDA requested any money from Congress for COOL 
program implementation in fiscal year 2009, as it has in the past?
    Answer. Congress appropriated $1.05 million for COOL program 
implementation in fiscal year 2006 and delayed expansion of mandatory 
COOL requirements until September 30, 2008. Since fiscal year 2006, the 
funding for COOL program activities has stayed substantially the same. 
The fiscal year 2009 budget includes $1.1 million in appropriated 
funding.
    For fiscal year 2009, the Budget proposes that the appropriated 
funding be used to conduct non-enforcement related COOL activities for 
all covered commodities. The budget proposal also identifies an 
additional $9.6 million needed on an annual basis for enforcement-
related activities on all covered commodities. This amount is to be 
provided through the proposed user fee.
                  commodity supplemental food program
    Question. CSFP eligibility is based only on income, while the food 
stamp program applies resource tests for household eligibility. These 
eligibility differences will likely prevent many CSFP recipients from 
participating in the food stamp program. What is your plan for 
participants who will no longer be eligible for benefits under food 
stamp guidelines?
    Answer. Elderly participants who are leaving the CSFP upon the 
termination of its funding and who are not already receiving food stamp 
benefits will be eligible to receive a transitional benefit worth $20 
per month ending in the first month following enrollment in the Food 
Stamp Program under normal program rules, or 6 months, whichever occurs 
first. The Department believes the number of CSFP participants who are 
ineligible for food stamps is relatively small. These individuals will 
be treated no differently than anyone else living in similar 
circumstances, who are currently unable to participate in the CSFP due 
to its limited availability.
    Former CSFP participants will have access to TEFAP and other 
government and private non-profit programs that offer community-based 
food assistance opportunities. Eligible women, infants, and children 
will be referred to the WIC Program. Finally, all seniors over age 60 
are eligible for both congregate and home-delivered nutrition 
assistance provided by one of 655 Area Agencies on Aging, which are 
funded through the Administration on Aging in the U.S. Department of 
Health and Human Services.
    Question. Isn't it true that the food stamp program and CSFP are 
supplemental programs that are meant to work with each other to ease 
the burden upon our low income seniors?
    Answer. The Food Stamp Program is the cornerstone of the national 
nutrition safety net, and is the largest nutrition assistance program 
serving the elderly. The Food Stamp Program serves nearly 2 million 
seniors in an average month. Because CSFP operates in limited areas, 
some low-income seniors have access to nutrition assistance through 
commodities as well as food stamps, while almost all other low-income 
seniors throughout the Nation must rely exclusively on food stamps for 
such help.
    In the administration's view, ensuring adequate funding for 
programs that have the scope and reach necessary to provide access to 
eligible people wherever they may reside is a better and more equitable 
use of scarce resources than to allocate them to programs that cannot 
provide access to many areas of the country. For this reason, the 
administration has placed a priority on funding food stamps, WIC, and 
other nationally-available programs that provide benefits to eligible 
people wherever they may live, including communities currently served 
by CSFP. Many elderly CSFP participants are expected to be eligible 
for, and to make use of the Food Stamp Program, from which they may 
receive benefits that can be more flexibly used to avoid conflicts with 
their individual medical issues and other needs.
    Question. What will you do for the 25 percent of the CSFP 
participants who are already enrolled in the food stamp program and 
would be losing a critical benefit?
    Answer. CSFP recipients who are already enrolled in the FSP will 
continue to receive monthly food assistance benefits and have access to 
nutrition education services. They will also have access to The 
Emergency Food Assistance Program and other government and private non-
profit programs that offer community-based food assistance 
opportunities, including congregate and home-delivered nutrition 
assistance provided by Area Agencies on Aging, which are funded through 
the Administration on Aging in the U.S. Department of Health and Human 
Services.
    The decision to eliminate CSFP reflects the administration's choice 
to make the best use of the resources available to serve all eligible 
people in need of nutrition assistance nationwide, wherever they live. 
Ensuring adequate funding for programs that have the scope and reach 
necessary to provide access to eligible people wherever they may reside 
is a better and more equitable use of these resources than to allocate 
them to programs that cannot provide access in many areas of the 
country. For this reason, the administration has placed a priority on 
funding food stamps, WIC, and other nationally-available programs.
    Question. In years past, CSFP has received bartered commodities 
from USDA. During the second round of bartered commodity purchases, 
none of the bonus commodities are being directed to CSFP. The National 
CSFP Association has asked you why this has occurred and it received 
the response that CSFP will not receive bartered commodities because 
the administration has proposed elimination of the program. However, in 
the first round of bartered commodity purchases, $10 million worth of 
bonus commodities were provided to CSFP and it had been eliminated in 
the administration's fiscal year 2008 budget then, too. Why is there a 
discrepancy between this round of bartered commodity purchases and the 
last round given that the administration's intention to eliminate the 
program has not changed?
    Answer. Under the first round of bartered commodity purchases, the 
Department provided modest amounts of bartered foods to CSFP, a program 
available in only limited areas. This modest support helped maintain 
program participation that was at risk due to funding difficulties. Our 
intention remains to distribute the majority of bartered commodities to 
TEFAP, a program which is available nationally.
                                 ______
                                 

            Questions Submitted by Senator Robert F. Bennett

                          rice stock reporting
    Question. It is my understanding that the National Agricultural 
Statistics Service has been asked by the rice industry to require 
additional rice stock reporting dates on June 1 and September 1. 
Further, I understand that NASS has agreed to implement the June date 
for 2008.
    Will the implementation of these dates require additional staff?
    Answer. No. The implementation of each additional quarterly Rice 
Stocks report requires a total of 0.20 FTE positions. This includes 
preparation activities, editing, analysis, estimation, and publication. 
These 0.20 FTEs are current NASS employees and are spread across 
various Federal staff in the rice estimating States and headquarters.
    Question. If not, what are the marginal costs associated with 
adding one or more date? Please provide a detailed breakdown.
    Answer. The marginal out-of-pocket costs associated with 
implementing each date are estimated at $26,000 in data collection 
costs; and $4,000 in miscellaneous costs such as postage and supplies. 
The cost of the 0.20 FTE positions, already in place, is estimated at 
$20,000 for Federal salaries and benefits.
             public law 480 title ii supplemental requests
    Question. Secretary Schafer, the pending supplemental request from 
the President contains a request for $350 million in additional funding 
for Public Law 480 Title II grants. This marks the third consecutive 
fiscal year the administration has requested exactly $350 million for 
``emergency'' need in this critical international food aid program. 
Since this is part of an emergency supplemental request, I would assume 
it is based on unanticipated emergency needs in the program. Yet I find 
the consistency in this amount over the past several years somewhat 
interesting.
    Is this request in fact based on unanticipated needs? Is it just 
coincidence that this amount has not changed?
    Answer. Although the supplemental request has remained at the same 
level, the location and nature of the needs have varied by year. The 
relative areas of focus, for example, have shifted among Darfur, 
Southern Africa, the Horn of Africa, and Afghanistan. We anticipate 
changing needs in fiscal year 2009 as well. The President is expected 
to submit a budget amendment to Congress requesting an additional $395 
million for Public Law 480 Title II to provide additional emergency 
food aid to Africa and other regions as well as to address higher 
projected commodity and transportation costs.
    Question. If not, why is this amount not included in the annual 
budget submission?
    Answer. It is extremely difficult to predict the extent of 
emergency needs in advance, particularly when development of the annual 
budget submissions begins over a year before the start of the fiscal 
year. The supplemental requests have been based on emergency needs that 
were previously unanticipated and are formulated once post-harvest 
assessments are complete.
                            commodity prices
    Question. Soaring commodity prices and increased volatility in both 
the cash and futures markets have had drastic ripple effects across all 
areas of agriculture. One glaring instance of these changes is the 
havoc that has been wreaked on the Department's feeding programs, both 
domestic and international. It would seem that the rising prices have 
not only the effect of making it more expensive to feed a person, but 
also drive the participation rates up by adding people who are no 
longer capable of self-sufficiency due to higher food costs.
    How is the Department dealing with the unpredictability of the 
costs and subsequent unpredictability of participation rates in these 
programs?
    Answer. The Department has tools and policies in place to respond 
to changes in projected demand and costs in both the domestic and 
international food assistance programs. The major domestic programs are 
designed to respond automatically to annual increases in participation 
when economic or other circumstances change. The programs' structure 
helps to ensure that benefits automatically flow into communities, 
States, or regions of the country in which increased numbers of 
eligible people apply for benefits.
    In the case of the international programs, we have the Bill Emerson 
Humanitarian Trust (BEHT) which allows the United States to respond to 
unanticipated emergency food aid needs overseas. The administration 
recently announced two releases from the BEHT. Last October, the 
President also requested supplemental appropriations of $350 million 
for the Public Law 480 Title II program for 2008.
    Finally, it is important to note that the Stocks-for-Food 
initiative that was announced in July 2007 is helping to provide 
additional commodities for programming under both the domestic and 
international food aid programs.
    Question. Dr. Glauber, what do you see as the main influencing 
factors in what we are seeing in these markets?
    Answer. Many factors are contributing to increased commodity 
prices. Global economic growth is boosting global demand for food. Real 
foreign economic growth in 2007 was a strong 4.0 percent and is 
expected to decline slightly to 3.9 percent in 2008 but remain well 
above trend, as has been the case beginning in 2004. Asia, excluding 
Japan, will likely grow at over 7 percent in 2008, above trend for the 
fifth consecutive year. Higher incomes are increasing the demand for 
processed foods and meat in rapidly growing developing countries, such 
as India and China. These shifts in diets are leading to major shifts 
in international trade.
    Crop and livestock production depend on the weather. The multi-year 
drought in Australia reduced wheat and milk production and that 
country's exportable supplies of those commodities. Drought and dry 
weather have also adversely affected grain production in Canada, 
Ukraine, the European Union, and the United States.
    Many exporting countries have put in place export restrictions in 
an effort to reduce domestic food price inflation. Exporting countries 
as diverse as Argentina, China, India, Russia, Ukraine, Kazakhstan, and 
Vietnam have placed additional taxes or restrictions on exports of 
grains, rice, oilseeds, and other products. This has further 
constrained food supplies.
    Higher food marketing, transportation, processing costs are also 
contributing to the increase in retail food prices. Record prices for 
diesel fuel, gasoline, natural gas, and other forms of energy affect 
costs throughout the food production and marketing chain. Higher energy 
prices increase producers' expenditures for fertilizer, chemicals, 
fuel, and oil driving up farm production costs. Higher energy prices 
also increase food processing, marketing, and retailing costs. These 
higher costs, especially if maintained over a long period, tend to be 
passed on to consumers in the form of higher retail prices.
    In recent years, the conversion of corn and soybean oil into 
biofuels has been a factor shaping major crop markets. The amount of 
corn converted into ethanol and soybean oil converted into biodiesel 
nearly doubled from 2005/2006 to 2007/2008. The growth in biofuels 
production has coincided with rising prices for corn, soybeans, soybean 
meal, and soybean oil. From 2005/2006 to 2007/2008, the farm price of 
corn has more than doubled and the price of soybeans nearly doubled.
    Question. How much of this can be attributed to the massive amounts 
of our crops now being diverted from the food supply to be used for 
biofuels production?
    Answer. Many factors in addition to biofuels production have 
contributed to lift current commodity prices above long-term averages. 
These factors include: record high petroleum prices; weather-related 
production losses; rapidly rising incomes in large population countries 
such as China and India; and, unprecedented speculative demand for all 
types of commodities.
    With respect to the effects of biofuels on prices, the exact level 
of impact is based upon numerous factors. For example, the United 
States uses about 10 percent of the world's corn production and 1 
percent of the world's vegetable oil production for biofuels. The 10 
percent of global corn used for biofuels represents only 4 percent of 
grain (coarse grains, rice, and wheat) production. Based upon current 
projections, only 1.2 percent of world harvested grain area will be 
required to meet U.S. ethanol corn demand this year. In addition, for 
every bushel of corn used to produce ethanol, 17 pounds of distillers 
dried grains (DDGs) is produced. DDGs can be substituted for corn in 
many livestock rations and when this offset is taken into account, corn 
and its equivalent feed value lost through ethanol production 
represents about 17 percent of current year corn production even though 
a projected 24 percent of the U.S. corn crop will be used by ethanol 
producers in 2007/08.
                             wic food costs
    Question. For this subcommittee, the increase has been felt 
primarily in the WIC program, which makes up one-third of our 
discretionary budget. The average monthly food cost for the WIC program 
increased 7.05 percent in fiscal year 2008, which is almost a full 
percentage point higher than the increase estimated in the President's 
fiscal year 2008 budget.
    Is this trend likely to continue or have we reached a plateau?
    Answer. The Department is projecting continued, but considerably 
slower inflation in average WIC food package costs for fiscal year 
2009. The Department's latest Monthly Report to Congress on the WIC 
Program contains our most current estimate of WIC food package cost 
inflation for fiscal year 2008.
    Question. Is the estimate in the fiscal year 2009 budget for WIC 
food costs likely to increase? The President's budget only projects an 
increase of 2.3 percent in fiscal year 2009.
    Answer. The Department's projected increase in WIC food package 
costs of 2.3 percent in fiscal year 2009 is based on a 2.08 percent 
projected increase in the Thrifty Food Plan (TFP) index plus an 
adjustment for anticipated changes in some States' infant formula 
rebate contracts. TFP forecasts are updated semiannually.
    USDA plans to revise its fiscal year 2009 WIC food package cost 
projection when the TFP is next re-estimated as part of the upcoming 
Mid-Session Review of the President's budget.
                        food stamp participation
    Question. Food Stamp participation has reached a record high. The 
growth in the program is astounding. For example, recent news reports 
indicate that 1 in 10 New York residents, 1 in 8 Michigan residents, 
and 1 in 6 West Virginia residents are now on food stamps. In addition, 
many States, including Maryland and Florida, have seen a 10 percent 
increase in participation in the last year alone. This is particularly 
troubling because one must be near poverty levels to qualify for food 
stamps. Specifically, an individual or household's net income cannot be 
more than the level of poverty to qualify.
    What do you attribute increases in food stamp participation to?
    Answer. The Food Stamp Program is designed to expand and contract 
as the economy changes. The Department forecasts an increase in 
participation for both fiscal year 2008 and fiscal year 2009, 
consistent with the projected increase in the unemployment rate 
provided by OMB for use in the development of the fiscal year 2009 
budget.
    The number of Americans receiving food stamps has increased by over 
60 percent since 2000 for a number of reasons.
    First, legislative changes made it easier to qualify for food 
stamps and simplified rules improved program access. The major 
provisions that contribute to increases in participation include State 
options for simplified reporting that make it easier for low-income 
families to participate, restoration of eligibility for many legal 
immigrants, and replacement of outdated limits on the value of vehicles 
that participants can own.
    Second, the percent of eligible low-income people who participate 
in the Food Stamp Program has increased in recent years. In 2001, only 
54 percent of those eligible for benefits participated. However, by 
2005, that proportion had increased to 65 percent. Over the last 
several years, USDA has engaged in multiple activities including an 
ongoing outreach campaign to ensure that needy persons are aware of the 
nutrition assistance available to them. Enrolling more eligible people 
can further the Nation's goals for improving the nutrition and health 
of low-income Americans and has been a priority of the Department for 
several years.
                  colombia free trade agreement (fta)
    Question. What are the potential negative effects on American 
agriculture we should expect if the Colombia FTA is not passed by the 
Congress?
    Answer. The effects are many. First, without an agreement, the 
terms of bilateral trade will continue to grow in favor of Colombia, 
contributing to a lopsided agriculture trade imbalance. In 2007, 
Colombia had a positive agricultural trade balance with the United 
States of $300 million. One reason for this is that nearly all of 
Colombia's agricultural products enter the United States duty free, 
under a unilateral trade preference agreement, the Andean Trade 
Preference and Drug Eradication Act.
    However, currently, no U.S. agricultural exports enjoy duty-free 
access to the Colombian market. With the agreement in place, more than 
70 percent of U.S. agricultural product tariff lines--52 percent of the 
value of U.S. agricultural trade to Colombia--will immediately enter at 
zero duty. Most all other tariffs on U.S. agricultural products will be 
reduced to zero within 15 years and all within 19 years.
    Second, without the agreement third-country competitors will gain 
market share at the expense of the United States. Colombia is currently 
negotiating a free trade agreement with Canada. Besides gaining 
immediate market share in our largest market in South America, allowing 
Canada to implement its FTA first will put U.S. exporters at a 
disadvantage, costing them millions of dollars.
    Colombia implements a variable levy known as the price band. Under 
the U.S.-Colombia Trade Promotion Agreement (CTPA) the price band 
system, which affects over 150 products including corn, rice, wheat, 
oilseeds and products, dairy, pork, poultry, and sugar, will be 
immediately eliminated. Tariffs under the current price band system 
vary with world prices and can reach as high as the World Trade 
Organization tariff bindings which range from 15 to 388 percent. Canada 
will be protected from international price fluctuations due to their 
agreement to eliminate the variable duty price band system. As long as 
the United States does not implement the CTPA, U.S. exporters will be 
subject to variable import duties that could change every 2 weeks. In 
addition, Canada will have access to markets for new-to-market products 
in Colombia, such as high quality beef, poultry parts, and select dairy 
products.
    Finally, but no less important, approval of the Colombian agreement 
would acknowledge and support the transformation of the people and the 
democratic government of Colombia. The agreement builds on Colombia's 
revival by enhancing long-term investments in the country. The 
Colombian people have demonstrated their commitment to deepening a 
U.S.-Colombian economic and political relationship when the Colombian 
legislature approved the CTPA last year.
                       african stem rust research
    Question. In the November/December 2007 issue of Agricultural 
Research, a science magazine published by USDA, there was an article 
entitled: ``World Wheat Supply Threatened!'' The article was about 
USDA's efforts to combat African Stem Rust or Ug99, a highly virulent 
and aggressive stem rust, which has rapidly spread through Africa and 
into the Middle East, threatening world barley and wheat production and 
food security. Most experts believe it eventually will reach the US 
where most barley and wheat varieties are highly susceptible. The 
threat to world food security and the US economy from this disease has 
not diminished.
    Why does this budget propose to eliminate ARS funding of $308,000 
at St. Paul, Minnesota which supports the agency's lead scientists 
working on African Stem Rust?
    Answer. The 2009 Budget proposes to eliminate all ($41 million) ARS 
earmarked funding, including $308,000 at the Cereal Disease Laboratory 
at St. Paul, Minnesota. The Department has proposed termination of all 
the ARS earmarks because they lack the programmatic control necessary 
to ensure quality as well as relevance to the core mission of ARS. 
Within the total proposed for ARS, the 2009 Budget includes $944,000 to 
continue priority wheat stem rust research.
    In fiscal year 2008, the Cooperative State Research, Education and 
Extension Service (CSREES) plans to fund 1-2 competitive grants 
totaling $248,000 for aerobiology modeling of Ug99 for assessing 
potential pathways, timing of incursion and to support rust 
surveillance. An additional $20,000 in Hatch Act funds will support 
wheat stem rust research. In fiscal year 2009, CSREES estimates $20,000 
in Hatch Act funds will support wheat stem rust research.
    Question. How does USDA propose to address the African Stem Rust 
threat?
    Answer. USDA-ARS is leading a national cereal rust research effort 
and is making key contributions to supporting international cooperative 
efforts through the Global Rust Initiative to address the new African 
wheat stem rust. ARS scientists are developing diagnostic tests for 
rapid identification of the disease should it enter U.S. borders and 
are contributing to monitoring and surveillance. Additionally, ARS is 
also developing and testing several new techniques that show promise in 
monitoring of wheat stem rust epidemics and for characterizing new 
races of cereal rust pathogens. A set of microsatellite DNA markers for 
the stem rust fungus has been developed. These markers are useful in 
tracing the geographical origins of new races of stem rust. Seedling 
evaluations are being conducted against African stem rust races to test 
the susceptibility of U.S. wheat varieties.
    In fiscal year 2008, USDA-CSREES plans to fund 1-2 grants for 
aerobiology modeling of Ug99 for assessing potential pathways, timing 
of incursion and to support rust surveillance.
                         food aid ``safe box''
    Question. Both the House and Senate versions of the farm bill 
contained language creating a ``safe box'' for developmental food aid 
resources. The language would essentially mandate that a certain amount 
of food aid resources be used for developmental programs and would not 
allow them to be diverted to cover emergency needs.
    In your opinion, what are some issues that may arise if similar 
language is included in a Farm Bill?
    Answer. Adoption of such a proposal would happen at the worst 
possible time as our emergency food aid is being seriously affected by 
rising commodity and transportation costs. Our capacity for emergency 
assistance has already been diminished by about $265 million to meet 
higher-than-anticipated commodity and freight prices in fiscal year 
2008.
    The hard earmark for non-emergency monetization food aid in the 
House and Senate versions of the farm bill will put millions of lives 
at risk and undermine our ability to prevent famine. The average level 
of non-emergency monetization food aid to Private Voluntary 
Organizations over the course of the last two farm bills has been 
approximately $360 million. Reserving a significantly higher level of 
funding to be used solely for non-emergency programs as under 
consideration in the Farm Bill encroaches and effectively cuts funds 
for emergency feeding, where food is used to feed hungry people in dire 
situations.
    This set-aside would create a funding shortfall that cannot be 
filled through other sources. The timing involved in requesting and 
Congressional approval of supplemental appropriations is unpredictable 
and untimely. The Bill Emerson Humanitarian Trust holds much lower 
levels than 5 years ago and does not have sufficient resources to cover 
emergency needs over the 5-year life of the next Farm Bill.
    Question. What would this mean for the emergency needs throughout 
the world?
    Answer. The hard earmarks for non-emergency monetization food aid 
in the House and Senate versions of the Farm Bill will put millions of 
lives at risk and undermine our ability to prevent famine.
    Question. Would the administration support waiving such a 
provision?
    Answer. The administration strongly opposes a hard earmark for non-
emergency food aid. There is limited funding available to meet the 
highest priority foreign assistance needs, including humanitarian 
assistance. The administration needs to have the flexibility to 
prioritize funding to meet the most critical needs.
             wic monthly report and fiscal year 2009 budget
    Question. In the report accompanying the final fiscal year 2008 
appropriations bill, the Committee requested monthly reports on the 
amount necessary to fund the WIC program in fiscal year 2009. The 
reason the reports were requested is to hopefully avoid the situation 
we had during the fiscal year 2008 appropriations process where the 
subcommittee had to provide $633 million above the President's request 
and never heard a word from the Department that WIC needs had 
increased.
    The reports were to include projections for food costs and 
participation and clearly explain how those projections differ from the 
assumptions made in the budget request and impact the WIC program in 
fiscal year 2009. The first report the Committee received was not only 
2 months late but woefully inadequate. The second report was 
significantly improved, but still did not provide an assessment of what 
current participation trends and food costs mean for the fiscal year 
2009 budget. For example, the Department leads the Committee to believe 
that the fiscal year 2009 WIC budget may be inadequate by stating that 
``reported participation estimates are higher than anticipated,'' and 
food costs have increased more than expected. However, the report does 
not go on to explain whether the Department believes these increases 
are an anomaly or a real issue that may need to be addressed. Surely, 
the Department is capable of making a professional judgment about a $6 
billion program. Given that WIC is one-third of this subcommittee's 
discretionary budget, the lack of information being provided is 
disappointing.
    Why has the report been delayed? Do you think the level of detail 
in the report provided to the Committee adequately reflects what was 
requested?
    Answer. I want to assure you that we take seriously our obligation 
to provide reports to Congress. The President's Budget request released 
in February provided participation and food cost data as requested. We 
have also provided reports on March 4 and April 4, 2008. We remain 
committed to working with Congress to provide monthly data regarding 
current participation levels and monthly food costs, as requested.
    Question. What does the statement ``reported participation 
estimates are higher than anticipated'' mean? Is this an anomaly or do 
you think we should be concerned that the fiscal year 2009 request for 
WIC is not adequate?
    Answer. The phrase reported participation estimates are higher than 
anticipated means that year to date reported program participation 
suggests that the annual average participation level for the WIC 
Program will be higher than was projected in, and supported by, the 
fiscal year 2008 budget.
    The President's fiscal year 2009 budget request of $6.1 billion can 
support an average monthly program participation level of approximately 
8.6 million persons in fiscal year 2009. This level of participation 
can be maintained as a result of savings accruing from the proposed cap 
on the WIC administrative grant per participant ($145 million) and an 
increase in estimated available prior year resources from fiscal year 
2008.
    USDA will continue to closely monitor WIC Program performance 
including trends in participation and food costs. This information, in 
conjunction with revised economic projections for fiscal year 2009, 
will permit the Department to assess the adequacy of the President's 
fiscal year 2009 budget request. This assessment will be made in 
conjunction with the annual Mid-Session Review (MSR) of the President's 
budget. Results of this evaluation will be communicated to the Congress 
when the President's MSR review is released and we will keep the 
committee informed through the regular monthly reporting process.
                     farm service agency it system
    Question. Mr. Secretary, at this time last year, I was in this room 
speaking with your predecessor about the major problems with the IT 
system of the Farm Service Agency and the plans to upgrade and maintain 
the system. Can you tell us what work has been done over the past year 
to achieve this?
    Answer. There are two projects that are moving forward in parallel: 
a modernization project and a stabilization project. I will provide a 
description of both of these for the record.
    [The information follows:]
    The modernization project has received business case approval to 
implement a commercial, off-the-shelf software solution. Since last 
year, USDA has developed MIDAS foundational requirements for governing 
an ``enterprise'' software acquisition of this type; USDA has hired a 
full-time program manager; and we are currently conducting Lean Six 
Sigma analysis of our USDA Service Center operations. USDA is 
positioning itself to be ready to move forward into the acquisition 
phase as soon as funding becomes available.
    The stabilization project has focused on reinforcing the elements 
of our Common Computing Environment infrastructure that failed to host 
our Web-based software applications successfully. In January 2007, USDA 
Service Centers experienced a widespread outage with system error 
messages saying ``page cannot be displayed.'' We have taken specific 
action to replace firewall technology, increase telecommunication 
bandwidth capacity, isolate inefficient application software and data 
bases accesses, install modern monitoring tools within the environment, 
and establish independent testing environments. Congress provided $37.5 
million for this project in fiscal year 2007 including funding for the 
costs of implementing an independent data warehouse capability. The 
data warehouse will allow USDA to isolate reporting queries from our 
transactional, production data bases that carry on the day-to-day 
delivery processes in order to improve the speed of transactions and 
improve information security.
    Question. What is the status of the system today?
    Answer. A minimum level of service delivery has been restored to 
Web-based software applications. USDA has been fortunate that the level 
of program activity has been very low due to high commodity prices. 
Even with low demand for the automated systems, we are still 
experiencing about 6 hours of unplanned outages per month. This is down 
considerably from a year ago when unplanned outages approached 16 to 20 
hours per month.
    Question. What are your plans to secure funds to perform the work 
you have outlined?
    Answer. USDA has provided the authorizing committees with 
legislative language to amend the CCC Charter Act to allow for the 
collection of user fees to fund the modernization and stabilization 
projects.
                 national animal identification system
    Question. In the report accompanying the final fiscal year 2008 
appropriations bill, the Committee expressed concern over the direction 
of the National Animal Identification System (NAIS), especially given 
the amount of funding provided for the program. The total amount of 
funding dedicated to NAIS through fiscal year 2008 is more than $127 
million. The fiscal year 2009 budget proposes an additional $24.144 
million. I appreciate the efforts of USDA to finally develop a business 
plan for the system last year. However, the budget does not outline how 
the requested funding will be spent or how the request fits into the 
plan. The budget only States that this is the amount the program needs 
to carry out essential activities, without explaining what those 
``essential activities'' are. I think we can agree that $24 million is 
a significant budget request that warrants more justification.
    Please explain in detail how the requested funding will be spent 
and how the funded activities fit into the business plan.
    Answer. USDA will use the $24 million included in the fiscal year 
2009 budget request for the following NAIS activities: $3.5 million for 
information technology (IT) maintenance and development, $10.8 million 
for cooperative agreements, $800,000 for communications and outreach, 
and $8.9 million for national program oversight and field activities. 
Specific short- and long-term milestones related to each of these 
categories will be provided to the Committee in the coming weeks. 
Additional information about the plan is provided for the record.
    [The information follows:]
    For efficient, effective disease containment, animal health 
officials need the data required to trace a disease back to its source 
and limit potential harm to animal agriculture. USDA's overall 
objective is to establish an animal tracing infrastructure that will 
retrieve traceback data within 48 hours of disease detection. The speed 
with which animal health officials can access critical animal location 
and movement information determines the timeliness--and effectiveness--
of the disease control and containment effort. USDA defines the 
retrieval of traceback data within 48 hours as optimal for effective 
disease containment. This type of effective response can result in huge 
cost savings to the government in terms of eradication efforts, and 
producers benefit in terms of property and marketability of livestock. 
USDA will work toward this long-term objective by implementing 
immediate, short-term strategies, as outlined in USDA's Business Plan 
to Advance Animal Disease Traceability. Through the strategies, it is 
USDA's goal to facilitate increased participation in the NAIS, bolster 
the existing animal disease response network, reduce the amount of time 
required to conduct and complete a disease investigation, and continue 
to build critical Federal-State-industry partnerships necessary for 
animal disease control and eradication success.
    Through existing fiscal year 2008 funds and requested fiscal year 
2009 funds, USDA plans to accomplish the following:
  --Nearly 100 percent traceability will be achieved for the commercial 
        poultry and swine industries (identification of commercial 
        production units in the required radius of a disease event) 
        with support and cooperation of the National Poultry 
        Improvement Plan and National Pork Board respectively;
  --Through continued integration of the National Scrapie Eradication 
        Program with NAIS, over 90 percent of the sheep breeding flock 
        will be identified to their birth premises and approximately 90 
        percent of the breeding population of goats will be traceable 
        to their birth premises within 48 hours of a disease event;
  --Over 90 percent of competition horses will be identified through 
        NAIS compliant processes through the integration of equine 
        infectious anemia testing requirements and interstate 
        certificates of veterinary inspection;
  --Over 70 percent of the commercial cattle population born after 2008 
        will be identified with NAIS compliant identification methods;
  --Critical Location Points will be registered in the National 
        Premises Information Repository (nearly 90 percent of the 2,750 
        county and State fairgrounds and racetracks; 100 percent of the 
        98 import/export facilities; 70 percent of the 3,388 markets 
        and dealers, including public auctions; nearly 100 percent of 
        the 3,097 harvest facilities, including renderers and slaughter 
        plants; nearly 100 percent of the 34 semen collection and 
        embryo transfer facilities; nearly 90 percent of the 8,000 
        veterinary clinics (large animal practices that receive 
        livestock); and 100 percent of the 880 licensed food waste 
        swine feeding operations);
  --The use of NAIS-compliant animal identification number (AIN) 
        devices will be initiated in breed registry programs;
  --The premises identification number will be incorporated in the 
        Dairy Herd Improvement Association's administration of the 
        National Uniform Eartagging Numbering System;
  --The electronic brucellosis vaccination and testing system will be 
        fully developed and implemented;
  --The NAIS-compliant premises identification number format will be 
        incorporated into existing Federal disease program activities 
        (e.g., vaccination, herd testing, emergency response, etc.); 
        and
  --The full integration of approximately 20 animal tracking databases 
        maintained by States and private organizations with the Animal 
        Trace Processing System will be achieved.
                   conservation reserve program (crp)
    Question. Secretary Schafer, can you please explain how the recent 
increases in commodity prices are affecting enrollment in the CRP 
program? In your opinion, how will the changes you are seeing affect 
the program in the years to come? Are there other conservation programs 
that are showing significant impact from rising commodity prices? What 
if anything is the Department doing to protect these programs?
    Answer. It is still somewhat early to say definitively how recent 
crop price increases have impacted CRP enrollment. First, we did not 
conduct a general sign-up last year and do not plan to conduct one this 
year, so we do not know to what extent interest may have declined. 
However, continuous sign-up enrollment has actually increased. Recent 
continuous sign-up enrollment is as follows:

------------------------------------------------------------------------
                                                          For the Fiscal
               Fiscal Year                 Through March       Year
------------------------------------------------------------------------
2006....................................         110,000         348,000
2007....................................          88,000         538,000
2008....................................         148,000         ( \1\ )
------------------------------------------------------------------------
\1\ To be determined.

    It is difficult to assess whether enrollment is up due to re-
enrollments of expiring contracts or due to continued interest in 
continuous sign-up.
    We are monitoring the extent that participants have been dropping 
out of the program prior to normal contract terminations. Reports from 
States indicate that about 130,000 acres were withdrawn between October 
2007 and March 2008, but we do not know what future dropouts will be. 
About the same number of general sign-up acres were ``lost'' during the 
entire 2007 fiscal year.
    It is also hard to predict enrollment in the years to come. Our 
baselines have projected that enrollment will decline, at least in the 
short term. In the fiscal year 2009 President's Budget, enrollment is 
projected to decline from 36.8 million acres on September 30, 2007 to 
34.8 million acres on September 30, 2008, and to 34.2 million acres on 
September 30, 2009. Because there will not be a general sign-up this 
year, the 2009 enrollment is now expected to be 34.0 million acres, a 
2.8 million acre decline from 2007 levels.
    We anticipate the Conservation Technical Assistance Program and the 
Environmental Quality Incentives Program (EQIP) will see increased 
attention as acres expire from CRP and need working lands assistance. 
Producers who wish to enroll in commodity programs on these expiring 
acres will require a Highly Erodible Land Compliance plan from NRCS. 
They may also need or wish to enroll in EQIP on these acres.
    We anticipate that higher farm income associated with increased 
commodity prices will result in increased conservation investments by 
producers, thus increasing demand for existing working lands programs, 
such as EQIP and the Wildlife Habitat Incentives Program.
    We want producers to have successful farming enterprises in 
conjunction with a healthy environment. In order to prepare for the 
changing economic picture of farming for energy crops, the 
administration has proposed a bioenergy reserve. The idea is to 
encourage production of energy crops such as switchgrass on CRP lands 
that are well suited and thereby mitigate potential shifts from CRP to 
cropping where it may not be advisable.
    CRP is partially protected from rising crop prices through its 
rental rate setting policies. In this process, rental rates are set at 
an average of the 3 most recent years' market rental rates for the 
area, adjusted for each individual soil's productivity. Rates are 
periodically updated.
    CRP also provides incentives for selected high-priority continuous 
sign-up enrollments. Practices such as buffer strips are eligible to 
receive a one-time signing incentive (SIP) of $100 per acre, a practice 
incentive (PIP) equal to 40 percent of the practice's establishment 
costs, and an annual incentive of 20 percent of the annual rental 
payment. Additional incentives are also provided through the 
Conservation Reserve Enhancement Program (CREP). In addition to 
providing SIPs and PIPs, many CREPs pay higher annual incentives.
                      wic fiscal year 2008 budget
    Question. Secretary Schafer, escalating food costs and 
participation has dramatically increased the amount necessary to fully 
fund the WIC program. With the information available to the 
subcommittee at the time, we provided an increase of $633 million above 
the President's request for fiscal year 2008. WIC program funding is 
now over $6 billion annually. Even with the increase, I am concerned 
that funding for WIC in fiscal year 2008 may not be sufficient. Do you 
believe that funding for the WIC program in fiscal year 2008 is 
adequate?
    Answer. Analysis of year-to-date WIC participation and food cost 
data suggests that program costs for fiscal year 2008 will exceed 
levels anticipated in the President's fiscal year 2009 Budget and 
funded by the fiscal year 2008 Consolidated Appropriations Act. Our 
current analysis of fiscal year 2008 program performance indicates that 
without additional funds for fiscal year 2008, the program would have a 
shortfall, even after the release of the remaining $150 million of 
contingency resources.
    Question. If not, are you addressing the shortfall?
    Answer. Yes. I am reviewing options that include transferring funds 
from the Food Stamp Program contingency reserve to the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC) to 
address funding shortfalls in that program.
                              fsis budget
    Question. In December 2007, the Office of Inspector General 
released a report on the Food Safety and Inspection Service's plan to 
implement risk based inspection. In the report, OIG questioned whether 
``FSIS has the systems in place--to provide reasonable assurance that 
risk can be fully assessed.'' OIG identified several specific concerns, 
including FSIS' assessments of establishments' food safety systems, 
security over IT resources, and data management concerns.
    FSIS agreed with all 35 of the recommendations in the report, and 
began work on implementing systems changes, including building a new IT 
system called the Public Health Information System (PHIS). The actions 
proposed by FSIS in response to the report seem to be very costly. 
However, the budget does not propose an increase to implement these 
items, and I'm curious from where the money for the current work on 
PHIS and other programs is coming.
    Is FSIS shifting money from current activities to address the OIG 
recommendations? If so, which activities and how is this affecting the 
performance of those activities?
    Answer. FSIS has not shifted money from current activities to 
address the OIG recommendations on implementing the PHIS. In September 
2007, FSIS awarded a $15 million contract for PHIS that will enhance 
our domestic and international inspection functions, export compliance 
certification functions and our agency-wide predictive analytics 
capability. The funding was made available at the end of the fiscal 
year as a result of delays in the hiring process. This contract will 
cover activities in fiscal year 2008 and fiscal year 2009.
    Question. Annually, how much would it cost to address the OIG 
recommendations and is this amount included in the fiscal year 2009 
budget?
    Answer. The major cost associated with implementing the OIG 
recommendations is for strengthening the infrastructure and the 
development and deployment of PHIS. All fiscal year 2009 funding in 
support of PHIS and the other ongoing activities identified in the 
management response to OIG's recommendations is included in the 
President's budget.
                    fsis humane methods of slaughter
    Question. The Hallmark/Westland meat recall that took place in 
February was the largest meat recall in history and was initiated after 
it became evident that the company was abusing cattle and had 
slaughtered cattle that could not stand or walk, commonly known as 
``downer'' cattle, without appropriate inspection. Many people are 
concerned how the egregious activities that took place at the Hallmark/
Westland facility went unnoticed by Food Safety and Inspection Service 
inspectors. It has been suggested that we enhance USDA inspection and 
increase oversight of humane handling at slaughter facilities, perhaps 
by enacting new legislation or more effectively targeting resources.
    What does the Department need to make sure that incidents like the 
Hallmark/Westland don't happen again? Does the Food Safety and 
Inspection Service need more staff, statutory authority, or staff 
training?
    Answer. The investigation being led by OIG with support from FSIS 
and AMS is ongoing. Once the investigation has concluded, we will have 
additional information that, along with the results of the additional 
verification activities, will determine the actions for FSIS oversight, 
inspection and enforcement that may be required.
                    export credit guarantee program
    Question. Mr. Secretary, reports in the press indicate that social 
unrest is building in countries such as Egypt, Morocco, Malaysia, and 
the Philippines over the rising price and declining availability of 
basic foodstuffs such as wheat and rice. The GSM-102 export credit 
guarantee program at USDA is specifically designed to facilitate the 
purchase of US agricultural commodities by these middle income 
countries during periods of challenging commodity markets and credit 
availability.
    Unfortunately, to date USDA has made available only $1.23 billion 
in guarantees for fiscal 2008. This is below the current program need, 
as evidenced by the fact that applications for approximately twice that 
amount were received within days of the guarantees being made 
available. In addition, current law requires that $5.5 billion in 
guarantees be made available each fiscal year. Under the current Farm 
Bill extension through April 18 of this year, it would appear that at 
least $2.86 billion should have already been made available by USDA. 
Given the current environment, even this amount would likely be below 
the actual program need.
    Can you tell the Committee when USDA will make GSM guarantees 
available to meet the rising demand for the program and the statutory 
minimum?
    Answer. The administration has treated GSM-102 the same as other 
programs that are affected by Farm Bill proposals. USDA has made 
resources available on a proportional share basis consistent with 
program levels reflected in the 2008 column of the fiscal year 2009 
President's Budget. The sharp increase in program demand due to 
changing world economic conditions and food shortages was not foreseen 
at the time the 2009 President's Budget was submitted. The 
administration urges Congress to complete action on a Farm Bill the 
President can sign as soon as possible. That action will ensure full-
year programming for GSM-102.
                                 ______
                                 

              Questions Submitted by Senator Arlen Specter

                  commodity supplemental food program
    Question. This is a follow-up question regarding the Commodity 
Supplemental Food Program (CSFP). It is my understanding that CSFP 
received a 33 percent increase in funding for fiscal year 2008 to 
compensate for increased food prices and to allow more program 
participants. Please provide an analysis on where the increased funding 
was directed. Please also provide a summary of supply vendor invoices 
for CSFP product over the last year, in order to account for the 
increase in food prices and participants? Finally, has USDA used 
bartered items and free/donated items for the program?
    Answer. The $139.7 million appropriation, after rescission, was not 
sufficient to maintain caseload at the 2007 level due to significant 
increases in food costs, a substantial reduction in the level of 
surplus or ``free'' commodities available to support the program, and a 
significant increase in the legislatively mandated administrative grant 
per caseload slot. A total of 473,473 caseload slots were allocated in 
2008, slightly lower than the 485,614 slots assigned last year.
    In agricultural markets, significantly less food has been, and for 
the foreseeable future, will be purchased under agriculture support 
programs and donated for use in domestic nutrition assistance programs, 
including the Commodity Supplemental Food Program (CSFP). Thus, without 
the customary levels of donated, or so-called ``free'' foods, a greater 
proportion of the cost of food packages in fiscal year 2008 was covered 
by appropriated funds than was the case in fiscal year 2007. For women, 
infants, and children, the appropriation must fund $24.27 of the 
average monthly cost of the food package (up from $21.92 for fiscal 
year 2007), and $18.15 of the average monthly cost for seniors (up from 
$16.64), an increase of over 10 percent and 9 percent respectively.
    Two examples illustrate the effect of rising food costs on the CSFP 
food package. In fiscal year 2007, nonfat dry milk was available as 
free to the program due to abundant supplies of surplus. However, as of 
mid-fiscal year 2008, the Food and Nutrition Service (FNS) will have to 
pay an estimated $1.96 per pound to obtain this product. Furthermore, 
in fiscal year 2007, macaroni cost FNS $0.41 per pound. The cost for 
this item has risen to $0.79 per pound in fiscal year 2008, an increase 
of over 90 percent.
    In order to maximize food dollars through economies of scale, USDA 
purchases CSFP commodities in combination with TEFAP and the Food 
Distribution Program on Indian Reservations. Therefore, invoice data 
are aggregated across all three programs, making CSFP-specific invoice 
sheets unavailable.
    With respect to bartered foods available through the Department's 
Stock-for-Food Initiative, approximately $10 million was distributed to 
CSFP in order to maintain program participation that was at risk 
because of funding difficulties.
                        colony collapse disorder
    Question. In the fiscal year 2008 Omnibus Appropriations 
legislation that was signed into law on December 26, 2007, language was 
included that stated: ``Within available resources, the Department is 
encouraged to take appropriate actions, consistent with the directives 
in this explanatory statement, to address areas of crop and livestock 
protection, foods (including food allergens), nutrition, colony 
collapse disorder, and other areas included in the President's budget 
for these research needs.'' Please provide specific information on the 
amount of funds that USDA has directed to colony collapse disorder 
(CCD) research and how these funds were used.
    With agriculture being PA's largest industry, this issue is 
important to my home State. Further, I am aware that the Pennsylvania 
State University has been a key leader and partner with the 
Agricultural Research Service in CCD research. It is my understanding 
that the United States is losing about 35 percent of the bee colonies 
this year as opposed to a 31 percent loss rate last year. There has 
been effort by Congress to help address this major concern in the long-
term through the Farm Bill. However, how does USDA plan on addressing 
CCD and other pollinator threats in the near future? Does the 
Department plan on utilizing its authority under CCC or Section 32 to 
direct funds to emergency assistance for beekeepers or to provide much 
needed increased funding for research to address this crisis?
    Answer. The Department is aware of the devastating effects of 
colony collapse disorder (CCD) and is utilizing all research funds 
available to address the issue. Currently, the Department does not plan 
to use either CCC or Section 32 funds to provide emergency assistance 
to beekeepers or provide additional funding for research. Information 
on USDA-funded projects is provided for the record.
    [The information follows:]
    For comparison purposes, funding information is provided for fiscal 
years 2006, 2007, and 2008. CSREES provides all funds for multi-year 
competitive grants in the first year of their existence and does not 
show recurring costs.
    In fiscal year 2007, ARS base funding for honey bee health 
increased $41,900. ARS also allocated $200,000 of fiscal year 2007 
temporary funding to CCD research at Beltsville, Maryland. CSREES 
grants awarded in the National Research Initiative (NRI) and the 
Critical and Emerging Issues (CEI) programs for honey bee health 
research increased $463,432.
    In fiscal year 2008, the Agricultural Marketing Service (AMS) will 
begin testing honey for pesticide residues on a fee basis as part of 
its Pesticide Data Program. ARS funding for CCD/honey bee health 
increased $123,400. Additionally to base-funded projects, a critical 
new project is the new ARS Areawide Project on Honey Bee Health, which 
is being supported by temporary funding of $670,000 in fiscal year 
2008. CSREES will initiate several new projects and increase funding by 
$1,497,843.

                                                    FISCAL YEAR 2006, 2007 AND 2008 FUNDING BY AGENCY
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Funding in fiscal  Funding in fiscal  Funding in fiscal
               Agency                          Name of Project                  Location             year 2006          year 2007          year 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
AMS.................................  Survey of Honey in Consumer Sized  Pesticide Data Program            ( \1\ )           $260,000           $260,000
                                       Containers at the Retail Level.                                                        ( \2\ )            ( \2\ )
ARS.................................  Preservation of Honey Bee          Beltsville, MD........           $382,200            384,300            381,500
                                       Germplasm.
ARS.................................  Managing Diseases and Pests of     Beltsville, MD........          1,679,200          1,688,300          1,676,200
                                       Honey Bees to Improve Queen and
                                       Colony Health.
ARS.................................  Improving Crop Pollination Rates   Tucson, AZ............          1,124,300          1,130,700          1,122,800
                                       by Increasing Colony Populations
                                       and Defining Pollination
                                       Mechanisms.
ARS.................................  Pests, Parasites, Diseases, and    Weslaco, TX...........          1,879,300          1,890,500          1,877,300
                                       Stress of Honey Bees Used in
                                       Honey Production and Pollination.
ARS.................................  Breeding, Genetics, Stock          Baton Rouge, LA.......          1,339,700          1,346,100          1,336,800
                                       Improvement, and Management of
                                       Russian Honey Bees for Mite
                                       Control and Pollination.
ARS.................................  Development and Use of Mite-       Baton Rouge, LA.......            955,000            960,000            953,000
                                       Resistance Traits in Honey Bee
                                       Breeding.
ARS.................................  Biochemistry of Pest and           Fargo, ND.............             64,600             65,000             64,500
                                       Beneficial Insects and
                                       Interactions with Host Plants
                                       and Natural Enemies.
ARS.................................  Chemistry and Biochemistry of      Gainesville, FL.......            208,400            209,700            208,200
                                       Insect Behavior, Physiology and
                                       Ecology.
ARS.................................  Areawide Project on Honey Bee      Various...............            ( \1\ )            ( \1\ )            670,000
                                       Health.
CSREES, NRI.........................  Time-Memory Control of Honey Bee   East Tennessee State              183,000            ( \1\ )            ( \1\ )
                                       Foraging Behavior.                 Univ.
CSREES, NRI.........................  Molecular Mechanisms of Honey Bee  North Carolina State              355,000            ( \1\ )            ( \1\ )
                                       Mating.                            University.
CSREES, CEI.........................  Colony Collapse Disorder:          University of Illinois            ( \1\ )             60,000            ( \1\ )
                                       Initiation of a National
                                       Response.
CSREES, CEI.........................  Colony Collapse Disorder:          Pennsylvania State                ( \1\ )             51,932            ( \1\ )
                                       Determination of the Roles of      University.
                                       Pathogens in Unique Colony
                                       Losses of Honey Bees and Funding
                                       of Workshop.
CSREES, NRI.........................  The importance of intracolonial    Cornell University....            ( \1\ )            206,000            ( \1\ )
                                       genetic diversity for foraging
                                       success in honey bee colonies.
CSREES, NRI.........................  Modulation of social interactions  North Carolina State              ( \1\ )            337,000            ( \1\ )
                                       by disease in honey bees.          University.
CSREES, NRI.........................  Assessing the mating health of     North Carolina State..            ( \1\ )            346,500            ( \1\ )
                                       commercial honey bee queens.
CSREES, CEI.........................  Unraveling Impacts on Honey Bee    Pennsylvania State                ( \1\ )            ( \1\ )             89,996
                                       Health of Agricultural and In-     University.
                                       Hive Pesticides.
CSREES, CEI.........................  Impacts on Honey Bees and          Pennsylvania State                ( \1\ )            ( \1\ )             89,987
                                       diseases from In-hive Miticide     University.
                                       Use.
CSREES, CEI.........................  Assessment of Miticide Use of      Clemson University....            ( \1\ )            ( \1\ )             90,000
                                       Honey Bee Longevity and Colony
                                       Health.
CSREES, NRI.........................  Toxigenomics of Apis mellifera...  University of Illinois            ( \1\ )            ( \1\ )            340,000
CSREES, NRI.........................  Analysis of genes and gene         Purdue University.....            ( \1\ )            ( \1\ )            479,134
                                       regions affecting agronomically
                                       important honey bee behaviors..
CSREES, NRI.........................  Genome Informatics for             Georgetown University.            ( \1\ )            ( \1\ )            410,158
                                       Agriculturally Important
                                       Hymenoptera Species and Their
                                       Pathogens.
CSREES, NRI.........................  Undetermined.....................  Undetermined..........            ( \1\ )            ( \1\ )          1,000,000
                                                                                                --------------------------------------------------------
      Total AMS.....................  .................................  ......................            ( \1\ )            260,000            260,000
      Total ARS.....................  .................................  ......................          7,632,700          7,674,600          7,798,000
      Total CSREES..................  .................................  ......................            538,000          1,001,432          2,499,275
      Total.........................  .................................  ......................          8,170,700          8,936,032         10,557,275
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ N/A.
\2\ Estimate.

Additional/Future Projects
    USDA developed a CCD Action Plan in July 2007 based on 
recommendations from the CCD Steering Committee, which is composed of 
academic, private, and Federal scientists. The Action Plan outlines a 
strategy for current and future needs to address the CCD crisis, 
involving four main components:
  --Survey and data collection;
  --Analysis of samples;
  --Hypothesis-driven research; and
  --Mitigation and preventative action.
    Within each topic area, the status of ongoing CCD research and 
future plans are outlined, as well as the organization(s) involved in 
the effort. Both ARS and CSREES are using existing funding authorities 
to support these research, extension, and education projects. The 
accomplishments of current research will be used to gauge the direction 
and prioritization of future research.
    In addition, in 2007 CSREES oversaw the formation of a Multi-State 
Research/Extension Committee titled ``Sustainable Solutions to Problems 
Affecting Honey Bee Health'' which will address CCD-related objectives 
that will complement those of ARS scientists and other CSREES-funded 
projects (e.g., NRI-CAP, and CEI). The Committee is administered by the 
North Central Region, funded by Hatch Multi-State allocations to 
participating States and also supported in part by Federal Smith-Lever 
appropriations to States for the Cooperative Extension System. Future 
research needs to be addressed by this committee are complementary and 
compatible with research priorities outlined in the Action Plan and by 
ARS.
    Looking to fiscal year 2009 and beyond, ARS has identified a number 
of projects, in varying levels of priority, to address CCD and honey 
bee health. Needs include developing artificial diet-based systems to 
increase pollination for specialty crops impacted by CCD (Tucson, 
Arizona); determining the role of pathogens and other stress factors in 
CCD and mitigating their effects (Beltsville, Maryland); reducing 
colony stress through integrated pest management (Tucson); developing 
genetic resistance to CCD (Baton Rouge, Louisiana); and treating and 
mitigating CCD (Beltsville). To fund these efforts, the President's 
2009 budget requests an increase of $780,000 for ARS.
                        food safety regulations
    Question. This is a follow-up to my food safety question. Does USDA 
have adequate authority and resources to implement the food safety laws 
and regulations? Further, it is my understanding that in 2007, there 
were a combined total of more than 70 new rules, notices, directives 
and regulations issued or finalized by FSIS. Please describe what USDA 
is doing to assist meat, poultry, and egg firms with compliance when 
they have problems and when the Department issues new regulations? Is 
USDA effectively training its workforce to implement these regulations?
    Answer. FSIS has adequate authority and resources to enforce the 
food safety laws and regulations under its purview.
    FSIS takes its outreach mission very seriously. In March 2008, FSIS 
announced the formation of the new Office of Outreach, Employee 
Education and Training, to provide consolidated access, resources and 
technical support for small and very small plants to better assist them 
in providing safe and wholesome meat, poultry and processed egg 
products. This program area will also ensure that all FSIS personnel 
have the necessary training to effectively carry out their assigned 
duties.
    For FSIS to ensure public health protection through food safety, it 
not only needs to verify that small and very small plants, 
establishments that comprise over 90 percent of the plants under FSIS' 
jurisdiction, are producing safe food but to reach out to those plants 
to make sure that they fully understand their responsibilities and how 
to achieve them. Thus, for small and very small plants, the agency 
launched a targeted Web page and launched a monthly publication called 
Small Plant News which includes articles with up-to-date technical 
information and guidance, resource materials, and FSIS rules and 
regulations as well as the most common questions asked and answers that 
apply to establishments' operational practices. All of this is in 
addition to outreach visits, net meetings, information sessions, and 
numerous regulatory education sessions.
    In 2007, FSIS launched askFSIS, an outreach effort for 
stakeholders. askFSIS is a Web-based feature designed to help answer 
technical and policy questions regarding inspection and public health 
regulations 24 hours a day. The new interactive feature provides 
answers on technical issues in more depth than the standard list of 
``frequently asked questions'' available through FSIS' Web site. It 
allows visitors to seek answers on topics such as exporting, labeling 
and inspection-related policies, programs and procedures, as well as 
submit new questions to be added to the system. This new Web-based tool 
has received high customer satisfaction marks from our stakeholders, 
and the system already has nearly 800 questions and answers.
    In the wake of ongoing, progressive policy changes, FSIS ensures 
that inspection program personnel and the industry fully understand 
FSIS rules, regulations, directives, and notices. The agency is 
developing a strong, ongoing strategy to evaluate the success of its 
training program. Through the In-Plant Performance System, AssuranceNet 
management controls, and reports from district analysts, the agency is 
ensuring that inspection program personnel are doing their jobs 
correctly, are held accountable, and have appropriate workloads and 
supervision.
                        hallmark/westland recall
    Question. Further, this question is specific to the Hallmark/
Westland recall of 143 million pounds of fresh and frozen beef 
products. Was there an alternative response that the Agency could have 
had to address the regulatory concern and not pursue an event that 
potentially confuses consumers? Possibly a market withdrawal? Finally, 
with much of the meat used for the School Lunch Program, can a USDA 
inspected plant sell meat to the program if it tests positive for E. 
coli?
    Answer. The recall action was deemed necessary because the 
establishment did not comply with FSIS regulations. The recall was 
designated Class II because the probability is remote that the recalled 
beef products would cause adverse health effects if consumed. This 
recall designation is in contrast to a Class I recall, which is a 
higher-risk health hazard situation where there is a reasonable 
probability that the use of the product will cause serious, adverse 
health consequences or death. A USDA inspected plant can continue to 
sell raw materials or finished products to the National School Lunch 
Program as long as the raw materials or finished products are not the 
ones that tested positive for E. coli.
                           u.s. beef products
    Question. Several significant beef markets and U.S. trading 
partners are still partially or completely closed to U.S. beef 
products. This stonewalling has persisted for more than 3 years. Having 
open beef markets is important to Pennsylvania's, and the Nation's, 
beef producers. According to the PA Department of Agriculture, the beef 
industry contributes about $1.9 billion annually to the economy. What 
do you plan to personally do as Secretary to address these remaining 
bans on all or part of American beef?
    Answer. USDA is working actively and constructively to re-open many 
international markets that closed as a result of the finding of bovine 
spongiform encephalopathy (BSE) in the United States in late 2003. 
Science and sound risk management principles remain the underpinnings 
of our consistent approach to all trading partners. As evidence of our 
success, U.S. beef and beef product exports rebounded to over $2.6 
billion in CY 2007, equal to almost 70 percent of trade in 2003, before 
BSE was identified in the United States. Last year, the World 
Organization for Animal Health (OIE) designated the United States as a 
``controlled risk'' Nation for BSE, reaffirming the effectiveness of 
the U.S. regulatory system to protect the food supply from BSE. With 
this rating in hand, we are stepping up our efforts to reopen markets 
for U.S. beef based upon science and internationally recognized 
standards. Indonesia, Barbados, and the Philippines are some of the 
countries that have fully reopened to U.S. beef and livestock since the 
United States achieved ``controlled risk'' status.
                                 ______
                                 

               Questions Submitted by Senator Larry Craig

                    food safety inspection user fees
    Question. I appreciate USDA's dedication to ensuring the safety of 
our food supply. As evidenced by the Hallmark/Westland violation, we 
have some work to do to improve the oversight of our inspection system. 
However, I am concerned about the proposal to add another $92 million 
in new user fees from meat, poultry and egg products establishments.
    Why would USDA propose to have the packers pay for their own food 
safety inspections when this is clearly the role of government? Are you 
concerned that these additional costs would be passed down to cattle 
producers?
    Answer. The legislative proposal to create new user fees would 
transfer a portion of the cost of mandatory Federal inspection services 
to the industries that directly benefit from them, and would result in 
savings to the taxpayer. If any costs were passed down to cattle 
producers, the amount would be extremely small.
                national veterinary medical service act
    Question. The National Veterinary Medical Service Act (NVMSA) was 
signed into law in December of 2003. This program has been funded 
through appropriations for several years now, yet USDA has failed to 
implement this veterinarian loan repayment program as it was designed. 
If implemented, this program would extend veterinary services to rural 
and other underserved areas that struggle to attract young vets.
    Does USDA recognize that there is a shortage of veterinarians in 
the United States, especially large animal practitioners in rural 
areas? Four years after passage of the National Veterinary Medical 
Services Act, what has USDA done to implement the full veterinarian 
loan repayment program? What do they need to move forward to implement 
it? Please provide for the Committee a timeline for when USDA plans to 
write the full program rules.
    Answer. USDA is aware of the shortage of veterinarians in the 
United States and recognizes that this shortage extends to virtually 
every aspect of the practice of veterinary medicine, including large 
animal practice, epidemiology, and food safety in both private and 
government employment. Further, we accept the validity of studies that 
show this shortage is growing.
    As you note, NVMSA was enacted in 2003. Funds for this program were 
first appropriated in fiscal year 2006. The Cooperative State Research, 
Education, and Extension Service (CSREES) conducted a review of program 
options and considered input from other Federal agencies, veterinary 
associations, and the veterinary educational community. CSREES 
developed an implementation plan that took advantage of already 
existing Office of Personnel Management student loan programs and 
regulations. On March 19, 2007, a final rule was published in the 
Federal Register that permitted CSREES to implement this phase of the 
NVMSA program. This rule specified that the USDA Food Safety and 
Inspection Service (FSIS) would utilize a portion of NVMSA funding as 
hiring incentives, to pay the educational loans of new hires. This 
strategy which included FSIS supplementing the NVMSA incentive by 
contributing a matching recruitment bonus, allowed USDA to reach the 
largest number of eligible veterinarians in the shortest possible time 
frame.
    To address other areas of veterinary shortage, CSREES is 
establishing a work unit that will involve both program and 
administrative employees with new staff hired to administer the NVMSA. 
Similarly, new processes and procedures will need to be developed and 
put in place, since the agency will be dealing with individual 
veterinarians instead of the universities that comprise its normal 
customer base. Simultaneously, CSREES will develop and publish the 
rule(s) necessary to fully implement this program.
    Because CSREES has never delivered a program of this type and 
complexity targeted to individual recipients rather than established 
institutions, it is very hard to judge how much time will be required. 
As an estimate, we believe CSREES may be able to accept applications as 
early as the second quarter of fiscal year 2009 with the repaying of 
educational loans by the end of fiscal year 2009.
                     exclusion of potatoes from wic
    Question. I understand that USDA published an interim final rule 
that expands the eligibility for the WIC program to include all fresh 
fruits and vegetables with the single exception of white potatoes. In 
contrast, I understand that WIC vouchers can currently be used to 
purchase fresh fruits and vegetables, including fresh potatoes, at 
farmer's market programs. It seems to me that fresh white potatoes, 
along with apples, bananas and carrots, are all popular vegetables 
which provide important nutrients critical to the diet of WIC 
participants.
    Can you provide the Committee with the public policy and 
nutritional rationale for excluding fresh white potatoes from the 
expanded WIC voucher program for all other fresh fruits and vegetables? 
What is the rationale for excluding fresh white potatoes from the 
expanded WIC program while allowing the inclusion of other frequently 
purchased fruits and vegetables? Excluding fresh white potatoes from 
the expanded WIC program will require State agencies and retailers to 
develop administrative procedures to exclude those purchases. Can you 
please provide this Committee a description of the process and an 
estimate of the cost of compliance for the exclusion of a single fruit 
or vegetable from the program?
    Answer. The changes to the WIC food packages were made based on 
scientific recommendations from the National Academies' Institute of 
Medicine (IOM). The IOM was charged with reviewing the nutritional 
needs of the WIC population, low-income infants, children, and 
pregnant, postpartum and breastfeeding women who are at nutritional 
risk, and recommending changes to the WIC food packages.
    The restriction of white potatoes, as recommended by the IOM, is 
based on (1) food intake data indicating that consumption of starchy 
vegetables by the WIC-eligible population meets or exceeds the amounts 
suggested in the 2005 Dietary Guidelines for Americans for consumption 
of starchy vegetables; and (2) food intake data showing that white 
potatoes are the most widely consumed starchy vegetable.
    There is no cost of compliance for the disallowance of a single 
fruit or vegetable from the WIC Program. WIC State agencies routinely, 
and as a part of normal business practice, determine what foods to 
include on their State WIC food lists from the list of Federally 
authorized WIC-eligible foods.

                          SUBCOMMITTEE RECESS

    Senator Kohl. Our hearing will end at this time. Next week 
we will be discussing the FDA budget, and we look forward to 
continuing our dialogue. Thank you so much.
    [Whereupon, at 11:15 a.m., Tuesday, April 8, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
