[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2014

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                              FIRST SESSION
                                ________

     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                  ROBERT B. ADERHOLT, Alabama, Chairman

 TOM LATHAM, Iowa                   SAM FARR, California
 ALAN NUNNELEE, Mississippi         ROSA L. DeLAURO, Connecticut
 KEVIN YODER, Kansas                SANFORD D. BISHOP, Jr., Georgia
 JEFF FORTENBERRY, Nebraska         CHELLIE PINGREE, Maine
 THOMAS J. ROONEY, Florida          
 DAVID G. VALADAO, California       

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Martin Delgado, Tom O'Brien, Betsy Bina,
                     Pam Miller, and Andrew Cooper,
                            Staff Assistants
                                ________

                                 PART 3
                                                                   Page
 Commodity Futures Trading Commission.............................    1
 Secretary of Agriculture.........................................  393
 USDA Research, Education, and Economics..........................  663



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                                ________

         Printed for the use of the Committee on Appropriations

                     U.S. GOVERNMENT PRINTING OFFICE

 82-638                     WASHINGTON : 2013

                                  COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\        NITA M. LOWEY, New York
 FRANK R. WOLF, Virginia              MARCY KAPTUR, Ohio
 JACK KINGSTON, Georgia               PETER J. VISCLOSKY, Indiana
 RODNEY P. FRELINGHUYSEN, New Jersey  JOSE E. SERRANO, New York
 TOM LATHAM, Iowa                     ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama          JAMES P. MORAN, Virginia
 KAY GRANGER, Texas                   ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho            DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas          LUCILLE ROYBAL-ALLARD, California
 ANDER CRENSHAW, Florida              SAM FARR, California
 JOHN R. CARTER, Texas                CHAKA FATTAH, Pennsylvania
 RODNEY ALEXANDER, Louisiana          SANFORD D. BISHOP, Jr., Georgia
 KEN CALVERT, California              BARBARA LEE, California
 JO BONNER, Alabama                   ADAM B. SCHIFF, California
 TOM COLE, Oklahoma                   MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida           BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania        TIM RYAN, Ohio
 TOM GRAVES, Georgia                  DEBBIE WASSERMAN SCHULTZ, Florida
 KEVIN YODER, Kansas                  HENRY CUELLAR, Texas
 STEVE WOMACK, Arkansas               CHELLIE PINGREE, Maine
 ALAN NUNNELEE, Mississippi           MIKE QUIGLEY, Illinois
 JEFF FORTENBERRY, Nebraska           WILLIAM L. OWENS, New York
 THOMAS J. ROONEY, Florida            
 CHARLES J. FLEISCHMANN, Tennessee    
 JAIME HERRERA BEUTLER, Washington    
 DAVID P. JOYCE, Ohio                 
 DAVID G. VALADAO, California         
 ANDY HARRIS, Maryland                
   
 ----------
 /1/ Chairman Emeritus              

               William E. Smith, Clerk and Staff Director

                                  (ii)

 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2014

                              ----------                              

                                            Friday, April 12, 2013.

                  COMMODITY FUTURES TRADING COMMISSION

                               WITNESSES

GARY GENSLER, CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION
SCOTT D. O'MALIA, COMMISSIONER, COMMODITY FUTURES TRADING COMMISSION
    Mr. Aderholt. Good morning. The subcommittee will come to 
order.
    Before I recognize Chairman Gensler and Commissioner 
O'Malia for their opening statements, I would ask the ranking 
member of the subcommittee, the distinguished gentleman from 
California, Mr. Farr, for any remarks that he may have.
    Mr. Farr. Well, thank you very much, Mr. Chairman. I 
normally do not read remarks, but I think since there are a lot 
of new members on this committee and this is a very complex 
issue, I would just like to read my statement.
    The Commodity Futures Trading Commission is an unsung hero 
of American fiscal stability. Since 1974, the CFTC has 
regulated the U.S. agricultural commodity and other futures and 
options markets. For 36 years, the CFTC executed its 
responsibilities professionally while protecting investors from 
fraud on a shoestring budget.
    But with the 2010 passage of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, the CFTC's jurisdiction 
exploded nearly sevenfold, from $37 trillion to nearly $300 
trillion. Make no mistake about it, that increased jurisdiction 
was absolutely essential.
    The 2008 economic collapse was proof positive that our 
financial regulatory oversight failed Americans. The 
unregulated swaps market helped concentrate risk in the 
financial system, and that risk spilled over into the real 
economy. The results were 8 million jobs were lost, millions of 
families lost their homes, and thousands of small businesses 
had to lock their doors.
    Something had to change, and Dodd-Frank mandated that the 
CFTC now regulate the $300 trillion swaps market in addition to 
its regular role of the $37 trillion agriculture commodities 
and other futures market. So it stands to reason that we should 
better resource the CFTC to carry out their new 
responsibilities.
    Unfortunately, that has not happened. The CFTC is still 
being funded at $207 million, which is barely enough to cover 
its old jurisdiction. If American taxpayers expect the CFTC to 
fully carry out its oversight and regulatory responsibilities, 
we should be providing them with the $315 million. And to give 
that figure some perspective, $315 million is a tiny fraction, 
just one-millionth, of the roughly $300 trillion market they 
must regulate. You think about that. That is almost a trillion 
dollars a day.
    While I share the concern of our current economic 
predicament, our failure to adequately resource the CFTC so 
they can exercise prudent oversight over the swaps market has 
far graver financial consequences for our national economy. It 
is worth repeating that the price tag for mindful neglect is 8 
million jobs lost, millions of families losing their homes, and 
thousands of small businesses locking their doors.
    There is absolutely no way our constituents and our markets 
can withstand another economic tsunami, and they shouldn't have 
to. But, unfortunately, those aren't the only costs of 
crippling CFTC's funding.
    Continued underfunding means CFTC won't be able to conduct 
enforcement investigations, and that costs the American 
taxpayer real money. In January 2013 alone, CFTC brought in $1 
billion in fines and penalties. That is $1 billion that goes 
into the U.S. Treasury, not into paying the workload of CFTC. 
Put another way, CFTC gave the American taxpayers almost a 
fourfold return on their fiscal year 2013 investment.
    And here is another cost to underfunding. Since Dodd-Frank, 
CFTC has written 43 of 50 new swap market rules. 
Understandably, Wall Street has questions about how to comply 
with these rules, but the CFTC doesn't have the money to hire 
the staff who can respond to these inquiries. And that 
understaffing stymies the pace of business, just when we need 
to have robust, productive, and transparent markets.
    The bottom line is this: The cost of fully funding CFTC is 
minor; the cost of underfunding CFTC is enormous. American 
taxpayers deserve this minor front-end investment in CFTC to 
yield enormous long-term returns.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you, Mr. Farr.
    Let me, first of all, welcome both of you to the 
subcommittee this morning and thank you for being here on this 
rainy Friday morning to join us. And we look forward to, 
Chairman Gensler, your testimony, and also welcome Commissioner 
O'Malia for your presence here this morning and look forward to 
your testimony, as well.
    The Commodity Futures Trading Commission is responsible for 
principle-based regulation of the commodities, futures, 
options, and swap marketplace. These markets are an integral 
part of our Nation's free enterprise system. The CFTC has 
received six consecutive annual increases in funding--an annual 
increase of 85 percent since the financial crisis of 2008. 
There are not many agencies or offices in our jurisdiction in 
this subcommittee that have enjoyed that attention. So part of 
what I want to focus on today is the taxpayers' return on 
investment for these funds and the funds that you have been 
entrusted with.
    While I realize that the Commission is nearing a point 
where most rules under the Dodd-Frank have been written, there 
still seems to be many questions about the overreach of some of 
these rules. And, quite honestly, CFTC's focus on hiring 
additional staff seems disconnected to the reality that most 
activity under your purview is being conducted electronically.
    CFTC's 2014 budget request is $315 million, an increase of 
53 percent over the current CR level. It certainly brings into 
question the rationality of such a large request given the 
fiscal environment and the reality of the CFTC's funding 
history. Further, I believe the best way to examine future 
funding is to examine the record.
    With that, I would turn it over to Chairman Gensler and 
then to Commissioner O'Malia.
    Without objection, both of your full testimonies will be 
included in the record. And if you would like to summarize in 
any way your testimony, hit the highlights, you are welcome to 
do so.
    So, with that, let me first of all recognize Chairman 
Gensler.
    [The information follows:]


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    Mr. Gensler. Chairman Aderholt, Ranking Member Farr, 
members of the subcommittee, thank you for inviting me to 
present the President's budget for 2014. And I am pleased to 
testify along with Commissioner O'Malia, who not only is a 
fellow commissioner of mine but has become quite a friend over 
these last 4 years of rulemaking and oversight of these 
markets.
    The CFTC's mission is critical, as you and the ranking 
member said, to so many in each of your districts. And just 
because there are some new Members here, I wanted to mention, 
it is the farmers and the ranchers but also the community 
bankers, the insurance salesmen, the mortgage brokers, and 
commercial companies, all of which we call end-users, if I can 
use that broad word.
    And why is it important? It is because we oversee the 
derivatives marketplace, both historically the futures market, 
but now more recently the swaps market. And derivatives are 
financial instruments. My mom asks me quite often, Gary, what 
is it you do down there? You might have the same question. 
Derivatives are financial instruments whereby an end-user tries 
to lock in a price or a rate so they can focus on what they do 
well.
    So your constituents benefit from a transparent and 
efficient derivatives market so that they can manage a price 
risk, maybe for energy or agriculture, or a rate risk for an 
interest rate, if they want to put up a small building in your 
district and they want to lock in the interest rate that they 
are being charged, or maybe they are importing goods from 
another country and they want to lock in a foreign exchange 
rate. So whether it is oil, corn, wheat, interest rates, or 
foreign currency, they want to get that risk out of the way so 
they can focus on growing the economy, providing services and 
goods to your communities.
    Now, our heritage dates back to the 1920s when we were part 
of the Department of Agriculture, and thus we are in front of 
this subcommittee and we are overseen by the Agriculture 
Committees in both Houses. But since 1975 we have been an 
independent commission, and until last year we oversaw just the 
futures marketplace. As has been mentioned, though, in response 
to the financial crisis Congress directed that we take on a 
significantly expanded mission: swaps, which were at the center 
of the crisis.
    Having completed most of the rules that Congress directed 
us to do, this small agency, the CFTC, now oversees both 
futures and swaps. These markets are approximately $300 
trillion in notional size. This represents $20 of derivatives 
for every dollar of goods and services that flows through our 
economy. If you fill up a tank of gas for $90, you can think 
somewhere in our economy there might be $1,800 of derivatives 
somewhere in our economy behind that, just an average. I am not 
saying it exactly works that way. Ninety percent of this is in 
the newly overseen swaps market, and about 11 or 12 percent of 
it is the market we have overseen to date, the futures 
marketplace, as measured in notional size.
    Now, the public is now beginning to benefit from this swaps 
market reform. Until just recently, the swaps marketplace was 
opaque, but now it is getting transparency. There is a modern-
day ticker tape like you have in the securities marketplace. We 
now have 75 swap dealers that are registered with us. These are 
the largest banks around the globe. Now we will be able to 
oversee their business conduct and ensure that the markets are 
fair to the rest of the public. We have also brought swaps into 
something called central clearing. This is a market mechanism 
that helps to lower risk to the markets.
    Our technology and our staff have not kept up with either 
this expanded mission or the paradigm shift that we have seen. 
As the chairman mentioned, we did grow in the last 6 years. 
That was, in essence, to get us back to where we were in the 
1990s. We are currently just 8 percent larger than we were 20 
years ago. We had shrunk from the 1990s, down to the bottom in 
2008.
    So the President's $315 million budget for 1,015 people is 
to grow this agency from the 690 people we are at now to try to 
oversee a market that is nearly 8 times the size we currently 
oversee.
    That does not mean we need eight times the resources, for 
sure. But we do need additional technology and staff to 
effectively promote transparency. We need additional technology 
and staff to make sure that people have access in your 
district. We need the technology and staff to closely monitor 
customer funds. And we need technology and staff to examine the 
vast number of new entities registered with us. And I think 
additional technology and staff are necessary to utilize our 
enforcement tools to the fullest potential.
    I will just give one example, which was in the interest 
rate markets, in LIBOR. You may have read about the London 
Interbank Offered Rate that was being pervasively and readily 
rigged, undermining market integrity in the interest rate 
futures markets. Millions of Americans have mortgages tied to 
LIBOR, and we are the Federal agency that has the--we are the 
cop on the beat for this--responsibility for overseeing these 
markets.
    Hundreds, maybe tens of thousands of small businesses 
borrow against an interest rate called LIBOR, and millions of 
Americans invest in money market funds that use LIBOR. So it is 
a really important thing. And we found three banks pervasively 
rigging it. That led to $2 billion--that is $2 billion that 
went into the U.S. Treasury in the last 12 months, between the 
Department of Justice and our fines.
    Now, it is just a point of reference, and it is not how I 
would recommend appropriating, but to the chairman's question 
about a return to taxpayers, that $2 billion represents the 
amount that was appropriated to our agency from 1990 to 2012; 
23 years of our appropriations were returned with that $2 
billion. I am just trying to address your question.
    We are a tiny agency with a tiny enforcement staff that is 
approximately the same size as our enforcement staff was in 
2002. Pound for pound, we get a lot out of that enforcement 
staff, but I do think we need more people, given the vast 
markets we oversee. I think the farmers and ranchers, the 
community bankers, insurance salesmen, mortgage brokers, and 
many, many other end-users in your districts would benefit. And 
it is a good investment for the taxpayers' money, though I know 
you all have a very hard job. I would not want to switch jobs 
and try to make the decisions as to how to allocate scarce 
resources. But I think this agency is a good investment for the 
taxpayers money.
    And I thank you for your time.
    Mr. Aderholt. Thank you.
    [The information follows:]


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    Mr. Aderholt. Commissioner.
    Mr. O'Malia. Good morning, Chairman Aderholt, Ranking 
Member Farr, and members of the subcommittee. Thank you for the 
opportunity to come and testify on the Commission's budget 
request. And I am pleased to be with my friend, Chairman 
Gensler.
    The Commission is seeking a 52.5 percent increase above the 
current-year funding level of 206.5 million. The Commission has 
sought similarly large increases in past requests. Although not 
provided these full funding increases, additional resources 
have been provided, as noted by both the chairman and ranking 
member.
    In FY 2007, prior to the 2008 financial crisis, the 
Commission received just $97.7 million and supported 437 full-
time equivalent staff and 59 contractors. Today, after 
consistent funding increases, the Commission is operating at 
206 million; or in the sequestration number about 194 million; 
and supports roughly 700 staff, as well as 200 contractors, 
which is an over 200 percent increase.
    Funding for technology also has grown during this time, and 
I appreciate Congress setting aside specific funding in bill 
language that provides and directs the Commission to focus on 
technology. This is a key component of our surveillance and 
essential to our oversight program. However, we have a very 
long way to go to develop a credible and comprehensive 
technology strategy to meet our mission objectives.
    I did not vote for the FY 2014 budget request for two 
reasons. First, I believe the requested level of 315 million; 
an increase of 52 percent, is both improbable and 
unsustainable. Second, the budget fails to provide specifics 
and makes a broad, unsubstantiated appeal for more resources 
without the requisite demonstration of mission priorities or 
essential deliverables. The budget request presents everything 
as a priority yet provides no metrics by which to measure the 
Commission's success or failure.
    As a former clerk of the Senate Energy and Water 
Subcommittee, I know firsthand the challenges you all face to 
allocate scarce resources among agencies and commissions, all 
fighting for increases in their budgets. These are not easy 
choices, as the chairman noted, and they are made even more 
difficult by today's acute budget pressure.
    Now, in my position as a regulator, I am working to make 
sure that the Commission is a responsible and effective steward 
of taxpayer resources. For you to have confidence in our 
mission, we must develop a credible, transparent, and specific 
budget request that we are able to execute in fulfilling our 
statutory objectives.
    I do believe there is a strong case to be made for the 
importance of our oversight mission of the swaps and futures 
markets. I also believe that it is apparent that expanded 
mission cannot be accomplished without modest increases in 
resources for this Commission.
    Since I arrived at the CFTC, each budget request that I 
have reviewed, including this one, includes a chart 
highlighting the stratospheric rise in futures trading as a 
justification for the sizable increase in our budget. It is 
abundantly clear that growth in futures trading is strongly 
tied to electronic trading, including the use of algorithms and 
high-frequency trading systems. Therefore, if the Commission is 
going to keep pace with the growth and technology innovation in 
these markets, it must make automated surveillance the 
foundation of our oversight and compliance program. Automation 
provides crucial leverage for our limited staff to oversee 
high-speed electronic markets.
    I believe there are several important priorities that are 
technology-related that the Commission must address 
immediately. I would ask that you continue to support separate 
bill language that provides for our technology funding. This 
specific allocation will keep the Commission focused on its 
most critical investments.
    Second, the Commission must develop a 5-year strategic plan 
focused on technology that requires each division and office 
within the Commission to develop a 5-year technology investment 
strategy with annual milestones by which Congress can measure 
our performance.
    This plan should explain in detail how technology and staff 
are integrated and should address the following issues. It 
should explain how the Commission will expand its surveillance 
tools to include message data, instead of relying on already-
stale transaction data. This is critical for us to oversee 
high-frequency trading strategies.
    Next, it should explain how the Commission will integrate 
its oversight of futures, swaps, and options markets and the 
execution of those across both the futures exchanges and the 
new swap execution facilities. Integrating that and reviewing 
that will be a major challenge for us going forward. We also 
need to prioritize our technology investments such as risk 
analysis and surveillance. We must pick priorities in this 
budget to be effective.
    Third, the Commission must establish a cross-divisional 
data unit to immediately address various data reporting, 
aggregation, and analysis shortcomings, as well as to develop 
new automated analytical tools. We have established swap data 
repositories, and we are beginning to collect data, but we have 
a long way to go before we are going to be able to make sense 
of that data.
    Fourth, we should address the November 14th, 2012, IG 
assessment letter which focused on the most serious investment 
challenges facing the Commission. And, Mr. Chairman, if you 
would, I would like to include that in the record.
    Mr. Aderholt. Without objection.
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    Mr. O'Malia. The IG identified the following concerns as 
serious management challenges: the efficient deployment of 
information technology resources and the expanded delivery of 
customer protection resources and consumer education.
    Fifth, I think we should develop a rule implementation 
plan. The Commission is shifting its effort from rule writing 
to rule implementation. Providing certainty and clarity to 
market participants and facilitating their compliance with our 
rules must be a priority. The Commission has provided a 
complicated ad hoc set of over 80 exemptions to our rules, the 
great majority of them since October, leaving the market 
participants confused regarding the application of the 
Commission's new rules.
    To ensure the Commission is well-positioned to fulfill its 
mission objectives, it must develop a technology-focused budget 
strategy that can justify the need for additional funding for 
the Commission. I am committed to working with this 
subcommittee to identify key investments that will enhance our 
capacity to oversee the markets through the use of technology.
    Thank you for the opportunity to testify here today.
    Mr. Aderholt. Thank you.
    [The information follows:]


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    Mr. Aderholt. Thank you both for your testimony.
    And we will go ahead and get into the questions. We will 
have a series of votes in probably another hour, so we should 
get at least one round, if not perhaps two rounds, of 
questioning in before then.
    As I had mentioned--Chairman Gensler, let me start with 
you--as I had mentioned in my opening comments, the Commodity 
Futures Trading Commission request for fiscal year 2014 is 53 
percent above what the agency currently receives. Since the 
financial crisis of 2008, CFTC has received an 85 percent 
increase in funds. In total, CFTC has received 833 million in 
taxpayer dollars since that crisis.
    Looking at the American taxpayers and what they get for 
their money, how much money has CFTC obtained in orders 
imposing sanctions and other penalties in fiscal year 2012 
through enforcement sanctions?

                             CFTC PENALTIES

    Mr. Gensler. Mr. Chairman, I might need to get back to you 
with a specific number, but just in the cases related to 
interest rate benchmarks, between the Department of Justice and 
our actions, it was $2 billion from June of last year to this 
February or March.
    So in fiscal 2012, the first piece of that was the Barclays 
case, which was a $200 million fine from us and $150 million 
from the Department of Justice. But I will get the full number.
    Ah, here it is. Very good work.
    Last year, in 2012, was penalties collected, $258 million.
    Mr. Aderholt. How much in customer funds were missing in 
fiscal year 2012?
    Mr. Gensler. Again, we might need to get back to you 
because the Peregrine failure, the funds in that circumstance 
are still being sorted out by the bankruptcy judge and so 
forth. But there was close to a $200 million shortfall in 
Peregrine during fiscal 2012.
    And then in the earlier circumstance of MF Global, I am not 
participating in it, but I believe maybe Commissioner O'Malia 
could comment on that.
    Mr. O'Malia. The trustees are working through the final 
solutions. And I believe we had a $700 million hole overseas 
that is being clawed back, and I think overall customers have 
received up to 80 percent of the funds back.
    Mr. Aderholt. But as far as a ballpark figure as far as the 
funds that were missing in 2012, do you have a ballpark of what 
that might be?
    Mr. Gensler. I think it might be easier for us to get back 
specifically, but the Peregrine situation was initially as much 
as $200 million. But then the actual available is somewhere 
between 30 and 40 percent, so it would probably be more like 
$150 million.
    And then Commissioner O'Malia might do the estimate on the 
other one.
    Mr. O'Malia. I think the initial hole in MF Global, is $1.5 
billion, and then we have brought some of the funds back. So I 
think it is best that we provide you final numbers.
    Mr. Aderholt. We had some numbers of somewhere in that 
ballpark, 1.5, 1.8. Would that be reasonable, that that could 
be----
    Mr. Gensler. Well, in any circumstance there is an amount 
of customer funds, and then there is the actual, under the 
trustee and bankruptcy provisions, how much actually is there, 
which takes time. So I think you may be referencing the initial 
numbers as contrasted to how much has come back through----
    Mr. Aderholt. Yeah, the initial numbers is what I am 
looking at, or what my question is, the initial numbers.
    Mr. Gensler. I see. But the actual shortfall might be what 
we were talking about.
    Mr. Aderholt. Okay. But as far as initial numbers, 1.5, 1.8 
would probably be somewhere in the neighborhood of what the 
number that we are talking about?
    Mr. O'Malia. Yes, that is correct.
    Mr. Aderholt. I see my time--and I know we have a couple of 
Members that will have to slip out, so let me recognize 
Congressman Farr.
    Mr. Farr. As long as we are talking about swaps, I am going 
to swap my time with Mr. Bishop, who has to go to MILCON.

                       INTERNATIONAL TRANSACTIONS

    Mr. Bishop. Thank you very much, Mr. Chairman.
    And thank you, Mr. Farr, for yielding to me.
    And welcome, gentlemen. And I will be brief, and I 
apologize because I have to leave.
    I kind of want to talk with you about the separate rules 
that are in place for the CFTC and the SEC governing 
international transactions. So for Chairman Gensler and 
Commissioner O'Malia, I have a question for each of you, and I 
will try to be very brief with it.
    Chairman Gensler, both CFTC and SEC have been separately 
involved in developing new rules governing the extraterritorial 
application of Dodd-Frank. There is a considerable amount of 
concern expressed not only by the industry but by Members of 
Congress, as well, as to why the CFTC and the SEC won't 
consider issuing joint regulations in this regard, avoiding 
duplications or contradictory regulatory obligations for 
international market participants.
    So could I get you, Chairman Gensler, to explain to the 
subcommittee what the justification is for the two separate 
sets of rules in this regard when possibly one might work?
    And then for Commissioner O'Malia, quickly, it is my 
understanding that the CFTC has proposed a swap execution 
facility regulation that would require customers to solicit 
prices by issuing requests for quotes from a minimum of five 
market participants. The SEC has proposed a different rule that 
will permit the SEFs to naturally evolve their execution 
mechanisms for the swaps that are widely traded.
    Do you support the efforts to modify the original CFTC 
proposal? When do you expect CFTC to act to consider the final 
rule related to the SEFs?
    So, gentlemen, thank you.
    Mr. Gensler. I thank you for the question.
    The cross-border application of these rules is critical, in 
that risk knows no geographic boundary. And in the midst of the 
crisis, whether it was the big insurance company AIG, whether 
it was Lehman Brothers, whether it was Citicorp, or many years 
ago a hedge fund called Long-Term Capital Management, often the 
risk was offshore and it came back here to affect our markets. 
In one recent downturn in which AIG was a central actor--8 
million people lost their jobs. AIG was operated out of London, 
out of the Mayfair neighborhood, still the U.S. taxpayers put 
$180 billion into it. It is remarkable that that risk comes 
right back here.
    So why might we be different than the Securities and 
Exchange Commission? At least two reasons. One is the law is 
different. Dodd-Frank actually put expressly a provision in for 
the extraterritorial reach of swaps but not securities-based 
swaps. Literally, Congress put different words in the statute. 
And we are seeking to interpret that. Two is we oversee the 
interest rate swaps markets, the credit markets, and so forth, 
95 percent of the overall swaps markets. The SEC has an 
important but smaller piece, about 5 percent, around single-
named credit default swaps.
    This is what we do as a jurisdiction. The SEC has so many 
other things to be done. We are nearly complete with our 
rulemakings and need to complete this cross-border application. 
If we don't cover JPMorgan and Morgan Stanley and Goldman Sachs 
and Bank of America and other major financial firms operating 
out of offshore venues, if we don't cover U.S. hedge funds with 
a P.O. Box in the Cayman Islands, if we don't cover them in 
some way, you may as well repeal Title VII of Dodd-Frank, and 
the American public will not be protected.
    So I think that to shackle us and to do joint rulemaking 
with the SEC would be sort of the equivalent of saying we are 
not going to cover all these major institutions offshore. We 
think we can look to comparable regulations in London and Japan 
and Toronto and so forth to cover, but not all 180 
jurisdictions around the globe have comparable regulations.
    And on swap execution facilities, I think it is a matter of 
promoting the best pre-trade transparency to help the markets. 
But I know that question was more for Commissioner O'Malia.

                       SWAPS EXECUTION FACILITIES

    Mr. O'Malia. If I might touch on the extraterritoriality 
definition, it would be extraordinarily difficult if we had two 
different definitions of how the rules should apply and who 
should they apply to--what is the U.S. person. To have two 
agencies here in the United States defining a U.S. person, I 
think, would send a mixed message to the market, and it might 
be more difficult to enforce.
    With regard to the swap execution facilities, the SEC has 
put out its draft plan. It does have a different requirement. 
Now, the Dodd-Frank Act did not specify a number. It had some 
flexibility for us to select a number. So right now the 
proposal is at five. We have received a number of comments and 
concerns regarding that as being overly restrictive, and that 
it might limit liquidity and price formation. But we have to 
debate that. It is a rule that is currently before the 
Commission, and I want to make sure that we follow the statute 
on that one and make sure that we have good, flexible rules.
    I want to make sure that everybody has the opportunity to 
get on a SEF. I think trading on a screen is going to be better 
for our markets. And I think we have to have good, flexible 
rules, especially early, to accommodate this new market. And I 
want to make sure that we leave no excuse for them not to come 
on to our markets.
    Mr. Bishop. Thank you.
    Thank you for accommodating me.
    Mr. Aderholt. Mr. Yoder.

                         INTERPRETIVE GUIDANCE

    Mr. Yoder. Thank you, Mr. Chairman.
    Appreciate your testimony today, gentlemen. Thanks for 
coming today. And I wanted to continue the conversation that 
Mr. Bishop was having, and I appreciated both of your answers.
    Mr. Gensler, in your answer, I think you make very clear 
that you feel that the responsibilities are unique enough that 
we need to have different rules. And I think that position is 
one that certainly is being debated and one that there are 
different opinions on. So I certainly respect your opinion. I 
disagree a little bit in the approach.
    And I wonder if you could speak to why the CFTC chooses to 
do a guidance as opposed to a rulemaking, which provides more 
opportunity for public comment, more opportunity for debate on 
the Commission, and to have that opportunity for the folks that 
are going to be impacted by those decisions to have an 
opportunity to be heard as part of that. And do you feel that a 
guidance would protect our consumers in this country better 
than a rulemaking process in this situation?
    Mr. Gensler. We had 50 or so places in Dodd-Frank where we 
were directed to do rules, and we have taken them up with 
vigor. Though we were asked to do it in a year, we didn't want 
to do it against a clock, but it is about 3 years in and most 
of those rules are completed.
    In this cross-border area, as well as three or four other 
areas, there were words that market people came in and said, 
will you interpret them? This was not the only time we did 
this. So we addressed ourselves through an interpretation and I 
think, Congressman, did exactly what you would hope we would 
do, is we put that interpretation out to public comment last 
July. We have gotten an enormous set of input.
    And, in fact, what we put out to public comment was largely 
based on the input from the market participants beforehand, 
laying out an approach to ``U.S. person,'' laying out an 
approach to where our rules would apply and not apply and, 
importantly, to something called substituted compliance.
    So I do think that we have benefited from rounds of public 
input. In fact, in December, we put part of it back out to 
further comment and asked further questions about this 
definition of ``U.S. person'' so that we can get the best 
input. So I think we are doing what you would hope we would do 
and get public input.
    Mr. Yoder. If I might, do you then feel that the rulemaking 
process, which includes the added protections of the 
Administrative Procedures Act, is less safe than using 
interpretive guidance?
    Mr. Gensler. No, we are actually using the Administrative 
Procedures Act to do this interpretation. So we have benefited 
from the public input----
    Mr. Yoder. Mr. Chairman, if I might----
    Mr. Gensler. I am sorry.
    Mr. Yoder [continuing]. As related to a rulemaking versus a 
guidance in this regard.
    Mr. Gensler. I think that the Administrative Procedures Act 
helps us in rulemaking and interpretations. This was a 
situation where somebody said, can you interpret these key 
provisions of section 722(d). It is this section about what has 
a direct and significant effect on U.S. commerce, therefore 
what is the scope of regulation.
    So I think there are both rules and interpretive guidance. 
We didn't have to seek public comment, but we thought that that 
was the right thing to do, and we have really benefited. Then 
we sought further public comment, as well, in December.
    Mr. Yoder. And then I want to get Mr. O'Malia's response on 
that, as well. But regarding the other topic, the SEC and 
CFTC's coordination on this issue, your stated emphasis on 
being more particular at the CFTC on having distinct guidances 
that might be inconsistent with SEC or distinct from SEC rules, 
do you think that the coordination and the increased ability 
for the SEC and the CFTC to be on the same page is somehow more 
dangerous than less coordination between the two agencies?
    Mr. Gensler. Well, we have had tremendous coordination from 
the very beginning when Dodd-Frank passed. We have shared with 
the SEC our drafts, our term sheets. We meet with the SEC 
consistently and in international forums. I look forward to 
working with Mary Jo White, but Mary Schapiro and Elisse Walter 
and I have traveled to Brussels and London and Paris and 
Toronto together to so many meetings. And on these cross-border 
issues, we actually participate through IOSCO together.
    So there is much that we have actually done together, but 
there will be some differences because the securities markets 
and the futures markets do have some differences and also 
because the law in this circumstance was written slightly 
differently. But we do greatly benefit from the work with the 
SEC.
    Mr. O'Malia. Well, on this issue, we do have a difference 
of opinion in terms of our process. The chairman is correct, we 
did put out guidance in order to flesh out some of these 
details, and we did apply a comment period that is consistent 
with the Administrative Procedures Act.
    Now, I would have preferred we went out straight with a 
rule. I think we have been very specific, and we have done very 
specific rule-like activities in this guidance. And I would 
have preferred that we would have fully embraced the 
Administrative Procedures Act for rulemaking and worked under 
those guidelines.
    There are several things that are in here that are more 
specific, and yet they are in guidance. And I also think that 
we have also missed some opportunities to be more specific. The 
chairman is correct that the standard of direct and significant 
should be interpreted. The way Congress drafted that language 
was a limitation on our authority. You can only apply your 
rules to the extent it has a direct and significant impact on 
our economy. Now, we have applied that to be from the first 
trade, essentially. We have had no finding. What does it mean 
to be direct and significant? We never described that.
    The next step--which really has become the crux of the 
debate between international regulators, and you have probably 
seen some of the responses from some of the international 
regulators, our counterparties, if you will--is substituted 
compliance. Where does our authority stop and theirs begin? How 
are we going to draw the lines and respect their jurisdiction 
and work within our own jurisdiction?
    This has a huge impact, obviously, as you make decisions 
regarding our budget. Where our jurisdiction stops and starts 
and how we are going to be traveling the world enforcing our 
oversight will have a big impact. International travel and 
accommodation, that has a big impact on our budget. It is not 
specified what that would be in this budget request going 
forward, so it makes your job that much more difficult.
    Mr. Yoder. Thank you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Farr?
    Mr. Farr. Rep. DeLauro, do you want to go?
    Mr. Aderholt. Do you want to yield to her?
    Mr. Farr. Sure.

                         EFFECT OF BUDGET CUTS

    Ms. DeLauro. Thank you.
    Welcome. It is good to see you again before the committee. 
And delighted to welcome you, as well, Mr. O'Malia.
    Chairman Gensler, you know the Budget Control Act set 
budget caps through 2021. They are estimated to cut nondefense 
discretionary spending by roughly 5.4 percent in real terms. If 
a long-term budget deal is not made, sequestration and the 
budget caps will cut nondefense discretionary spending by a 
total cut of 10.6 percent below the 2012 level.
    Your budget request is impossible to be met under those 
circumstances; is that correct?
    Mr. Gensler. That is a choice for this committee and 
Congress, as to how you allocate. But under those types of 
cuts, it gets a lot harder, a lot harder for you, for sure.
    Ms. DeLauro. And we don't know whether or not there will be 
a $6 million surplus, as is currently said that there is. Is 
that right, Mr. O'Malia?
    Mr. O'Malia. I think we had $6 million in carryover 
balances.
    Ms. DeLauro. Carryover balances.
    Mr. Gensler. Oh, yes, from 2012, we carried over----
    Ms. DeLauro. You may not have that luxury.
    Mr. Gensler. I think at the end of this year--we have been, 
I think, cautious and prudent that we have been able to plan 
that we are not going to have furloughs through September 30th 
but, in part, because we carried over $6 million from fiscal 
2012 into fiscal 2013. We will not have that type of carryover 
into fiscal 2014. And I think, absent some real help from this 
committee, we will be in a furlough and maybe even a RIF 
situation.
    Ms. DeLauro. Okay.
    What will happen to your oversight of the swaps and 
commodities market in the next decade if these cuts remain in 
place? In your view, are we setting ourselves up for another 
financial crisis?
    Mr. Gensler. Well, I don't know about crisis, but I would 
say this: We cannot effectively ensure for the transparency and 
the integrity of the markets at significantly fewer people than 
we have now and significantly less technology than we have now. 
And under the current numbers, we would have to continue to 
shrink.
    Ms. DeLauro. Will these cuts limit your ability to properly 
oversee the swaps market? Will we see fewer enforcement actions 
like your recent engagement regarding the LIBOR scandal?
    And may I offer congratulations on the LIBOR scandal and 
the work of yourself and the Commission.
    The questions, though, are: ability to properly oversee the 
swaps market; will you see fewer enforcement actions like the 
effort with regard to LIBOR?
    Mr. Gensler. We always have to prioritize and use 
taxpayers' money prudently and effectively, but as resources 
shrink, we certainly--there are more challenging, interesting 
cases in front of our enforcement division every day partly 
because of our expanded scope to swaps. And as the chairman 
said, even as you move to electronic trading, there are still 
very interesting and complex items that come to our attention. 
We have a new whistleblower program, as well.
    And so, in making those priorities, we have to sometimes 
delay justice. What that old line was, justice delayed is 
justice denied.
    Ms. DeLauro. Right.
    So if we don't, for a third year in a row, provide you with 
the resources to complete your congressionally mandated 
expanded mission, what won't get done? How will your oversight 
of the swaps and futures markets be curtailed?
    Mr. Gensler. We don't have enough people to examine the 
major clearinghouses that Congress said we have to go in 
annually for examination. Customer funds, as the chairman and 
all of us know, last year we had these two major circumstances. 
We have to do a better job at the CFTC and at the self-
regulatory organizations with regard to customer funds and 
actually go in, I think, and help with more examinations as 
well. We won't have the resources for enforcement.
    And all that Commissioner O'Malia said that I agree with, 
most of it, about technology, we won't have the resources for 
that technology for analyzing the data, taking the data in, and 
helping the public see that data in relevant aggregate forms.
    Ms. DeLauro. Uh-huh. Uh-huh.
    My time, well, it is up, so I am hoping that we will get to 
a second round. Thank you.

                     MARKET PURPOSE AND VOLATILITY

    Mr. Aderholt. Mr. Fortenberry?
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Good morning, gentlemen. Thank you for your testimony.
    Since, Chairman Gensler, you began with some basics, I 
would like to start out with a basic question, as well.
    Given that the fundamental purpose of the futures markets 
and swap markets are to mitigate risk, derivatives market are 
to mitigate risk, given that the traditional number of hedgers 
to speculators is inverted, and given the explosion of the swap 
market, are these markets actually achieving the end result of 
decreasing volatility by mitigating risk?
    Mr. Gensler. It is an excellent question that academics 
address themselves, and you have some on both sides of that 
debate.
    I think that we are not a price-setting agency at the CFTC. 
Our key goal and mission is to ensure that the prices in that 
market reflect the forces of supply and demand. And though, as 
you rightly say, in some of the markets, 80, 85 percent of the 
markets are non-producers, non-farmers and -ranchers and -
merchants; they are financial companies. Sometimes they are 
swap dealers, sometimes they are pension funds, sometimes they 
are hedge funds, but a significant amount is non-producers and 
-merchants.
    I think that adds to the reason why you want an effective 
CFTC, to ensure that there is not fraud and manipulation, that 
those markets competitively reflect the forces of supply and 
demand. And I fear that if we were to not get additional 
resources, it is harder to ensure for the integrity of these 
markets.
    Mr. Fortenberry. Would you care to comment on this 
proposition as well?
    Mr. O'Malia. Well, it is something that we have been 
looking at. The markets are changing. We have heard from 
producers frequently that I don't feel that these markets fit 
me as well as they did in the past. And that is a real concern. 
When producers and hedgers say that they don't feel comfortable 
in their own markets which were created for them, that is 
troubling and that bears investigation.
    We are using a technology advisory committee, which I am 
the chairman of, to dig into that, to look at some of this 
trading, how the markets have evolved and what is driving the 
change in the markets. They are electronic. They are moving at 
high speeds. And people are very concerned about the high speed 
of orders coming into the market and the decreasing size of the 
trades. And they don't feel that, in many respects, the hedgers 
are getting a fair deal. We have heard that. We want to 
investigate it, and we are going to get to the bottom of that. 
And we are going to use the technology advisory committee to 
investigate that.
    Having said that, one area of technology where I think we 
need to focus, which we are not doing today because of the 
shift from technology to personnel, is in the order data. I 
think that is an area where the high-frequency traders and 
automated traders execute their strategies. And it is the order 
data that we should be looking at, and that is useful to us to 
understand how this has changed the markets for hedgers. The 
data we receive today is stale. It is transaction data. We can 
do a better job of understanding the impacts that people are 
facing in the market today.
    Mr. Fortenberry. Well, I encourage you, as you guide this 
technology committee, to stay tethered to the fundamental 
purpose that these markets exist. The reason is that they are 
supposed to decrease volatility by mitigating risk, not 
increase volatility by creating products that are spinoffs that 
are so complicated no one can understand and they take advanced 
algorithms where there is a time delay before it can be 
unpacked by the regulator or anybody else who has a legitimate 
use for hedging risk.
    I mean, I think we all have to continually remind ourselves 
that that is why we are doing this.
    Mr. Gensler. I agree with you, Congressman, that the reason 
to have this agency and why it was set up, why our predecessors 
were set up in the Department of Agriculture so long ago was to 
make sure that a farmer can lock in the price of corn at 
harvest time, as you say, and then focus on their crop; and, in 
the modern day, that a small business can lock in whether it is 
an interest rate or currency and say, good, now I can focus on 
what I do well and innovate in my----
    Mr. Fortenberry. Right.
    Well, I will close with a quick anecdotal story. In the 
midst of the financial crisis, I had one of our Chamber groups 
out here with some bankers, and I asked them a question. I 
said, how many of you use synthetic collateralized debt 
obligations? They didn't know what I was talking about. And I 
said, thank you.
    Because, again, the basics of these markets center around 
three fundamentals. It is capital, time, and interest rates. 
That is it. It should be basically that simple, going back to 
the fundamentals.
    Mr. Gensler. I agree. I grew up, my dad had a small 
business in Baltimore, and he never used collateralized debt, 
you know, et cetera.
    Mr. Fortenberry. If I could summarize your two positions, 
though--right quick, Mr. Chairman, if you will indulge me for a 
moment more--given the explosion of the swaps market, the 
derivatives market, your job is made more complicated, you need 
more resources, particularly on the technology.
    Mr. O'Malia, you agree with that basic proposition, but you 
are urging the Commission to state the specifics more clearly 
and how the outcomes are going to be measured.
    Is that a fair summary?
    Mr. O'Malia. It is.
    Mr. Gensler. I think so.
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Farr.

                         IMPORTANCE OF THE CFTC

    Mr. Farr. Thank you, Mr. Chairman.
    This discussion can be seen as awkward because you are 
coming in and asking for a 52 percent increase in a climate 
where all we are doing is cutting, squeezing, and trimming 
everything. We realize that you can't do that across the board. 
We just gave a multibillion-dollar increase to the Defense 
Department, gave them flexibility with how to spend it. You 
have a lot of people trying to beat up on you because you are 
setting regulations in a field where some of these people don't 
want to be regulated.
    There are really people out there in the market who are the 
beneficiaries, the market participants, who need those 
regulations. And I wondered if you can give us some specific 
examples about the importance of having a well-resourced CFTC 
as it applies to market participants.
    Mr. Gensler. As Congressman Fortenberry was talking about, 
whether it is a small business that is just now entering into 
an interest rate swap to help put, you know, a $5 million or 
$10 million business, a building, or even a $1 million building 
in a community, they often use an interest rate swap with a 
community bank. And we have made sure in our rules that that 
community bank didn't have to bring it to central clearing.
    That community bank and that small business in that 
community will benefit from the transparency in the marketplace 
and get better pricing. And even 1 basis point or 2 basis 
points on an interest rate swap adds up. In a $300 trillion 
marketplace, even 1 basis point, that is 1/100th of 1 percent, 
is $30 billion a year to the U.S. economy. So it is because of 
the law of large numbers that it can benefit.
    And then, of course, our traditional markets, in the energy 
markets and the agricultural markets, it is for the local 
utility company, it is for the farmer or grain elevator 
operator to have confidence that the market is free of fraud, 
manipulation, and they can have some confidence that the price 
set there is not manipulated.
    In the LIBOR circumstance, we found that it was rigged, 
pervasively rigged, by large banks. That was not good for the 
American economy, it was not good for the small-business person 
who just says, hey, I want a fair deal, I want to know my 
interest rate was--I know I am not going to set the interest 
rate, but I want to know that the forces of the market set the 
interest rate, not a few bankers rigging a market.
    Mr. Farr. So 52 percent is how much of an increase?
    Mr. Gensler. It is $109 million. And that 109 is hard for 
this committee to find, I know. And whatever your allocation 
you get from the full committee is going to be less, probably, 
than you would like, and so it is a hard ask. But I do think it 
is a good investment. It is a shame you can't count any of our 
penalties and fees against this committee's allocations.
    Mr. Farr. I don't know of any regulatory agency that is 
allowed to keep its fines and fees. But they have fees they can 
keep, but not fines, right?
    Mr. Gensler. No, we are a little bit unusual. The 
Securities and Exchange Commission and we still come to 
Congress. That is part of our constitutional system. We come 
and make our case for appropriations. But the bank regulators 
and the consumer finance board and so forth are not in the 
appropriations process, so they are sort of outside.
    And I enjoy my time in front of this committee. I just wish 
I could make a better case and that you had more flexibility.

                               USER FEES

    Mr. Farr. Is there a fee structure, though, that would be 
appropriate for the CFTC to fund itself--like the FDA?
    Mr. Gensler. I believe, though it is not in our budget, 
that the President this year, as he has in the past--and I 
believe President Bush did in his time, too--recommended some 
fees to be collected on transactions to help defray the cost of 
our agency. If that is something this committee and the 
authorizers wanted to work on, we would look forward to working 
with Congress in any way that you thought was appropriate.
    Mr. Farr. Thank you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you.
    Mr. Nunnelee.

                             SEQUESTRATION

    Mr. Nunnelee. Thank you, Mr. Chairman.
    Commissioner, just describe for me briefly your planning, 
say, in the 6 months leading up to sequestration. What did you 
do? How did you prepare for it?
    Mr. Gensler. We spent a lot of time with our executive 
director, our head of technology, and our human resources folks 
thinking through, if sequestration were to happen, what does it 
mean for us?
    And so we consciously were conservative about back-filling 
staff, and we let that sort of taper off about 4 or 5 percent 
into sequestration. We were aware also that we came into the 
year with some modest carryover because you were good enough at 
this committee and elsewhere to give us 2-year money.
    So, fortunately, we weren't in a position that so many 
other agencies had to furlough. But I don't think that would be 
the case coming in 2014. We sort of have enough to get to that 
point.
    I hope that answers your question.
    Mr. Nunnelee. Mr. O'Malia, do you have anything to add to 
that?
    Mr. O'Malia. Well, obviously, coming here and asking for 
increased technology budgets and the importance of that to 
integrate into our oversight program, it gets a little 
frustrating when we have to shift technology resources to 
consistently cover staff increases. I understand completely 
that we can't operate this commission without the staff. 
However, picking priorities and making certain going forward in 
tough budget environments that we are going to be able to use 
technology in a very important and leveraged fashion to enhance 
the capability of staff would be useful.
    Congress has given us the flexibility, so I respect that. 
But I hope going forward that we continue to make sure that 
that is on equal footing--in fact, a priority of our 
enforcement and oversight program.

                              ENFORCEMENT

    Mr. Nunnelee. Chairman, it is my understanding that in 
testimony before one of the Senate committees you said, in 
response to a question about sequestration, that you have 
shelved some cases. And you made a comment recently that one 
could easily blow a hole in the bottom of reform like a gaping 
hole in the bottom of a boat.
    So isn't shelving these cases actually blowing the hole in 
the bottom of reform?
    Mr. Gensler. We are constantly faced, as any law 
enforcement agency is, with making priorities as to which cases 
to pursue. But what we have found, because of the financial 
crisis of 2008 and because of the passage of Dodd-Frank and 
some of the changes in the marketplace, that we are 
increasingly faced with complex cases, complex investigations 
and we don't have sufficient staff to address them.
    It is not as much related to sequestration as just, 
generally speaking, we have--I think our enforcement staff, 
about 154 people, is about where it was 11 years ago. And with 
the crisis and the passage of Dodd-Frank, we have an 
overabundance of complex cases in front of the agency, as these 
LIBOR cases have shown.
    In terms of blowing a hole in Dodd-Frank, that was more a 
reference on this cross-border area because there are 188 
jurisdictions around the globe. Most of the large U.S. 
financial institutions have between 2,000 and 3,000 legal 
entities. And they can just drop a legal entity in some 
jurisdiction, whether it is the Cayman Islands or Mauritius or 
somewhere, and do their business there if they wish. But then 
the risk comes right back here. That is what happened in AIG 
and these other circumstances. So that was the reference I was 
making.
    Mr. O'Malia. With all due respect on enforcement, we have 
taken a very aggressive stance. I think in your budget on page 
25, you will see that we have filed a record number of cases, 
pursued a record number of investigations, and, as we have 
discussed, issued a record number of penalties. We take 
enforcement very seriously. We are pursuing Dodd-Frank 
enforcement today.
    So we have a very robust and aggressive enforcement 
program, and that is appropriate. I have not been told by our 
director of enforcement that we are giving up cases due to 
budget constraints.
    Mr. Nunnelee. Thank you.
    Thank you, Mr. Chairman. Yield back.

                               TECHNOLOGY

    Mr. Aderholt. Commissioner O'Malia, let me address this 
next question to you.
    First of all, with a marketplace that trades 80 percent 
electronically and the Commission already at record high 
staffing levels, I wanted to take a look at the Commission's 
current standing on technology. Of course, you chair the 
technology advisory committee of the Commission, so I wanted to 
particularly point this to you.
    For the last 3 fiscal years, this committee has fenced off 
$147 million for technology. To the committee's dismay, the 
Commission has transferred $31 million from IT to pay for staff 
and also for other purposes. In 2011, CFTC told the committee 
that over 5,000 forms per quarter, or 20,000 per year, were 
received via hard copy and entered into a database by hand. 
With 82 percent of the Commission's staff being paid more than 
six figures annually, this seems to be an astonishing waste of 
resources.
    As chairman of the CFTC's technology advisory committee, as 
I mentioned, can you tell me if the Commission has made any 
improvements in using technology processes to replace costly 
and burdensome hand-entry methods?
    Mr. O'Malia. Thank you very much for that question.
    When I first arrived at the Commission, I was astounded to 
find out that we were receiving many of our forms via facsimile 
or PDF. That is an electronic version, but it doesn't 
automatically populate our surveillance systems. And in the 
21st century, surveilling 21st-century markets that trade at 
microseconds, it is unacceptable that we have a fax-based form 
and compliance program. There are too many errors. It is too 
labor-intensive for us to receive faxes, enter in the data, and 
then begin to do our analysis. The forms should automatically 
populate our systems.
    I raised that in the very first year that I arrived, and I 
think we have actually made significant progress through modest 
increases in technology that this committee has provided to 
focus on that.
    Now, we have a very long, long way to go before we are in a 
position to have a 21st-century electronic surveillance 
program. And with Dodd-Frank, that changes that even more, to 
integrate the swaps and futures markets to really understand 
how people trade and operate. We are making progress, and I 
think that is why technology has to be absolutely our top 
budget priority.
    Let's talk about a 5-year budget plan that really lays out 
the strategy going forward. This budget tells you exactly what 
we have done in the past. It does nothing to tell you about 
where we are going in the future, and that is our real 
shortcoming. What is it going to take to be a 21st-century 
technology-based regulator? How many people, what kind of 
systems, and when can we install it? And how much is it going 
to cost? That is what you need to know. That is what we need to 
know.
    Where in this budget is technology a priority? You cannot 
see any priorities in this budget. Everything is a priority. 
And, therefore, it is going to be difficult if you have limited 
resources or are concerned about sequestration cuts or modest 
increases. How are you going to apply them? What comes first? 
What comes second?
    It is a very difficult balance, but we are not giving you 
the tools and information you need to make well-informed 
decisions about how much this is going to cost and where we are 
going to be in the next 5 years.
    Mr. Aderholt. Chairman Gensler, would you like to add 
something?
    Mr. Gensler. I agree with Commissioner O'Malia that we have 
made progress but we are not where we need to be.
    Of this approximately $195 million that we have this year, 
that is with sequestration, approximately $63 million or $64 
million, or one-third of it, is technology. Now, that 
technology is sometimes outside services; some of that 
technology is our in-house full-time equivalents. But about $63 
million or $64 million of the $194 million.
    So there is no disagreement here that we need to keep 
bolstering and moving forward on technology. We do actually get 
daily transactions and daily open interest electronically. But 
Commissioner O'Malia is right and the chairman is right; we 
need to continue to make progress on other forms that need to 
be electronically populated and so forth.
    And I think that that total of $63 million internally and 
externally spent on technology, we have requested closer to 
$100 million out of the $300 million total, will be well-used 
if we are able to get part of it or all of it.
    Mr. O'Malia. If I may, in my testimony I have broken out 
how we spend the $102 million on technology. And it took some 
work to get it out of this budget document because it actually 
isn't explicit in this budget document. You can't really tell. 
And we have asked. We are working with staff.
    $102 million breaks down to roughly 76 cents of every 
dollar we are spending goes to staff. That is people. Now, 
again, you cannot run a technology program without people 
servicing it. Fifty percent of the overall technology budget 
fundamentally goes to just keeping the lights on. That is 
running our telephone system, our network, which of course is 
essential, BlackBerrys, laptops, you name it, desktops, 
copiers. That is in that budget, too.
    So when you think about where we are going for Dodd-Frank 
and what we are going to tackle going forward, you really need 
to separate out and understand how much we are actually 
applying to Dodd-Frank. As best as I can calculate, it is 
roughly $12 million that is actually going to hard technology, 
software, of the $102 million for Dodd-Frank technology 
initiatives. That is not enough.

                                PLANNING

    Mr. Aderholt. And you mentioned a 5-year technology 
investment plan?
    Mr. O'Malia. I think it is incumbent upon us to give this 
committee the specifics of where we need to be to live up to 
the enforcement requirements that we have laid out in our 
rules.
    Dodd-Frank gave us a new set of rules. What is it going to 
take to be that 21st-century regulator? What tools do we need 
to invest in? What kind of people do we need? And what does the 
budget look like? And you need to give us annual milestones, 
direction for annual milestones, so you can measure our success 
or failure.
    Mr. Gensler. We put together a 5-year strategic plan, the 
Commission, around the time of the passage of Dodd-Frank, so 
that is 3 years or so ago. We are set to do another 5-year 
strategic plan early throughout the rest of this year, and then 
we would submit it to Congress and so forth.
    Mr. Aderholt. Which he was referring to.
    Mr. Gensler. Even broader, because a broad strategic plan 
would include technology, but it would be broader covering all 
Commission programs.
    So we are where we need to update our 5-year strategic 
plan, in essence, early, after about 3\1/2\ years, because now 
that we have not only got the passage of Dodd-Frank, but now we 
have a lot of experience. Our rules are largely done, market 
participants and data and the uses of it. It is time to update 
the whole strategic plan, with technology being a key 
cornerstone of it.
    Mr. Aderholt. So, you know, just making sure I clarify 
this, when you are talking about developing a 5-year plan, 
yours is more comprehensive. Are you talking mainly more 
technology-specific?
    Mr. O'Malia. Absolutely.
    Mr. Aderholt. And, you know, let me just ask you, Chairman, 
would you work with the other commissioners in trying to 
develop something for technology, a 5-year plan in that regard?
    Mr. Gensler. I think as it relates and it is part of the 
broad strategic plan. Because I think that you can't really 
decide how to put technology to work unless we have some shared 
views as to what is our overall strategy of examination and 
registration, enforcement, and how it fits into that strategic 
plan.
    But, yes, as it is part of that overall, it is our full 
intention to be doing it as part of the strategic plan that--I 
can't remember the exact timing, but later this year or early 
to the first quarter of next year we would finalize.
    Mr. Aderholt. My time has run way over.
    Mr. Farr.

                        TECHNOLOGY FUNDING NEEDS

    Mr. Farr. Well, thank you, Mr. Chairman. I want to continue 
along those lines.
    Our oath of office is to provide for a check and balance on 
all things, private and public. It is also, I think, the 
fundamental responsibility to guarantee the national security 
of our country. And part of that national security is our 
financial security.
    And as we talk about your need to have the tools, both 
personnel and technology. In many ways, you are like the staff 
of this committee. Because we are like the board of directors 
of the CFTC. And we really ought to be making sure that in this 
modern world that you have the tools you need to do the job. I 
want to understand what kind of risks are at stake if we fail 
to meet your concerns.
    I just wonder if your $125 million ask is enough. I mean, 
ironically, you are talking about a 5-year strategic plan. You 
know, the other agency that does 5-year strategic plans is 
called the Department of Defense.
    Mr. O'Malia, you talked about having a separate budget for 
technology. I haven't looked at it that closely. Is it separate 
from the $125 million increase?
    Mr. O'Malia. In our request, it is wrapped up in the 
overall total.
    Mr. Farr. Uh-huh.
    Mr. O'Malia. For the last 3 years, Congress has provided 
bill language designating a specific amount, a minimum for 
technology.
    Mr. Farr. Well, the numbers that you are quoting are the 
numbers that came out of OMB. What are the numbers? Are your 
numbers different?
    Mr. O'Malia. No, they are not. The number we have given--as 
an independent agency, we develop our own budget and we submit 
it to OMB. They have--you know better than I, Mr. Chairman--
what they do to our budget was relatively unchanged from our 
recommendation. In fact, when we send our recommendation to 
OMB, we send an identical copy to you so you know exactly what 
we are recommending to OMB. So this budget is what we 
recommended to OMB. The only difference, I think, is the 
President proposed a fee structure, but not to be kicked in 
until next year.
    One of the things and why I continue to focus on technology 
is I can't give you a good number on technology because I don't 
have any planning horizon to base that on. I have no idea how 
much it will cost to develop an order message system, meaning 
how we are going to pull in order messages, to supplement our 
transaction details. I have no idea how much it will cost to 
establish a risk-analysis system for designated contract 
markets or clearinghouses. I don't know how much it is going to 
take to integrate swap execution facilities, and the swap 
market with futures markets.
    We haven't done the math. We don't have the details to 
inform you and us, frankly, what our needs are going forward.
    Mr. Farr. Well, this committee has never been technology-
averse. I mean, we took our Farm Service Agency, which has 
field offices in every one of our districts, but when they 
asked for a technology increase, we gave them everything they 
needed. And we upgraded their software all over this country.
    And I think Chairman Gensler last year indicated that it is 
not just technology, because when you get down to these cases 
that you just settled and got the fines on, judges don't want 
to hear computers, they want to hear people testify. But, 
obviously, the data you are using comes from technology.
    But, Mr. Chairman, this is one where we can't afford not to 
meet their request. There is too much at risk.
    Mr. Gensler. I share your view, but I know that it is a 
challenging budget environment for a committee of yours to be 
faced with a commission like ours coming for a request. But, 
fortunately, though it is 52 percent, we are a small agency, 
and it is $100 million in the overall budget of the U.S., which 
is measured in the trillions. I know that is not what you get 
to allocate at this subcommittee, but I do think it is a good 
investment.
    Technology is just a tool----

                    NATIONAL AND FINANCIAL SECURITY

    Mr. Farr. In this light of national security, that is where 
we put more money. If it is terrorism-oriented, we will put 
money toward it. But we don't think of the financial world as 
also being part of our national security. And it is. I mean, 
obviously, the intel agencies monitor the markets every day. It 
is a big, big issue. And it seems to me you need the so-called 
weapons to do your mission, as the DOD does.
    Mr. Gensler. Yeah. I like your analogy. We need the weapons 
or tools of technology and people to oversee these markets. I 
think of it usually about economic security.
    And it is so that people in each of your districts--and, 
again, it is the small-business man, like my dad was, that can 
just make sure that when they take out a loan, they can lock in 
the interest rate, or if they are a farmer, that they can lock 
in the price at harvest time. That is what these markets are 
for. There are speculators in the market, but the heart of the 
market, the reason this small agency exists and has existed, is 
to ensure that the markets work for those people at the core of 
it.
    Mr. Farr. But when it was invented, we never even heard of 
derivative swaps.
    Mr. Gensler. Well, we never heard of so many things, and so 
much has changed even in the last 5 years. And Congress gave us 
a whole lot larger mission. And we will probably be grappling 
with this for a number of years. I just think this agency is no 
longer right-sized to the mission that we got. And whether we 
catch up with that hopefully this year or whether it takes us a 
number of years, it is to right-size it to the mission.
    Mr. Farr. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Yoder.

                      RECORD KEEPING REQUIREMENTS

    Mr. Yoder. Thank you, Mr. Chairman.
    Gentlemen, I have been listening closely to this dialogue 
we have been having about the scope of the mission, how that 
has changed over the years, certainly Dodd-Frank. I think the 
point has been made very clearly on that.
    I want to take that conversation and maybe move it into a 
thought process on some of the things and rules that are being 
placed upon some of our commercial market participants and the 
burdens we are placing on those folks. So these are the burdens 
you are placing on others versus the burdens we are placing on 
you, and maybe think about these things in similar terms.
    And, Chairman Gensler, in particular, with regard to the 
oral and electronic recording requirements included in part 
1.35, as you know, despite significant comments from both 
industry participants and others at the Commission, these 
requirements may be beyond the scope of anything needed to 
perform adequate market oversight, yet the Commission has 
chosen to leave them in place, placing an enormous burden on 
small commercial market participants, in particular, for what 
some see is merely a regulatory fishing expedition.
    So I would like you to speak to that. And I would also like 
to know, would you agree that these requirements for some are 
going to be extremely onerous and, in some cases, actually 
cost-prohibitive to industry participants, and potentially have 
the effect of likely having these rules force some current 
members away from the exchanges?
    Mr. Gensler. Oral tape recordings are very important to our 
oversight of markets. They are at the core of these recent 
interest rate investigations. And so, in this rule that you 
mentioned, rule 1.35, we finalized in the fall and 
significantly narrowed--we proposed it, again, through the 
Administrative Procedures Act, we got a lot of comments in, and 
significantly narrowed it, and then finalized that in the fall 
so that futures commission merchants--we only have 110 or 120 
futures commission merchants--as well as swap dealers--Congress 
specifically put in statute that swap dealers had to do oral 
recordings--do oral recordings.
    I would like to follow up with you directly if there are 
issues that you are hearing from specific futures commission 
merchants and members of exchanges. Because our clear intent 
was to get the tools of law enforcement and the tools that 
these recordings be made by these major market participants, 
and not--it is not a requirement on, let's say, a grain 
elevator operator or a farmer or small business. But I would 
like to better understand, because if you can help us be our 
eyes and ears, maybe you have heard something I just haven't 
heard yet.
    Mr. Yoder. Sure. I appreciate that, Mr. Chairman.
    Commissioner.
    Mr. O'Malia. Yes, the concerns I have heard are from small 
FCMs. There are two issues that have really raised their 
concerns recently. One is the residual interest issue and how 
they are going to be dealing with the payment of margin. And 
the other one is this 1.35 rule.
    And these are the smallest FCMs. Now, we have provided an 
exemption for small IBs; these are the introducing brokers. But 
there are some elements, there are certain participants or 
agents of the FCM that go out, and they use regional offices, 
they use other facilities, and they don't have recording 
capabilities in these satellite offices. And those are the 
individuals I have heard from most recently.
    And so I think that really bears careful examination to 
figure out, have we created an expectation that they can do 
this without much cost? And that could have been a failure of 
our own cost-benefit analysis to really thoroughly look at all 
of the participants in the market. And maybe they didn't get on 
our radar screen and we should go back and take care of that.
    Mr. Yoder. Okay. I appreciate those answers.

                          LITIGATION EXPENSES

    And then a final question regarding your budget, in 
particular, and this discussion about technology and where we 
might need to invest to make, essentially, the CFTC more 
efficient. Certainly, there are some areas of the budget that 
don't create efficiencies, that don't provide value, and one of 
those, probably, areas is when we get into litigation. You 
know, as a lawyer, certainly I understand lawyers have to put 
food on the table and we have to make sure that--you know, 
lawyers are people, too. But the litigation costs of CFTC 
certainly are a factor that might drive away from other 
priorities.
    And so I thought I might just allow you to discuss ways in 
which the CFTC can operate in a manner that might avoid some of 
these lawsuits. Or are there ways that we can find solutions 
that might get us past the very divisive 3-2 votes and points 
in which we might not be in agreement and then creating this 
litigation atmosphere that is costly for everyone?
    Mr. Gensler. I in no way want to create any discomfort for 
my friend and fellow commissioner O'Malia, but the vast 
majority of our rules are actually unanimous. I think 70 
percent have been finalized unanimous. But there are a handful, 
a small handful, of 3-2 votes, but it is maybe only 10 percent 
of what we finalize. We work and work and work at consensus; we 
don't always get there. And that is the nature of five 
independent-minded and thorough people.
    In terms of litigation, I assume you are referencing that 
we have had I think it is 3 circumstances where somebody has 
brought litigation, on 48 final rules. I think it is part of 
our democracy that that occurs, but it just gives you a sense 
of it.
    We address ourselves through the Administrative Procedures 
Act, cost-benefit analysis, Paperwork Reduction Act, and so 
forth, and all of the procedures. But if somebody thinks we got 
it wrong, they have the right, as they should have the right, 
to take that into the court system.
    We address issues ourselves, trying to be a very open 
process. I think we are nearing 40,000 comment letters. We put 
all the comments up on our Web site. We have had over 2,000 
meetings. And we put all these meetings up on our Web site so 
people can see, and run as openly as we can this challenge of 
getting this in place.
    Mr. O'Malia. One area where I think we can do a much better 
job in minimizing the legal fees and increasing the compliance 
is to really draft commonsense, straightforward rules.
    The swap dealer rule, unfortunately, does not meet that 
test. It is a joint rule with the SEC, yet we have come up with 
different solutions on what a hedge is. And that is 
frustrating. I know that the end-users, specifically, are 
frustrated by the facts and circumstances application of, are 
they or are they not a swap dealer? We ended up using a de 
minimis threshold to lower their concerns, but it is very 
difficult for them to figure out where dealing activities and 
commercial activities stop. That shouldn't be the case.
    In fact, this is one area where I think Congress should 
actually weigh in and revisit it, because the swap dealer rule 
and its application is of enormous concern to the end-users. We 
could be much more clear about where their activities stop, and 
then they could reduce their reliance on their lawyers to 
figure out what their commercial activities actually are and 
are not. So I think we could do a much better job on that.
    And there is a whole host of other rules. The chairman 
noted, of the 42 or 43 rules we have finalized, we have also 
had over 80 exemptions or clarifications. And that really takes 
a lot of the staff's time, in fact, to interpret what we 
actually said in the rule. It makes the industry nervous about 
compliance deadlines because frequently we wait right up until 
the end and they are very uncertain. And then when you look at 
the entirety of the rulemaking, understanding what rules apply 
to you and when, has been a very common theme among end-users, 
everybody, frankly. Does it apply to me, does it not apply to 
me?
    If everybody knew what the compliance deadlines, 
requirements, and rules were and there were better bright 
lines, I think we would increase our compliance and we wouldn't 
waste our time, we wouldn't waste their time.
    Mr. Yoder. Appreciate those responses.
    Mr. Chairman, if I might, do we know what the cost of 
litigation is to the CFTC?
    Mr. Gensler. You are referencing these two or three 
lawsuits?
    Mr. Yoder. Yes.
    Mr. Gensler. We could probably get--we haven't estimated 
it, but we probably could estimate it and get back to you.
    Mr. Yoder. I think it would be helpful to know that, 
because particularly with the Commissioner's comments regarding 
when we have no action letter and all these things. And we had 
a good conversation earlier about the challenges regarding a 
guidance versus a rule----
    Mr. Gensler. Right.
    Mr. Yoder [continuing]. And the SEC and the CFTC related to 
foreign relations, all these entities. That stuff creates 
litigation when we don't have specifics.
    Mr. Gensler. I could answer this way. Our Office of General 
Counsel, which is between 50 and 55 people, ten of the people 
are in what is called a litigation unit.
    Mr. Yoder. Okay.
    Mr. Gensler. But they also litigate appeals in our 
enforcement cases.
    Mr. Yoder. Thank you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. DeLauro.

           ADDITIONAL PLANNING FOR INCREASED RESOURCES NEEDED

    Ms. DeLauro. Thank you, Mr. Chairman. And sorry to dash out 
to the floor and back.
    Mr. O'Malia, in your testimony, you admit that the 
Commission's, quote, ``expanded mission cannot be accomplished 
without modest increases in resources.''
    Let me ask you, how large an increase would you support?
    Mr. O'Malia. A similar question was asked by Mr. Farr, and 
right now----
    Ms. DeLauro. Okay. I am sorry.
    Mr. O'Malia. No, you were out, you had other 
responsibilities.
    I can't give you an answer. I don't know because we haven't 
done the math. We don't know what the requirements are for our 
technology going forward, which is a priority for me, of 
course.
    I would like to know where we need to be to surveil across 
markets, SWAPS and futures markets, and what is it going to 
take to develop a better risk analysis to make sure that we can 
surveil the London Whale and the clearinghouses. These are very 
important tools that I think we need to adopt. They have a very 
heavy reliance on technology. If we had a 5-year technology 
budget plan with annual milestones, we would have a better 
sense of what it is going to cost to build this out.
    I would like to see an order intake system so we understand 
how high-frequency traders are trading, what their strategies 
look like----
    Ms. DeLauro. Uh-huh. No, go ahead, because I have a high-
frequency question too. I have a series of questions here, and 
I want to get them in in the 5 minutes.
    Mr. O'Malia. So I think it would benefit the Commission if 
we did our homework, developed this budget plan over 5 years, 
both staff and technology, so we can tell you and we can, 
frankly, reflect on it ourselves whether we are on the right 
track and how much it is going to cost.
    Ms. DeLauro. Uh-huh.
    Well, you spoke of high-frequency traders and futures 
markets; it has grown 56 percent. You are critical of the 
Commission for adequately investing in technology to monitor.
    How does--and I would like to ask Mr. Gensler the same 
question--how can the Commission develop the technology to 
monitor the market without additional resources?
    Mr. Gensler. We simply can't.
    Commissioner O'Malia is right when he points out that we 
should oversee orders, not just transactions. I signed off on 
this over a year ago, but we don't have sufficient funds to do 
it.
    The chairman of this committee has rightly noted that we 
have transferred between technology and staff because we have 
been trying to stay at least at this level of staff. So we are 
making tough choices. We need more resources to oversee----
    Ms. DeLauro. So, in essence, if the budget request is fully 
funded, these are the kinds of activities that you would be----
    Mr. Gensler. Yes.
    Ms. DeLauro [continuing]. Trying to engage in in some way.
    Mr. Gensler. Absolutely.
    Ms. DeLauro. Also, in the testimony, ``The budget request 
presents everything as a priority and provide no metrics by 
which to increase the Commission's success or failure.'' Would 
you address that?
    Mr. Gensler. Well, see, when we did a new strategic plan 
3\1/2\ years ago, we actually took the approach that we were 
not going to set a bunch of standards that we could meet 100 
percent, that there were going to be real standards.
    Maybe we took it too seriously because our latest report to 
Congress on this, under GPRA, I guess, is the law, we found 
that a lot of places we don't meet--we are sometimes at 40 
percent of where we need to be or only 60 percent of where we 
all collectively decided to be.
    We are going to do a new strategic plan and set, again, 
some roadmaps and standards for the next 5 years. And I think, 
actually, as commissioners, we have our first offsite in early 
May to start to work on that strategic plan.

                       UTILITY OF SELF-REGULATION

    Ms. DeLauro. Again, Mr. O'Malia, in the testimony, you 
praised the new industry initiative deployed to monitor and 
protect the segregation of consumer funds. The initiatives were 
created by self-regulatory organizations.
    Let me get the two pieces in, and then I will ask you both 
to respond.
    In your opinion, what role should the Commission have in 
overseeing these programs?
    I will just tell you, as someone who is an observer and 
needs to be an informed observer because we vote in these 
areas, that, you know, I always get concerned about self-
regulation. I have watched it not just here but I watch it in 
food safety, I watch it in a whole variety of areas. So it 
seems to me that when you are dealing with self-regulation, we 
head back to where we were before the crisis.
    But I want to get your response as to what role the 
Commission should have in overseeing these programs and, Mr. 
Gensler, your opinion on what role the Commission should have 
in overseeing self-regulatory organizations.
    Mr. O'Malia. Well, I think the SRO, the self-regulatory 
organization designation, is somewhat of a misnomer. We have 
complete and thorough oversight of the two entities I referred 
to, the National Futures Association and the CME Group. Both of 
those entities did step up and deliver in the aftermath of MF 
Global and the Peregrine Financial.
    We had a technology advisory committee meeting. We said, 
this is an industry failure that needs to be solved, and you 
need to solve it and you need to pay for it. And they did it. 
And today they are going to be able to report that they are 
going to be able to analyze the FCM balances with the custodian 
bank balances for the customers. They are able to match that up 
for both equities and cash and flag for themselves and us 
whether there is any deviation in that number.
    So, in the case of Peregrine Financial, the gentleman who 
stole the money out of the bank account and defrauded the 
customers, that can't happen anymore. The banks push the 
information out, and the SROs compare those two balances on a 
daily basis. So we have closed that loophole. And, thankfully, 
the industry did it on their dime and on their time frame, 
because if we had to do a rulemaking and get comment, we would 
still be doing it.
    Ms. DeLauro. I want to get Mr. Gensler, if I can, Mr. 
Chairman, just to answer the question, what role the Commission 
has in overseeing self-regulatory organizations.
    Mr. Gensler. I think we have a critical role. Congress put 
it right in our statute decades ago to oversee the self-
regulatory organizations. We have the National Futures 
Association to oversee parts of the market and the Chicago 
Mercantile Exchange.
    But I don't imagine you would want us to say that we are 
not going to ever go in to examine JPMorgan's swap book or 
Goldman Sachs' swap book or some mid to large futures 
commission merchant. I think part of the circumstance at 
Peregrine was that we didn't go in enough, as well. Even though 
the frontline regulator was the National Futures Association, I 
think that we need to do a better job as well.
    Ms. DeLauro. So you need to oversee the self-regulating.
    Mr. Aderholt. Mr. Bishop.
    Ms. DeLauro. Sorry. Thank you.
    Mr. Aderholt. Mr. Bishop.

                       DISTRIBUTION OF RESOURCES

    Mr. Bishop. Thank you very much.
    Your fiscal year 2014 budget proposal allowed a total of 
1,015 civilian full-time employees, FTEs, which is about a 47 
percent increase over the level provided for in fiscal year 
2012.
    Can you give us some indication of how these new employees 
will be distributed among the Commission's various activities? 
Assuming for argument's sake if the committee were to agree to 
only half of the proposed increase in the FTEs, say, 164 
additional FTEs, what would be the Commission's priority in 
terms of the additional resource needs? What impact would not 
receiving the full FTEs have on your enforcement capabilities 
and capacity?
    Mr. Gensler. Just to give you a sense, I am just breaking 
down the 2014 budget increase by people; I could do it by 
dollars as well. But it is 21 percent enforcement, 19 percent 
examination, 17 percent surveillance. So those three, I would 
say--enforcement, examination, surveillance--are the three 
biggest priorities.
    Mr. Bishop. These are personnel areas?
    Mr. Gensler. That is if you measured it in people. If it is 
pure dollars, it changes a little bit because in dollars it is 
surveillance, enforcement, and then the third is data 
infrastructure--so the data in dollars, because so much of that 
is technology--would be the top three, and then examinations 
falls to fourth.
    Mr. Bishop. And what would the priorities be and how would 
you be impacted if you don't get further funding?
    Mr. Gensler. I think it depends where this committee and 
Congress came out. As you said, if we only got half of the 
funding, I still think those four areas would be the 
priorities. We would have to rejuggle. We would be deeply 
appreciative if we did get half of our request because that has 
not been what is happening the last several years. But we would 
juggle between those three or four areas--data, infrastructure, 
which is so much the technology area that Commissioner O'Malia 
and I agree.
    Mr. Bishop. You can't do your job if you can't get your 
request; is that basically it?
    Mr. Gensler. Well, I certainly think that is the correct 
assumption if we still under continuing resolutions are flat-
lined. And, in fact, it gets worse because we won't have a 
carryover balance going into 2014.
    But if you are able to see your way in this difficult time 
to help us out a bit, then we would focus, I think, on these 
three or four key areas.
    Mr. Bishop. What you are asking for, really, is to 
discharge the responsibilities and obligations that Congress 
has placed on you?
    Mr. Gensler. Very much so. Very much so.
    Mr. Bishop. If we don't give you the tools to do it, we are 
inhibiting your ability to carry out our directives.
    Mr. Gensler. Yes.
    Mr. Bishop. Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you, Mr. Bishop.

                           GIFT CERTIFICATES

    As you have heard, the bells have sounded, and we do have a 
vote. I do want to briefly follow up with one question I know 
that was asked last year for the record and just want to follow 
up on that.
    In fiscal year 2011, the Commission signed a contract 
through 2014 with giftcertificates.com. You may be familiar 
with that or remember that, to provide its employees with $50 
gift certificates. The gift certificates would allow Commission 
staff to buy various things at retailers of their choosing.
    As I mentioned, this question was asked about that last 
year. I just wanted to know how much money has been spent on 
that contract to date and how many of these cards have been 
given to employees.
    Mr. Gensler. If I could, Mr. Chairman, get back to you 
promptly with answers. I personally wasn't prepared to know, 
and those are very detailed questions. So if I could get back 
to you promptly.
    Mr. Aderholt. Okay, if you could just find us--again, I 
will just summarize on that--the amount of money that has been 
spent on the contracts to date and then how many of the gift 
cards have been given to Commission employees.
    [The information follows:]


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    Mr. Aderholt. So, with that, thank you both for being here 
and for your testimony this morning. We look forward to working 
with you as we continue on with the fiscal year 2014 budget.
    And the committee is adjourned.
    Mr. Gensler. Thank you.


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                                           Tuesday, April 16, 2013.

               BUDGET HEARING: DEPARTMENT OF AGRICULTURE

                               WITNESSES

HON. THOMAS VILSACK, SECRETARY, DEPARTMENT OF AGRICULTURE
JOSEPH GLAUBER, CHIEF ECONOMIST, DEPARTMENT OF AGRICULTURE
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. The subcommittee will come to order. Today we 
begin our review of USDA's fiscal 2014 budget request. I want 
to welcome the Secretary of Agriculture, Tom Vilsack; the chief 
economist, Dr. Joe Glauber; and Mike Young, USDA's budget 
director to the subcommittee. Go, gentlemen, thank you for 
being here this morning. And we look forward to your testimony.
    The strength of American agriculture continues to be in our 
network of domestic and international partnerships, producers 
in rural communities, research scientists looking for ways to 
increase production while protecting the environment, and 
exporters seeking out new markets. This system allows for less 
than 2 percent of our population to produce safe, wholesome and 
affordable food for our Nation and much of the world.
    Agricultural exports continue to be a bright spot in our 
trade balance as projected for fiscal year 2013 exports are 
forecast at a record $142 billion, while imports are forecast 
at $112.5 billion, resulting in a $29.5 billion trade surplus.
    Every Member should be aware that this subcommittee 
provides the funding for the agencies--Research, Foreign Ag 
Service, Animal and Plant Health Inspection Service, Food 
Safety and Inspection Service, among others--that play an 
important role in keeping American agriculture safe and 
competitive. More importantly, we have to thank the American 
taxpayers who entrust us with using their tax dollars in the 
most efficient and effective way possible.
    Turning to USDA's budget request, at first glance it would 
appear to be straightforward. In fact, the Secretary's 
testimony says that the request is approximately $109 million 
below the 2013 enacted level. However if you look a little 
deeper, you will see increases in every mayor area of the 
Department compared to the enacted levels of fiscal year 2013 
Continuing Appropriations Act. All told, there are some $1.3 
billion in increases that are largely offset by a proposal to 
cut $1.4 billion from agricultural programs and move them to 
international development assistance programs. It is a risky 
proposition to pay for increases based on a proposal that at 
least 21 Senators are on record opposing, including the ag 
approps subcommittee chair and ranking member, the ag 
authorizing and committee chair and ranking member, and the 
full committee chair on appropriations.
    Secondly, the budget includes proposals to eliminate the 
direct payments to farmers, modify the Conservation Reserve 
Program and change the crop insurance program. While these 
proposals may or may not have merit, they do have to go through 
the authorizing committees.
    One of the things that the authorizing committee agreed on 
last year on a bicameral and bipartisan basis as they were 
developing their respective versions of the farm bill was to 
reduce spending on SNAP. The Senate bill had a $4 billion 
reduction that passed the Democrat-controlled body, and the 
House bill had a $16 billion reduction that passed the full 
committee, yet your budget proposes to maintain the increase 
that was provided in the Recovery Act at an additional cost of 
$2.3 billion. There seems to be some disconnect with those 
numbers.
    Finally, we look at the presence of overall requests and 
find that it is paid for with an additional $1.1 trillion in 
new taxes and never balances. In a sense this whole proposal 
really does fit the axiom ``dead on arrival.''
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    Mr. Aderholt. Mr. Secretary, before I recognize you for 
your opening statement, I would like to ask the ranking member 
of the subcommittee, the distinguished gentlemen from 
California Mr. Farr, for his opening remarks.
    Mr. Farr. Well, thank you, distinguished chairman. Thank 
you very much.
    Thank you, Mr. Secretary, for being here. I am a big fan of 
your administration of this agency, and I think in the process 
of giving you these budgets and CRs and sequestrations, I think 
your Department really got whacked, and I am sorry to see how 
hard it got whacked.
    I think you haven't got credit for what you are doing in 
trying to focus on a strategy for rural America in developing 
the rural economy, and I congratulate you for your focus on 
that. I think you haven't got any credit for the leverage 
efficiencies that your were able to find in the Department to 
have savings. I wonder if the blueprint for stronger service is 
systemwide, is governmentwide, or is that only in the 
Department of USDA, because we have never heard any other 
department find the kind of administrative savings that you 
have been able to find just doing commonsense approach to 
modern management.
    I am concerned about the cuts to NRCS. I think I would also 
have some concerns that we need to upgrade NRCS to use the best 
management practices, much like they are doing in organic, 
because there are a lot of lessons learned in organic that 
traditional agriculture is following in my district, and they 
are very pleased when they see organic researchers being able 
to teach them how to use less herbicides, pesticides and so on.
    And I think just one challenge for you, really not a 
committee or budget question, is that I think as a former 
Governor and mayor, you understand local government. I think 
this next decade is essentially one where the Federal 
Government, because of lack of increased resources, financial 
resources, is going to be stuck, and we are going to be stuck 
funding the old silos that have been created, you know, long 
times ago. And I think this is a real opportunity to do 
realignment.
    In many ways I look at why doesn't the Federal Government 
contract with States and local governments to provide services 
when they have on-the-ground people doing the exact same thing? 
We have done this in military bases by allowing cities to take 
over the operations of a military base, doing all the what they 
call base ops, which is, mowing the lawns and paving the 
streets and things like that, and fixing things when they are 
broken. So those are sort of challenges that I think, as we 
look forward, you have the opportunity to do a lot of 
realignment, and I hope you look at it.
    I look forward to the testimony, and, Mr. Chairman, that 
concludes my remarks.
    Mr. Aderholt. Okay. Thank you, Mr. Farr. Just as a 
remainder, if anyone has any electronic devices that ring, if 
you could put those on mute or turn those off.
    Mr. Secretary, let me just say that this is a busy morning 
on Capitol Hill. We have three of your colleagues in the 
Cabinet that are at different hearings this morning on the 
appropriations process, so the Members will be going back and 
forth between hearings. I plan to be here, but there will be 
some Members after they ask their questions may be slipping out 
to run by another subcommittee and also some coming in late. So 
as you know, that is part of the protocol up here.
    But, without objection, your entire testimony will be 
included in the record, and I want to recognize you now for 
your oral statement, and we will proceed then with the 
questions. So you have the mike, Mr. Secretary.

                           Opening Statement

    Secretary Vilsack. Mr. Chairman, thank you very much to you 
and to Congressman Farr and the other members of the Committee. 
We appreciate the opportunity to be here today.
    I will tell you that I think all of us are here with a 
slightly heavier heart as a result of the activities that took 
place yesterday. I myself have completed five marathons, and I 
know that at the end of that race, it is supposed to be a point 
of exhaustion, but jubilation and celebration, and 
unfortunately that was the not the case yesterday. But yet it 
is important for us to send a message to the rest of the world 
that we are going to not stop doing business, and so I 
appreciate the fact that you are having this hearing today and 
will do our best to do it in a professional way.
    I don't envy this Committee's challenge. You obviously have 
a concern, as I do, for rural America and for those who farm 
and ranch our lands, and at the same time, you are obviously 
confronted with some serious fiscal challenges. We provide a 
budget today which we think provides balance.
    Let me point out the discretionary budget authority in this 
budget will put us below the 2009 levels. In fact, it will put 
us roughly a billion dollars below the 2009 levels. Let me also 
point out that as a result of steps that we have taken over the 
course of the last 4 years, we have reduced the staff years at 
USDA by nearly 5,000 fewer staff years.
    Notwithstanding the fact that we have fewer people and 
fewer resources, we are still seeing an increased level of 
service being provided to those who live, work and raise their 
families in rural America. Whether it is ag exports, 
conservation, farm service loans, rural development, all of 
that is at or above record levels.
    So we come today with a budget that is focused on trying to 
do what needs to be done to help our farmers, ranchers and 
producers. This budget will provide credit to 34,000 farmers. 
It will continue to expand opportunities in research. It will 
provide a strong safety net, allocating nearly $9\1/2\ billion 
for crop insurance and reinstating disaster assistance programs 
that were allowed to lapse in 2011 which are extraordinarily 
important to livestock producers in this country. It will allow 
us to continue to continue to aggressively promote trade, as 
the chairman indicated the importance of exports, by fully 
funding our market access programs. It will support free and 
transparent markets; continue our efforts to support and to 
protect our crops and our animals and plants from deadly 
diseases; and proposes a new program on feral swine, which is 
currently causing over a billion dollars in damage each and 
every year.
    It will indeed modernize our research facilities, proposing 
to fully pay for a new poultry disease inspection facility in 
Georgia. It will simplify our conservation efforts and 
streamline them, but still allow us to have a record amount of 
conservation activity in the United States. It will support all 
methods of production, including organic. We will note that 
organic production has significantly increased over the course 
of the last several years. In fact, we are now looking at a $31 
billion industry and growing at a very fast pace. And we will 
continue our efforts to provide technology to allow us to make 
services more convenient to our producers.
    This budget also commits us to a continued effort to 
rebuild the rural economy, as Congressman Farr alluded. It 
commits nearly a billion dollars of assistance in efforts in 
helping small business development and job growth in rural 
areas, with a particular focus on local and regional food 
systems, clean and renewable energy, and our new bio-based 
manufacturing initiative.
    It commits nearly $7 billion to improving utility services, 
providing cleaner water, and expanding renewable energy as well 
as broadband in rural areas, the basic infrastructure that will 
allow us to continue to succeed in rural areas. It will support 
the finance of nearly 1,700 community facilities, hospitals, 
schools, police stations, fire stations, all of which are 
necessary to improve the quality of life in rural areas, and it 
will provide homeownership opportunities for as many as 174,000 
families.
    Now, this is a budget that also understands and appreciates 
the important role that our forests and private working lands 
play; provides fire-suppression resources, which is not the 
area of this Committee's review, but still an important aspect 
of USDA's responsibilities. In addition to protecting families 
from fires, it will also continue to improve our food safety 
inspection system. It will support an effort to provide all 
Americans in need of assistance, and particularly our children, 
with adequate nutrition, proposing new dietary guideline 
research for children zero to 2 years of age, and will focus a 
significant effort, as I know this subcommittee is concerned, 
on the integrity of all of our nutrition programs, providing 
additional resources and direction in each and every one of our 
nutrition programs.
    Finally, we are acutely aware of the need for us to be 
responsible in terms of budget and deficits, and this budget 
proposes $39--roughly $38 to $39 billion in deficit reduction 
in crop insurance, conservation, water projects and the food 
aid program which you have alluded to.
    Mr. Chairman, I look forward to responding to the questions 
the subcommittee has, but, again, I don't underestimate the 
difficult challenge this subcommittee has. We offer this budget 
as a path forward and look forward to your work. Thank you.
    Mr. Aderholt. Thank you, Mr. Secretary.
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                    PROPOSED POULTRY SLAUGHTER RULE

    Mr. Aderholt. And certainly, as you rightly pointed out, 
our thoughts and prayers go out to the victims and their 
families in Boston. And those are weighing on our hearts and 
minds this morning.
    I want to start out this morning by talking a little bit 
about the proposed rule on poultry slaughter. It was announced 
January 20th, 2012, and has been over a year since they 
proposed a rule to modernize the way USDA conducts poultry 
slaughter inspection. Can you give us a little overview to the 
committee about the status of the rule?
    Secretary Vilsack. Certainly, Mr. Chairman, and thank you 
for your questions.
    Our poultry slaughter process has probably not been 
reviewed in terms of its methods for nearly 50 to 60 years. We 
have learned a lot from science as a result of research in 
terms of what causes disease, food-borne illness, and we 
believe it is appropriate and necessary for us to modernize our 
inspection process to really focus attention and time on the 
areas where we know pathogen risks are greatest.
    We have proposed this rule. We received a number of 
comments, as you probably know. We are in the process of 
reviewing those comments. I would expect and anticipate that we 
will take action to essentially publish this rule very soon, 
and then obviously we will have an opportunity for people to 
weigh in.
    This is obviously an issue that people have great and 
strong feelings about, but we estimate and believe that 
somewhere between 3- and 5,000 food-borne illnesses will be 
prevented by it this new system. We think it will help us 
upgrade a number of inspection jobs. It will also allow the 
poultry industry, I think, to continue to be profitable, and at 
the same time it will allow us to save some money as well. So 
we think it is an opportunity for to us have a good 
conversation about an inspection system that has not been 
reviewed for quite some time.
    Mr. Aderholt. Seeing that the budget justification that 
FSIS is saying that in implementing the rule, that they will 
likely have to overcome legal challenges, negotiate with the 
unions, and work with industry to arrange conversion to the new 
system, I am most concerned about the legal challenge aspect of 
it and wondering if could you tell us if you belive the 
Department has a solid legal foundation for this proposal, and 
has the OGC weighed in on it?
    Secretary Vilsack. Mr. Chairman, we believe we do, and the 
reason we do is because this is not a brand new concept, this 
is a concept that has been working in 20 plants as a result of 
litigation some time ago. From the experience in the 20 plants, 
we strongly believe that there will be fewer food-borne illness 
incidences as a result of this inspection process.
    There have been concerns raised about worker safety, and we 
have attempted to address those concerns by suggesting that 
this gives us an opportunity to study that issue and to make 
adjustments accordingly if indeed there are additional risks. 
We are obviously not interested in, and I am sure this 
Committee is not, in increasing risk to workers.
    We feel we are on solid ground. We feel that there is 
adequate factual and legal basis for us doing this, and it is 
certainly consistent with our mission and responsibility to 
maintain food safety for Americans.

                         INTERNATIONAL FOOD AID

    Mr. Aderholt. Moving on to touch base a little bit about 
the SNAP, on a number of occasions, you have talked about the 
use of dollars in the SNAP program and the corresponding fiscal 
stimulus of the economy through a multiplier process. In other 
words, when U.S.-grown commodities are used in the maximum 
possible way in this program, we generate jobs associated with 
every title of occupation in rural America, and the grain 
producer--from the grain producer to the person loading grain 
on barges along the Nation's waterways.
    I wanted you to explain a little bit to the subcommittee 
why the U.S. Department of Ag would support a major overhaul of 
this program, especially if fewer dollars are going back into 
the farm-based commodities, and the proposal could jeopardize 
American businesses and jobs.
    Secretary Vilsack. Mr. Chairman, this is one of those 
issues that you are confronting where you are trying to balance 
a variety of needs and requirements and at the same time trying 
to be fiscally responsible. The reality is that the proposal, 
we believe, will result in 4 million additional people being 
helped and assisted. That will provide emergency assistance in 
terms of food aid more quickly than our current system. In 
fact, we believe it will probably cut somewhere between 11 and 
14 weeks off the amount of time it takes to get food to people 
who are actually in need.
    We do believe the way this is set up that 55 percent of the 
food that will be sold or utilized in this program will still 
come from American producers, and we will obviously evaluate 
the impact and effect of that. It does provide resources to 
make sure the maritime industry and those who work in the 
maritime industry are provided help and assistance, about $25 
million, that is set aside for that purpose.
    So this is really about getting more assistance to more 
people, more quickly, with fewer dollars. And we believe it 
will save over the course of a 10-year period $500 million.
    Mr. Aderholt. My time has expired, so let me recognize Mr. 
Farr.

                         INTERNATIONAL FOOD AID

    Mr. Farr. Thank you very much.
    Mr. Secretary, I know that in the proposal there is a 
proposal to move the Public Law 480 program to the Department 
of State, to USAID, so to another Committee and another budget. 
And although I think from a delivery-on-the-ground perspective, 
it makes sense to be involved with those agencies, what I am 
concerned about is that it is a transfer of authority and 
money, but it doesn't guarantee that it is going to get there, 
because we know, first of all, that rarely has Congress adopted 
the foreign aid budget. Secondly, the budget is so full of 
other responsibilities--foreign aid to other countries--that we 
need assurances that it will get to the people it was intended 
for. Our food aid program was signed into law by President 
Eisenhower in 1954. That was post-World War II. America had 
plenty of food, Europe had none. It was the idea of how do we 
take our excess and ship it abroad and feed people. I think it 
was started for all the right reasons. It has just become the 
most expensive food in the world in the way we buy it here, the 
way we handle it, and the way we deliver it.
    I am not endorsing the transfer yet, until there are 
assurances that the program will stay intact and will not be 
raided by other foreign aid interests.
    Secretary Vilsack. Congressman, the proposal basically 
suggests the resources will be divided into three specific pots 
of money: an international emergency assistance fund, the bulk 
of which would go in that fund. There would also be a 
development fund as well as an emergency fund. And I believe, 
given the way this is structured, that there will be proper 
oversight and accountability in terms of dollars getting to 
people that need it. That is why we are confident that we will 
help 4 million additional people, that it will save money, and 
that it will also save time.
    As all of us know, in an emergency situation time is not 
just money, it's also about saving lives. And if we are taking 
11 to 14 weeks to get emergency assistance to people who are in 
need, that raises some serious questions about whether or not 
we are doing the right thing with these dollars.
    It is true that this program started in the 1950s, and it 
did start at a time when America was faced with significant 
surpluses, and other parts of the world had none. I think it 
has changed a bit. We have found a multitude of ways in which 
we use our food and feed products in this country, which is why 
we are seeing a very robust agriculture economy today, and I 
believe it will continue.
    So I am confident that we will be able to administer this 
program; when I say ``we,'' the USAID will be able to 
administer this program properly, and that we will get more 
help to more people more quickly, and we will save money.
    Mr. Farr. Well, you can't control what Congress will do 
with the money. And I would like to see more of the details but 
I am still reluctant on it. And I don't think it is going to 
happen--it is just the politics. I don't think it will happen 
this year, but probably the discussion of moving that way will 
happen eventually. But we need to make sure that the money will 
get used to feed the most needy people in the world, which I 
think is really important for our foreign policy and for 
international security.

                     BLUEPRINT FOR STRONGER SERVICE

    Let me ask you another question about the opportunity--what 
I have been discussing at the local level. It seems to me that 
NRCS, which takes a big whack in your budget, and many farmers 
aren't going to be able to get the services. I think it is an 
excellent program, but I think it is also a program that was 
started and still does education-based prior to the adoption of 
the organic standards and the organic rules, which are now in 
our tenth anniversary. I mean, that is a new farming technique, 
and it has been really developed through all kinds of smart, 
science-based sense of how do you do farming without having to 
use pesticides by using nature in herself. And I don't know 
whether--from what I hear is a lot of those practices haven't 
been really integrated into NRCS. And it seems to me that there 
are efficiencies that you could obtain that might generate the 
savings that you have done in your other leveraged efficiencies 
by upgrading the NRCS educational program to really incorporate 
lessons learned in the organic thing. It is just a statement.
    My real question really goes to you is that you have done 
these leveraged efficiencies within your Department and had 
tremendous savings and never got any credit for it. Have other 
Secretaries gone through the same thing? Are they under a 
mandate to do it, or is this just Secretary Vilsack's own 
initiative to sort of look about how we can modernize 
management within the USDA?
    Secretary Vilsack. We started 2 years ago to do this, 
recognizing we were facing some difficult budget challenges, 
and you all were facing the same challenges. And I have shared 
our techniques and our process with a number of--at the 
direction of the President with the Cabinet, and a number of 
Cabinet members have actually asked our team, our Blueprint for 
Stronger Service Team----
    Mr. Farr. That blueprint is USDA's blueprint?
    Secretary Vilsack. Yes, sir.
    Mr. Farr. So it is not departmentwide, it is----
    Secretary Vilsack. It is not governmentwide, it is 
Department-wide for us.
    Mr. Farr. And how much savings do you think you have been 
able to generate?
    Secretary Vilsack. We have been able to identify over $700 
million, and that number is going to continue to climb.
    Our next goal is to focus on centers of excellence and 
shared service centers where we basically find out who within 
USDA does the best back-room operations, and then basically in 
a sense contract with those folks to be able to save money on 
the back-room operations.
    Mr. Aderholt. Mr. Fortenberry.

                          AMERICAN AGRICULTURE

    Mr. Fortenberry. Thank you, Mr. Chairman, for holding this 
hearing.
    Mr. Secretary, welcome. Nice to see you again.
    Did you watch the Super Bowl? There is no trick here.
    Secretary Vilsack. I am a Steeler fan. I did not really 
want to watch the Ravens win the Super Bowl.
    Mr. Fortenberry. Well, I am not a big devotee to Super Bowl 
commercials. A lot of them can be on the margins, as you know. 
But there was one that was extraordinary, and it basically for 
about a minute portrayed the ideals, the values, the risks, the 
hard work, the noble cause, if you will, of using your own two 
hands and growing food. And I thought it was so powerful and 
impactful in helping restore, if you will, the romantic ideal 
of the American agriculture. I was just deeply, deeply 
impressed. Didn't even realize it was a truck commercial until 
the very end.
    With that said, I think both of us have a responsibility, 
all of us here actually have a serious responsibility, to 
continue to reexplain the importance of American agriculture to 
our people, our Nation. Agriculture is not only about a safe 
and abundant food supply, it is also about economic policy, one 
of the few bright spots in our economy, trade policy, energy 
policy, environmental policy, as well as the national security 
policy.
    We have had dozens of Nebraska national guardsmen go to 
Afghanistan who have farm backgrounds to help that country 
transition to some sort of economic stability, put their lives 
on the line to help farmers over there to build up their 
economy as a part of our draw-down strategy.
    With that said, I know you are a robust presence throughout 
the Nation on behalf of American agriculture. I have seen your 
speeches, and I really appreciate that. I just wanted to 
elevate the importance of all of our conversation to the 
broader communities out there about how much agriculture 
contributes to the Nation's well-being. Sometimes we get into 
narrower policy fights up here, but lose sight of the broader 
impact that our farmers and ranchers and all of our producers 
have for America's well-being. So thank you for your leadership 
in that regard.
    One quick point. We are, in our region, suffering a severe 
drought, as you know. I was on the phone with one of my 
producers midwinter, and I asked him what he was doing. He said 
he was moving dirt. I said, how are you doing that? He said, 
well, there is no moisture in the soil, so you can break 
through it pretty easily.
    So it is important, I think, that we all look at and 
continue to think creatively as to how we research and engage 
in drought-mitigation measures, and I wanted to hear how big of 
a priority that is for the Department. And I have a couple 
other questions, so I will just stop here.
    Secretary Vilsack. Representative, first of all, thank you 
very much for your comments about the American farmer, rancher 
and producer, the best in the world and very underappreciated 
throughout the country.
    We obviously take this issue of drought and, for that 
matter, extreme weather conditions very seriously, and it is a 
priority area of ours in this year and for the next 4 years as 
long as I am Secretary to focus on mitigation and adaptation 
strategies to allow our farmers to be the best in the world. 
Let me give you a couple of examples.
    We will be announcing in the next month or two a series of 
initiatives focused on climate change and expanding research 
opportunities. We are focused very much on multicropping and 
cover cropping because we think that is a conservation 
opportunity that we have not fully appreciated and have not 
fully educated folks about the benefits. We are looking at 
additional barriers in our crop insurance program that make it 
harder for people to embrace cover crops and multicropping, 
trying to remove those barriers. We are looking at ways in 
which we can create market opportunities for those cover crops. 
And we are doing research on the impact that certain cover 
crops have on primary crops to make sure that we don't solve 
one problem just to create another.
    We will continue to keep a watchful eye this year. 
Fortunately some of the spring rains and late winter snows have 
abated the drought situation in some areas of the country, but 
there are still a number of areas, including Nebraska, that are 
still quite dry. So we will have the same set of tools that we 
had last year available, and we will keep a wary eye on this, 
and, if necessary, we will utilize additional CRP land, for 
example, if it becomes an issue of forage. We will continue to 
look at ways in which we can provide help to producers.

                           BUDGET PRIORITIES

    Mr. Fortenberry. Thank you for saying that. I think it is 
terribly important, given that we spent $15 billion on 
indemnity payouts on crop insurance to mitigate the affects of 
drought, which were important obviously. But thank you for that 
commitment and those statements.
    In a broader sense I would like to hear from you what--we 
all have again a responsibility to continue to think 
entrepreneurially about policy. What is old that needs to be 
modernized or let go of; what is new that needs to be invested 
in? And from, again, a higher level of perspective, how would 
you answer that question?
    Secretary Vilsack. Well, specifically in the area of rural 
development, we are proposing a consolidation of a number of 
the smaller programs into a more competitive program that will 
stir the imagination and creativity of folks in rural areas to 
think more creatively about rural development. We established 
the Great Regions Initiative in which we are asking people to 
think not just about their individual community, but how they 
fit within an economic region.
    We are focused very much on building the bio-based economy. 
We think this is an underappreciated opportunity for innovation 
and rebuilding the middle class, as the President has directed, 
basically taking everything that we grow and raise and 
converting it into a chemical, into a plastic, into a fiber, 
into a fabric.
    I have seen extraordinary things recently. I have seen 
plant material that is being used to produce something that is 
akin to fiberglass that will be stronger, but lighter, that 
someday will be used in auto bodies to allow us to have more 
fuel-efficient cars. I have seen wood that is being converted 
with nanotechnology into armor that is lighter than the current 
Kevlar. We have seen corn cobs producing plastic bottles for 
Coca-Cola's water project, and we have seen at Ohio State 
literally hog manure being used to create asphalt.
    I mean, there are just unlimited opportunities here, and 
investing in those opportunities and helping to focus people's 
rural-development efforts is one of the strategies. I could 
talk about this for a long, long time, but the chairman is 
going to do what he just did.
    Mr. Fortenberry. Thank you.
    Mr. Aderholt. Ms. Pingree.

                               GIPSA RULE

    Ms. Pingree. Thank you very much, Mr. Chair.
    And thank you very much, Mr. Secretary. It is a pleasure to 
have you here today. I am indeed fortunate to be the newest 
member on this side of the committee, and I enjoyed working 
with you on the Agriculture Committee, and I am glad I get to 
continue to work with you over here. Thank you for your good 
work.
    And I appreciated your opening comments. Being from Maine, 
we think of Boston as, you know, one of our hometowns and have 
a lot of our own residents and citizens down there. And my kids 
have run that marathon twice, so I feel very deeply for the 
families and their victims, and I am glad you are keeping that 
in our minds today.
    I unfortunately will have to also run off to another 
committee, and I have 25 questions I would like to talk to you 
about this morning, but I am sure I will get in what I can 
today and then hopefully have a chance to submit some or 
continue the dialogue.
    But one thing I wanted to bring up this morning is the 
GIPSA rule. In recent years your agency has taken a lead in 
highlighting some of the anticompetitive and deceptive 
practices that have become commonplace in the livestock and 
poultry sectors. Consolidation in these markets, as well as 
vertical integration and spread of the one-sided sort of take-
it-or-leave-it production contracts has caused a lot of concern 
about the impacts on farmers and their communities.
    In spite of the very clear directions from Congress in the 
2008 farm bill requiring USDA to address some of the most 
abusive practices in these sectors, the last two agriculture 
appropriations bills included policy riders. As you know, they 
hamper your ability to write regulations to address those 
concerns.
    In the GIPSA rider included in the 2012 agriculture approps 
bill, Congress put a stop to some of the regulations that USDA 
had proposed, but gave a green light for you to finalize other 
regulations, which was helpful, particularly those addressing 
abuses in the poultry sector. Even as modest as those were, 
Congress again reversed course in the 2013 continuing 
resolution which we just passed and included another rider that 
actually forces you to rescind some of the grower protections 
that we had green-lighted in the 2012 bill. This rider in the 
CR was strongly opposed by farmers groups across the board, 
from the American Farm Bureau Federation to the National 
Farmers Union.
    I personally, as you can tell, don't believe these riders 
were a good idea, I think they should be corrected, and I would 
just like to hear you talk a little about why those poultry-
grower protections are so important and these riders aren't 
helpful to our farmers.
    Secretary Vilsack. Well, Representative, I had the 
opportunity to speak to a number of producers who had been 
dealing with Pilgrim's Pride in the Carolinas, and who, as a 
result of the bankruptcy of that particular company, suffered 
significant harm. They expressed concerns about the way in 
which they were treated, the lack of notice, the lack of 
ability to adjust their operations.
    In the poultry areas in particular for growers, they are 
required to invest a substantial amount of money to build these 
poultry facilities only to find the contracts on which those 
poultry facilities are based pulled out from under them with 
very little or short notice. And that is the reason why we put 
these rules in place, to give those farmers an opportunity to 
have a more level playing field in negotiation. We also felt 
that they were being taken advantage of as a result of 
arbitration, they had very little say in the arbitration 
process, and the result was we put together a series of rules 
designed to level the playing field.
    You know, the reality is that this is a very difficult and 
challenging market for small producers. It is one of the 
reasons why we are focused on creating, as you well know, and 
as you are a great champion for, local and regional food 
systems as we create additional market opportunities for the 
smaller producers. But without some protection, they are really 
at the mercy of companies, and it makes it very, very difficult 
for producers to be able to go into the bank to secure the 
financing to allow them to continue their operation and to 
expand it.

                    KNOW YOUR FARMER, KNOW YOUR FOOD

    Ms. Pingree. Well, thank you for that. I appreciate your 
continuing support for the farmers in this situation.
    Let me see if I can sneak in one more question while I have 
a chance. So I, like many of my colleagues, was sad to see that 
Kathleen Merrigan was going to be leaving the Department, and I 
really just want you to know how much I appreciated the work 
that she did on public advocacy around local food, and organic 
agriculture and many of the issues which, as you know, have 
been my top priority around agriculture.
    And I just want to get you to speak briefly about, given 
that she will be gone, the commitment that your Department will 
have to things like the local food systems; the fact that you 
mentioned earlier, the growing market in organic foods, local 
foods, and farmers markets. I think that the local food 
initiative that you have done and the Web site and all those 
things have been really beneficial to many of the small farmers 
in my area finding huge new markets that they can connect with 
the consumers. So I don't have a lot of time, but just love to 
hear how you see that continuing. I am sure you will be 
appointing great people, but seems like an important 
consideration.
    Secretary Vilsack. Let me assure you that it is a priority 
of mine. The local and regional food system is an important 
component of rebuilding the rural economy, and it will 
continue. The Deputy did an amazing job of putting together a 
committee of our Know Your Farmer Know Your Food effort to 
basically allow all aspects of USDA to be engaged in this 
effort. That will continue and strengthen, and we hope to 
institutionalize that process throughout the next 4 years.
    You are correct. There has been a 175 percent increase in 
farmers markets. There has been an extraordinary increase in 
investment in food hubs, which allows us to aggregate that 
locally produced food, and we are creating additional markets, 
and it is providing an entrepreneurial opportunity that we want 
to encourage. It is, I think, hopefully bringing younger people 
into the farming sector, and it is also providing an 
opportunity for returning veterans who are interested in 
farming, but who may not have a family member who owns a farm 
to get started.
    So this is extraordinarily important, and rest assured, 
notwithstanding Dr. Merrigan's leaving the Department, we will 
continue to follow through with her vision and your vision and 
my vision of this local and regional food system.
    Ms. Pingree. Thank you very much.
    Mr. Aderholt. Mr. Yoder.

                          AMERICAN AGRICULTURE

    Mr. Yoder. Thank you very much, Mr. Chairman.
    Mr. Secretary, thanks for joining us today. I appreciate 
the opportunity to have a dialogue with you about the future of 
agriculture in our country, about your budget, and how we can 
work together to continue to provide a strong rural way of life 
in this country.
    I am concerned about the economic future of agriculture, as 
many of my colleagues are. I think Mr. Fortenberry and you had 
a nice dialogue about the value of promoting the family farm 
and how it is really central to our values in this country to 
have a strong agricultural production and small family farms. 
It is a structural strength, I guess, that makes some of our 
values in this country work.
    And so I grew up on a farm. I grew up in a time in the 
1980s, was very worried about our farm going bankrupt. A lot of 
our neighbors went under, and it was a scary time in a lot of 
regards. My father came up in 2011 to see me sworn into 
Congress. It was the first time he had been in Washington, 
D.C., since 1978, when he drove his tractor and parked on the 
Mall and caused all sorts of havoc, along with a lot of other 
farmers, because, you know, farmers get very passionate about 
what they are doing, and so, you know, there is a strong 
history there.
    In sort of reviewing your budget, and looking at the future 
of an ag bill in this Congress, and figuring out where we are 
going to place our priorities, some of the savings are coming 
from reducing aid to farmers, support in different programs. 
And I would like to hear your thoughts about the long-term 
perspective, the types of policies we could support to ensure 
that we have investment. We have young people getting engaged 
in farming, that they feel like there is an economic viability 
there.
    We have a tendency to operate in the here and now when it 
comes to agriculture, so things are pretty good in the world of 
agriculture right now. So we are in the process of saying, let 
us cut A, let us cut direct payments, let us cut crop 
insurance, let us whatever folks are suggesting in this 
Capitol, because it is pretty strong right now in the world of 
agriculture. Some concerns are maybe an ag bubble out there.
    And so I would like your thoughts on how we work together 
to pursue policies that can ensure that we can have a strong 
push towards agriculture policy in this country, that we can 
ensure investment, and we can ensure young people continue to 
be engaged, and not just deal in maybe the moment in terms of 
ag policy, but think long term, and think where we have been 
all the way dating back to 1978 and beyond into the future.
    Secretary Vilsack. You know, Congressman, that is an 
excellent observation and an excellent question. We do have a 
tendency here to think in 1- or 5-year increments, and the 
reality is I think we have to have a longer-term vision in 
agriculture.
    I would say a couple of things, one of which is not 
necessarily a focus of this budget, but I think is 
extraordinarily important in a topic of conversation today, and 
that is immigration reform. If we really, truly want to support 
agriculture, then we have to make sure there is an adequate 
amount of workforce there available to pick what needs to be 
harvested and to work on the farms and the very operations that 
need workers.
    Secondly, I think we have to be very concerned about the 
impact of extreme weather conditions on the ability to grow and 
raise what we have become comfortable growing and raising in 
certain parts of the country. That is why I think it is 
important for us to invest and significantly increase our 
investment in agricultural research. The reality is that ag 
research has been flat-lined for far too long when we have 
invested in a lot of other research areas significantly and 
aggressively. I think we need to play some catch-up there.
    I think we do continue to need to have a strong safety net. 
Having said that, I don't think it necessarily means that you 
can't change aspects of the safety net. And I think we have to 
be very concerned about credit. You know, we are going to help 
34,000 farmers access credit, but that doesn't mean that there 
isn't a backlog of unmet and unfilled credit needs out there. 
And so we need to work with our commercial lending institutions 
to make sure that they feel comfortable with providing credit 
to farmers.
    And then finally a big issue that I think we all have to 
address is this issue of who is going to farm. The reality 
today is that the average age of a farmer, I think, when the 
census is completed is probably going to be close to 60 years 
of age. And we have significantly more people farming who are 
over the age of 65 and 75 than we do under the age of 35. We 
have got a million or so returning veterans. I think this is an 
enormous opportunity for us to link a need for beginning 
farmers with--as Representative Fortenberry suggested, a lot of 
these kids who were serving in the military came from those 
small towns; 40 percent of the military is from rural America. 
So it is an opportunity for us to reconnect those young people.

                IRRIGATION CROP INSURANCE PILOT PROGRAM

    Mr. Yoder. We covered a lot of ground. A specific one 
regarding the conversation with Mr. Fortenberry regarding a 
drought, and particularly into irrigation. I want to ask about 
the irrigation crop insurance program, and whether that is 
something that the Department of AG, RMA would have an answer 
on whether that can be a policy that we can move forward on the 
idea of a program where we would have farmers plant lower 
population, less irrigation, expect a lower yield, whether that 
would be supported by the USDA?
    Secretary Vilsack. Well, we have a pilot program, as you 
know, operating in that area, and I think the reason you have a 
pilot is to basically study the mechanics and the economics of 
this.
    RMA is always looking for ways in which we can provide help 
and assistance. We have expanded the number of crop insurance 
programs in the last 10, 15 years from 98 to 132. The number of 
acres has increased by 100 million. So we are always looking 
for ways in which we can expand significantly this risk 
management tool. I think you are going to continue to see that 
aggressive effort.
    Mr. Yoder. Thank you.
    Mr. Aderholt. Mr. Bishop.

                 SOUTHEAST POULTRY RESEARCH LABORATORY

    Mr. Bishop. Thank you very much, and welcome again, Mr. 
Secretary. And I appreciate your remarks. I think you expressed 
the sentiments of all of us with regard to the casualties and 
the situation in Boston.
    Mr. Secretary, I would like to take a point of personal 
privilege and commend you and the Department on your decision 
to invest $155 million in the new Agriculture Research Service 
poultry laboratory in Athens, Georgia, which I understand is 
the Department's number one priority for the agency this year. 
As you know, the State of Georgia is the number 1 producer of 
poultry products in the Nation; $18.4 billion to the State's 
economy generating 100,000 jobs, 54 of the States's 
agricultural economy, and we have 105 counties out of our 159 
counties that are producing over $1 million at the farm level. 
So as a cochairman, along with Representative Crawford of 
Arkansas, of the Congressional Chicken Caucus, I just want to 
applaud the Department's decision in that regard.

                            PEANUT RESEARCH

    With that said, I would be remiss if I didn't also point 
out my disappointment with the ARS proposals to reduce funding 
for two existing projects at the National Peanut Laboratory in 
Dawson, Georgia, and to reprogram the funds through other 
peanut laboratory activities, specifically the $899,000 
reduction in the research efforts that is aimed at sustaining 
peanut cropping system competitiveness, and the $730,000 
reduction in the research project aimed at developing irrigated 
and nonirrigated peanut-management technologies.
    The work that the National Peanut Lab has done over the 
last decade has just been tremendous in helping the peanut 
industry remain competitive in the global marketplace by 
helping to decrease the irrigation costs, more efficiency in 
irrigation, the metrics of metering to monitor the amount of 
water that is actually used, and it has really contributed 
immensely to the bottom line for peanut farmers. So I am very, 
very disappointed with that, particularly when some of our 
farmers, particularly the new and small farmers that are trying 
to expand, many of whom have been dry land farmers and are 
trying to now become irrigated--the techniques that are 
developed in irrigation through this research at the National 
Peanut Lab really make it much more affordable for new small 
and disadvantaged farmers to convert from dry land to 
irrigated. And so I just wanted to express that and ask you to 
give some thoughts on that.
    Secretary Vilsack. Congressman, thank you for your comments 
about the poultry facility. Not only is Georgia a major 
producer of poultry, but the reality is the United States of 
America is the number one poultry producer, and the fact is 
that we have got antiquated facilities that will probably not 
set and cannot meet the challenges that that industry has from 
a disease standpoint. So we hope that the Congress will take 
into consideration our request and to note that we are not 
asking for a small amount of money to get something started, 
that we have actually figured out how to actually pay for it in 
1 year.
    As it relates to the concerns that you expressed about the 
peanut research, we have done a rather extensive effort at 
reviewing all of our research facilities and all the research 
that is going on in the research facilities, knowing full well 
that over time we are going to be faced with tight budgets. And 
we have come up with a capital improvement plan basically that 
is attempting to marry the best-suited facilities in terms of 
capacity with the most important research, and basically make 
sure that we are doing this in the most efficient way. And the 
facilities that may be not as well equipped to do research or 
research that is not as high priority, we obviously have to, 
with limited resources, make choices. These are not easy 
choices, and this particular case, I suspect it is probably 
about the age of the facility and the ability of the facility 
to actually do the research. It is important. I suspect it is 
not because we want to discontinue the research. But I will 
certainly double-check that and make sure that we get you 
accurate information as it relates to those particular labs.
    [The information follows:]

             National Peanut Laboratory in Dawson, Georgia

    The fiscal year 2014 budget request has proposed no change in the 
overall funding level for the Peanut Research Laboratory at Dawson, 
Georgia. The Agricultural Research Service (ARS) proposes to redirect 
to focus of some research within the Peanut Research Laboratory at 
Dawson, Georgia to supplement higher priority peanut research needs. A 
portion of the funding will be redirected for work on research related 
to peanut cropping systems. This research will look for ways to sustain 
peanut agricultural production capacity over long periods. The 
remaining funding will be redirected to focus on peanut water 
management research.

                       PECAN PRODUCTION ESTIMATES

    Mr. Bishop. Thank you, Mr. Secretary.
    Very quickly let me point out also on another issue that 
one of the casualties of sequestration was the National 
Agricultural Statistical Service's plan to suspend pecan 
production estimates and the forecast, which is effective 
immediately. The entire industry relies very heavily on these 
reports as well as a monthly cold storage report, which we 
understand will continue.
    Unlike other U.S. tree nut crops, pecans are growing across 
a wide swath of 15 States, and, as such, the industry is 
segmented and has not been successful in establishing a 
marketing order. Therefore, the pecan industry has very limited 
means to determine the size of the crop in any given year.
    The numbers that NASS provides are critical to the pecan 
industry's ability to operate in what is a very volatile 
marketplace. Can you ask your staff or can you review other 
options whereby the reports might be reinstated, because they 
are so critical to the pecan industry in the United States.
    Secretary Vilsack. Congressman, we respect the request, but 
I would point out that in addition to sequester, Congress also 
added an additional 2.7 percent cut to this budget, so we had 
to face a 7.5 percent cut to the budget. We had 6 months, in 
essence, to essentially absorb that cut. That is, in essence, a 
15 percent cut of the remaining resources that we have 
available.
    We are not going to be able to do this without making some 
very difficult decisions. We try to make decisions based on the 
most important data to the market out there. We will be happy 
to review that, but I don't want to hold out undue hope that 
there are many options, because there aren't.
    Mr. Aderholt. Mr. Rooney.
    Mr. Bishop. I thank you, Mr. Secretary.
    Mr. Aderholt. Mr. Rooney.

                            CITRUS GREENING

    Mr. Rooney. Thank you, Mr. Chairman.
    And, Mr. Secretary, I appreciate your allegiance to the 
black and gold. I guess the one good thing about the Ravens 
winning is that the 49ers didn't get their sixth Super Bowl, so 
we are still number one.
    My district in South Central Florida is one of the largest 
citrus-producing districts in the country. From Orlando to the 
Keys and Vero Beach to Tampa, we have seen an explosion in 
citrus greening to the tune of over 6,000 jobs and $3 billion 
in revenue lost.
    The good news is that the growers I talk to when I am in 
the district believe that because of USDA efforts and the 
research that we have been able to do, they do see a light at 
the end of the tunnel. They do believe that we can defeat 
citrus greening, but it is going to take a commitment, it is 
going to take a lot of work that I know that you are committed 
to.
    Besides tourism, agriculture is the number two industry in 
Florida. Could you elaborate on the changes the President's 
budget makes to the pest management and crop protection 
activities when it comes to citrus? Specifically, how will 
these changes impact invasive pest and disease research as it 
relates to the citrus industry?
    Secretary Vilsack. Well, Congressman, we certainly 
appreciate the challenge that the industry faces with citrus 
greening. It is a devastating disease, and it is economically 
devastating. That is one of the reasons why we created a 
special program in Florida with an appropriation of roughly $9 
million dedicated simply and completely to citrus greening.
    The good news is that we think we have found a way in which 
we can deal with the vector of this disease. It doesn't cure 
the disease, but it potentially can significantly reduce the 
spreading of it. We are going to continue this research, we 
understand it is important, and we understand the significance 
of it.
    There are areas throughout our budget where we essentially, 
you know, prioritize what you can fund, and when you basically 
run out of money, there are things below the line that you 
cannot fund. Citrus greening is not one of those things, that 
is a priority for us, but there are other areas that will be 
impacted. There may be circumstances where eradication was the 
strategy, and eradication may not actually work, and so we may 
have to go to a mitigation strategy, which is less expensive. 
There may be circumstances where conceivably and potentially 
cooperators at the State and local level may be asked to assume 
a bit more responsibility because of the difficulties of our 
budget. But in this particular area we are still focused and 
will continue to be focused.
    Mr. Rooney. Thank you. Thank you, Mr. Secretary.
    I yield back, Mr. Chairman.
    Mr. Aderholt. Mr. Valadao.

                             BIOTECHNOLOGY

    Mr. Valadao. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Biotechnology provides farmers with new tools to manage 
weeds, insects and especially drought. As the need for 
herbicides with multiple modes of action to combat the issue of 
wheat resistance grows, what is the USDA doing to accelerate 
the approval of biotechnology traits that not only enable 
solutions to this issue, but also preserve the ability to 
utilize soil-conserving practices like conservation tillage?
    Secretary Vilsack. As part of our Blueprint for Stronger 
Service, we initially instructed all of our agencies to engage 
in process improvement, to embrace Six Sigma, to establish 
folks within each agency and Department that were well versed 
in Six Sigma practices. One of the first projects that we 
embraced with this new effort was in the area of biotechnology 
regulatory approvals. When we began the process, I think it 
took over 900 days to secure approvals. Today we have 
substantially reduced that. I think the goal is to get it below 
a year. So you can see that we are significantly reducing the 
amount of time.
    The second thing we have done is to understand that it is 
not just enough for us to approve and accelerate our regulatory 
approval process, we also have to get our friends and neighbors 
in the international community to do the same. So we are 
working with China on a pilot project to basically dovetail our 
regulatory processes with theirs and synchronize them so that 
we can shorten the time to get new technologies in the 
international area, specifically in China, a year or two sooner 
than otherwise.
    Mr. Valadao. I don't know if I have enough time. I don't 
see where the clock is at.
    Mr. Aderholt. Go ahead.

               NATIONAL ANIMAL HEALTH LABORATORY NETWORK

    Mr. Valadao. I have got enough time for another question?
    Regarding the NIFA budget and the NAHLN budget, which 
includes a number of State laboratories, the herd veterinarian 
I happen to use personally in California uses the Taleo 
laboratory near my district to help diagnose problems in my own 
dairy herd. The UC Davis Animal Health and Food Safety 
Laboratory performed the initial identification of the 2012 
case of BSE in the cow in California that was then confirmed by 
the national laboratory in Ames, Iowa.
    The partnership and expertise of USDA and the State 
laboratory network in this instance illustrated the importance 
of this coordinated system in disease surveillance and in 
getting accurate, timely information to the public. I am 
concerned that without a long-term funding plan for the overall 
network and how it supports the State laboratories, we will see 
a decline in the important infrastructure necessary for the 
timely identification of animal diseases and food safety risks.
    Mr. Valadao. What is the role of the State laboratories in 
connection with the National Animal Health Laboratory Network, 
and do you know how many states participate in the network?
    Secretary Vilsack. Congressman, I do not know the number, 
specific number. We will be happy to get that to you. 
Obviously, this issue of disease detection and determination is 
something that does require cooperative efforts. It is one of 
the reasons why we want to strengthen our overall lab system. 
It is one of the reasons why we are proposing a new lab on the 
poultry side, and it is one of the reasons why we engage in 
this rather extensive review of our capital resources.
    We are obviously going to continue to work with States, and 
in fact our relationship will likely get stronger. Because of 
the fiscal challenges we face, we will have to have a stronger 
partnership with States because they may be asked at some point 
in time to assume--to do a little bit more than they have in 
the past.
    So we will continue cooperative arrangements, we will 
continue partnerships, and we are going to look for 
opportunities to leverage our resources. Throughout this budget 
there are a number of examples where we are going to try to 
figure out new strategies to stretch our dollars and to 
leverage our dollars because we understand the work is not 
being reduced, it is expanding.
    [The information follows:]

               National Animal Health Laboratory Network

    The National Animal Health Laboratory Network (NAHLN) is a national 
network of non-Federal public animal diagnostic laboratories under the 
leadership of two USDA agencies--the National Institute of Food and 
Agriculture and the Animal and Plant Health Inspection Service--and the 
American Association of Veterinary Laboratory Diagnosticians. The NAHLN 
consists of 54 State and university laboratories, located across 39 
States as well as two laboratories from the National Veterinary 
Services Laboratories.
    NAHLN is part of a national strategy to coordinate the Nation's 
Federal, State and university laboratory resources. These laboratories 
provide accessible, timely, accurate, and consistent animal disease 
laboratory services nationwide; provide laboratory data to meet 
epidemiological and disease reporting needs; respond to foreign animal 
disease outbreaks and other adverse animal health events of significant 
consequence; and focus on diseases of livestock.
    Animal disease-detection criteria have been developed for the 
following high-consequence diseases: Foot-and-Mouth Disease, Exotic 
Newcastle Disease, Classical Swine Fever (or hog cholera), High 
Pathogen Avian Influenza, Low Pathogen Avian Influenza, Bovine 
Spongiform Encephalopathy, Scrapie, Chronic Wasting Disease, Rift 
Valley Fever, African Swine Fever, Swine Influenza Virus and Swine 
Pseudorabies Virus. Swine Pseudorabies Virus was added in Fiscal Year 
2012.

    Mr. Valadao. Thank you.
    Mr. Aderholt. Ms. DeLauro.

                  TRANS-PACIFIC PARTNERSHIP AGREEMENT

    Ms. DeLauro. Thank you, Mr. Chairman. My apologies for 
dashing around. We have the Secretary of Labor next door, so we 
are going back and forth. But welcome.
    Secretary, before I begin questions, let me just say thank 
you for the work that you did in extending the claims period 
for women and Hispanic farmers and for the recent trip you made 
up to Connecticut. And I was also very pleased that the 
administration requested an extension of the temporary increase 
in the SNAP program that I and others worked so hard for in the 
Recovery Act.
    I understand that I missed an earlier exchange on the 
Department's poultry inspection proposal, and curious at the 
fact that 2 of the 20, 10 percent of the plants in the pilot 
failed the latest round of salmonella testing, and that was 
overlooked.
    But my question. The resolution of trade disputes is 
critical to industry, but the integrity of those standards is 
imperative to consumers. There are reports that the 
administration is considering a TPP, a Trans-Pacific 
Partnership Agreement, a provision that would require a, quote, 
binding dispute resolution for SPS standards. This presents a 
real threat to the substance of our food safety standards, 
ranging from the inspection process to specific microbacterial 
standards, like our zero tolerance for some of the most 
dangerous pathogens, plus it will result in a significant 
resource strain as agency staff are diverted away from primary 
public health mission of preventing food-borne illness.
    My question is, why is the administration considering such 
binding resolutions rather than nonbinding technical 
consultations? The consultations could be helpful in the timely 
review of the science without resulting in a binding decision 
that in my view puts our food safety at risk.
    Secretary Vilsack. Well, Congresswoman, I think the reason 
is because we confront significantly greater numbers of 
circumstances where countries establish nonscientific, 
nonrules-based criteria and barriers to our products and make 
it harder for us to get products that are healthy, to get 
products that are sound, to get products that are not posing a 
risk into countries. And you have to have a process by which 
those decisions can be determined more quickly than the current 
system.
    I will give you an example. Russia currently today is 
essentially preventing any import of American meat products 
because we use Ractopamine. The international community has 
sanctioned Ractopamine. There is no scientific basis for 
concluding that it creates risk or hazard, but yet Russia is 
basically establishing a no-Ractopamine, zero-tolerance policy, 
which is not based on the science. It takes a long time through 
the current process to get a determination or some kind of 
decision that will break down those barriers.
    This is not designed to create a circumstance where we are 
going to let unsafe food in this country. That is not going to 
happen. That is certainly not going to happen while I am the 
Secretary. That is not the intent. The intent is to create a 
process by which we can have some decisions made quickly when 
other countries create nonscientific, nonrules-based decisions 
that block our products.
    Ms. DeLauro. I understand that, Mr. Secretary, and I have 
full faith and confidence in you, and I know your views, but 
quite frankly, in the interest of shortchanging a science 
process to move in the direction of a binding resolution, which 
then, you know, what happens with regard to food safety and 
with public health? I mean, that is always, as you know, we 
have had this conversation before, that in the interest of 
trade there is a wink and a nod--not a wink and a nod, that is 
unfair--but there is this sense that that takes precedence over 
the opportunity to work to speed up a process on science--and 
sometimes it is not quickly done--that would ensure public 
health and food safety.
    And I do not believe that those trade implications ought to 
take precedence over the safety of the food and the public 
health here. And I do not understand why we are moving in this 
direction. And my concern overall about this trade agreement is 
what direction we are going with regard to food safety. And I 
think we have to be very, very careful of what the decisions 
are before we do that, and I do not know how the consumers' 
best interests are being represented in these negotiations.

                         CROP INSURANCE REFORM

    If I have time for another question, I would like to just 
ask that I was pleased that the administration's budget request 
included reforms in the crop insurance program. Let me just ask 
you, do you expect these reforms to reduce producer enrollment 
in the program or companies that offer crop insurance policies?
    Secretary Vilsack. No, we do not. The evaluation that we 
have done is that essentially the insurance--part of the 
reforms we proposed is basically reducing the return on 
investment to insurance companies consistent with a study that 
shows a 12 percent return will be sufficient to adequately 
support the program. Right now the return on investment is 
roughly 14 percent. In terms of the producers, we are talking 
about a situation where currently the government is subsidizing 
more than 50 percent of the premium.
    Ms. DeLauro. It is over 60 percent, as I understand it, Mr. 
Secretary.
    Secretary Vilsack. But there were several aspects of this. 
More than 50 percent covers them all, and we do not think that 
that is necessarily going to reduce the amount of people who 
buy crop insurance or the number of companies that sell it.
    Ms. DeLauro. Okay.
    Mr. Aderholt. Thank you.
    Recognize the gentleman from Mississippi, Mr. Nunnelee.

                         SCHOOL LUNCH STANDARDS

    Mr. Nunnelee. Thank you, Mr. Chairman.
    I was encouraged when I heard reports last week that USDA 
in Nashville indicated that we plan to get away from the 
maximum amounts on school lunches for meats, grains, poultry. 
And I was just wondering if you can give me a timetable on when 
USDA is going to be moving on that.
    Secretary Vilsack. That is already the case. We basically 
provided flexibility within the guidelines for schools to 
essentially create, in response to the concerns that were 
expressed, greater flexibility. It was an effort this year 
which we likely will make permanent for upcoming years.
    Mr. Nunnelee. All right. So my schools are no longer 
limited. If they want to serve a baked chicken breast on Monday 
morning, that does not restrict their ability to serve 
nutritious proteins the rest of the week?
    Secretary Vilsack. No. It is an effort to try to give them 
flexibility within the overall guidelines in terms of calories 
and the efforts that we are undertaking to improve the quality 
of the meals in terms of lower fat content, lower sodium, and 
lower sugar. But they still have flexibility within those 
guidelines.

                       SNAP PARTICIPATION LEVELS

    Mr. Nunnelee. Okay. Thank you on that.
    A couple of weeks ago we had Administrator Rowe in front of 
this committee, and I expressed my concern about the growth in 
the Food Stamp Program. It has almost doubled in the last 5 
years. Projections are it looks like it is going to double in 
the next 5. It is growing at a rate we cannot continue to 
afford. And I was shocked at her response when I asked her what 
can we do to turn that growth around, and she said, her 
response was there is nothing. It is going to grow as it grows. 
She said as the unemployment number goes up, the costs are 
going to go up.
    Well, we have had declining unemployment numbers. The 
economy is showing signs of recovery. Yet number of people on 
food stamps has grown over the last several years. So I will 
ask you the question, what can we do?
    Secretary Vilsack. Well, the projection in this budget is 
that those numbers will start to go down as a result of the 
improving economy, but let me specifically answer your 
question. I think there is an enormous opportunity here for us 
that we have not taken full advantage of. We know who folks are 
who are receiving SNAP, and we know those who are working and 
those who are capable of working, and I think what we ought to 
be doing is a better job of using our employment and training 
dollars to create better opportunities for those on SNAP to 
move out of qualifying for the program or to move out of 
needing as much of the program as they currently need by having 
better employment opportunities.
    I think that there are a number of States that do a pretty 
good job of this, but there are a number of States that do not, 
and I think if we focused and targeted our efforts, as we are 
proposing to do in five States to learn best practices, if we 
basically study, as we are going to study this fall, the 
characteristics of these folks so that we know how to move them 
more effectively from needing SNAP to a life of work and self-
sufficiency, I think we could reduce these numbers in a 
significant way and therefore reduce the cost of the program.
    The concern that I have with some other proposals is that 
you are going to cast a wide net, you are going to get some 
people that may not qualify for the program, but you are going 
to get a whole lot of people that actually do qualify for the 
program, and that is not really fair to them. But focusing on 
employment and training and doing a better job I think is the 
most effective way to really reduce the number.

                      SNAP CATEGORICAL ELIGIBILITY

    Mr. Nunnelee. What about the issue of categorical 
eligibility, where I get phone calls when we have lottery 
winners that are on food stamps? As we deal with the farm bill, 
can we deal with that?
    Secretary Vilsack. After the Michigan situation, we now 
have a rule that basically says that lottery winners cannot 
qualify for SNAP.
    As it relates to categorical eligibility, you know, I think 
you have to be careful because it is an efficiency for States 
that are administering these programs. States are dealing with 
tight budgets. And you get rid of that, you are going to create 
some administrative costs associated with it.
    Our data suggests that there are not as many people who are 
getting into the system as a result of categorical eligibility 
that would not otherwise already be in the system or qualify. 
So we are not sure that you are going to trade one efficiency 
for more inefficiency, and again, you are going to get people 
that may qualify for the program that are not going to get into 
the program.

                         INTERNATIONAL FOOD AID

    Mr. Nunnelee. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Secretary, I want to go back to the Food 
for Peace Program that we had talked a little bit earlier. I 
think there is some confusion as to what the minimal 
requirement is for the purchase of U.S. Commodities. Your 
testimony, as you mentioned earlier and was highlighted, states 
that 55 percent of the funds will be used for the purchase and 
transport. USAID is saying that 55 percent is for purchase, 
transport, and related cost. How much does USDA believe will be 
the minimum percentage for just commodities?
    Secretary Vilsack. Well, Mr. Chairman, you know, I think it 
is hard to distinguish that, but my understanding of what we 
were trying to do was to reassure producers that this was not 
going to be a wholesale withdrawal from the market as a result 
of the transfer of this responsibility. I do not know that we 
have a specific figure, but the goal here is to ensure that 55 
percent is helping to support American agriculture, and that is 
my understanding of what we are doing

                         SCHOOL LUNCH STANDARDS

    Mr. Aderholt. I want to dig a little deeper in the issue 
that Mr. Nunnelee had mentioned about the National School Lunch 
Program and Breakfast Program. The school food service 
directors from across the country have met with many of us and 
talked with many in Congress concerning the issues and concerns 
they are dealing with on a daily basis to implement the 
regulations from the Healthy, Hunger-Free Kids Act. It actually 
seems that a perfect storm has been put into motion for schools 
with the implementation of the final rule for the nutrition 
standards in the National School Lunch and School Breakfast 
Programs.
    As you know, the rule establishes new requirements for 
schools to increase the availability of fruits, vegetables, and 
whole grains while meeting the nutritional needs of 
schoolchildren within their calorie requirement. According to 
USDA's own numbers, the average daily participation in the 
lunch program is down from the same time last year, 
particularly in the paid meal categories. Reduced 
participation, when combined with rising input cost and 
increased cost to implement the changes in the new regulation, 
has many schools operating in the red.
    Again, it seems to be a perfect storm has been put into 
motion for the schools with the implementation of this final 
rule. This rule establishes new requirements for schools to 
increase the availability of fruits, vegetables, and whole 
grains while meeting nutritional needs of the schoolchildren 
with their calorie requirement. The final rule established 
weekly maximum amounts for serving grains and proteins, which 
proved far more difficult for schools to meet.
    In response to the feedback from schools, as you mentioned, 
the Department expanded flexibility in meeting the weekly 
maximums for grains and proteins for the current school year, 
as well as the 2013-2014 school year.
    My question would be is, how are some other ways can we 
work with you in providing school flexibility in implementing 
these new standards?
    Secretary Vilsack. Well, I think it is important to point 
out, if it is an economic issue, that schools, if they comply 
with these regulations, are entitled to additional 
reimbursement of 6 cents a meal, and perhaps some schools are 
not taking full advantage of that reimbursement. That would be 
one suggestion of making sure that people understand that there 
is an additional reimbursement there for complying.
    Secondly, you know, I think we have--we, USDA, have to do a 
better job of educating people about the cost of all of this 
because there are ways in which fruits and vegetables can be 
purchased less expensively. And I think, you know, sometimes we 
have a tendency to think that fruits and vegetables are more 
expensive because of the way in which we calculate value. 
Traditionally, we have done it based on a hundred calorie 
serving. A hundred calories of potato chips, a hundred calories 
of broccoli, you know, a hundred calories of broccoli would 
fill this table, a hundred calories of potato chips is like 
maybe a handful.
    That is probably not the right way to do this. The right 
way to do it is, what is a portion size of broccoli versus a 
portion size of potato chips? And if you actually do that, you 
are going to find that fruits and vegetables are not as 
expensive as you think.
    So I think part of it is education, part of it is creating 
flexibility, part of it is getting feedback from folks, and 
part of it is understanding what is at stake here, that a third 
of our kids are obese or at risk of being obese. We have got 
fewer and fewer kids that qualify for military service and that 
is why admirals and generals are concerned about this 
particular program and making sure that it stays firm. There 
are healthcare costs associated with it there are educational 
achievement results associated with it. So I think we have to 
be patient with this and listen and try to be flexible, which 
is what we have done this year
    The other thing I would say, and the last thing I would 
say, Mr. Chairman, is that this issue of calories is a little 
bit--it is interesting because the calorie difference between 
last year and this year is not all that great, so it is not as 
if, you know, several hundred calories fewer in the meals today 
than last year. I think the difference is somewhere in the 
neighborhood of 25 to 30 calories, and I am not sure that 25 to 
30 calories is, you know, at the end of the day, is as 
significant as some people would suggest.
    Mr. Aderholt. Mr. Farr.

                        ARS RESEARCH FACILITIES

    Mr. Farr. Thank you, Mr. Chairman.
    I want to drill down on ARS and the facilities. I really 
appreciate your comments about needing to invest in research. I 
think Mr. Valadao from California, first time we have had 
another member from California, and I realize that what made 
our State take the lead in high tech and everything was the 
investment that we had in our universities in research. A lot 
of that Federal investment but also State and private 
investment. And it seems to me that we need to do a better job 
of also making sure that the facilities, in response to Mr. 
Bishop's question, was that you move the science to the better 
facility.
    We ought to also have facilities where the work is being 
done. And as you know, in California, we grow more crops than 
in any other State, it is the number one agriculture economy in 
the United States. There are 17 crops that are only grown in 
California. You visited my area. My one county of Monterey does 
$4 billion in sales and a multiplier of $8.2 billion, employs 
75,000 people in this county, collects $102 million in taxes 
from the activity of agriculture, and yet we have a research 
station that is World War II Quonset huts. And we have been 
able to get the idea of co-participation, which you talked 
about, co-investment, getting States to take some of the 
responsibility. We have got the University of California, we 
have got the community college, we have certainly the private 
sector on board. We have got to upgrade that facility, and we 
are not going to get there from here if we just do one at a 
time.
    You have put, for the first time, reestablished some money 
in the capital outlay account, which is going to go to the 
poultry facility, but I am wondering how aggressively you are 
going to also seek for the rest of the list, which you went out 
and prioritized what facilities in the country need to be 
upgraded. And I am hoping that in that you will also weigh in, 
which I think you do very well, is let's bring the science to 
the field rather than making the field, you know, come all the 
way back to Beltsville, Maryland, to get information.
    Secretary Vilsack. Congressman, we have put together a 
capital improvement plan, which I will make sure my staff gets 
to you, which basically outlines precisely where our priorities 
are. And the reality is that everyone can have a different list 
of priorities, but I do not think anybody can disagree with the 
process, which is that you take a look at the facilities that 
you have, you take a look at the modernization.
    [The information follows:]

       Agricultural Research Service Capital Investment Strategy

    The ARS capital inprovement plan has been provided to the 
Subcommittee.

                    ARS RESEARCH FACILITIES FUNDING

    Mr. Farr. I am not against that. I am wanting to get money 
into that account so that you can do the work. That account was 
zeroed out.
    Secretary Vilsack. Well, I was going to get to that, that 
there were resources and those were taken for other purposes.
    Mr. Farr. Well, you can put them back. I mean recommend 
they be put back.
    Secretary Vilsack. Frankly, the reason we have done what we 
have done with the poultry facility is to basically say to 
Congress, if we are going to fund something, let's fund it and 
let's not sprinkle the money out in 15 different pots only to 
have it 2 years down the road basically scooped up because 
there is some other greater need. In that circumstance, nothing 
ever gets done, all right.
    Mr. Farr. I totally agree. I am not in disagreement with 
you. I want to get that program vigorously upgraded so that we 
do not lose the capacity to keep that seed corn of intellectual 
knowledge, and I think that is where we beat the rest of the 
world. As long as we are ahead of them in our science and 
application of that science to agriculture, we can stay 
competitive, but we have got to make sure that the facilities 
at least can house the equipment and the personnel that are 
going to be that brain trust.
    Secretary Vilsack. You are absolutely right, and that goes 
in line with the comment that we have to invest in research, 
which we have not done as much.

                         LIGHT BROWN APPLE MOTH

    Mr. Farr. We will look forward to you aggressively 
supporting new research.
    We have got a real conundrum. USDA is circulating a draft 
plan to deregulate LBAM, which is the light brown apple moth. 
We have listed this moth as saying it is one of the top 15 pest 
in the United States, invasive species. It attacks 250 plants. 
This is your comments. You are circulating this to convince 
foreign countries or other States that this is bad critter, at 
the same time you are saying we have given up on trying to get 
rid of it, we are going to leave it up to the State. And the 
growers are stuck in the middle with this, growers are saying I 
have got this product I am trying to sell to Canada or I am 
trying to sell to Florida and now they are going to use the 
LBAM as a reason for not bringing my product in. And USDA in 
one hand is telling everybody how bad it is and other hand 
saying you are going to deregulate it.
    If it does deregulate, and I think it will, what are you 
going to do to protect the growers' interest in being able to 
move product to other States and to other countries?
    Secretary Vilsack. What we are attempting to do here is to 
find and walk a fine line between those areas that basically 
are not impacted by this and the capacity of those areas to 
actually export out of their county--interstate or 
internationally--while dealing with the issue in the few 
counties that are currently dealing with this. It is basically 
trying to walk a fine line here.
    Mr. Farr. But will it allow the States then, if you 
deregulate and it is up to the States, and a State says we do 
not like this light brown apple moth coming into our country, 
we are not taking any product from Napa County, which is a 
big--or from Monterey County, which, you know, grows almost all 
the spinach and all the broccoli in the country. How are you 
going to prevent the States from denying product from moving 
from source into those States?
    Secretary Vilsack. Well, and I will try to respond to this 
quickly, Mr. Chairman. It is not easy to do this, but the goal 
here is to allow those areas that currently are not problematic 
to continue to trade and to allow those areas that are 
currently dealing with this issue to deal with it without 
compromising the ability of other areas to continue to trade. I 
mean, it is a fine line we are walking here.
    We will continue to work with States, we will continue to 
work with folks to understand this, but that is what we are 
trying to do here. We are trying to walk a fine line so that we 
do not shut down the process completely for those folks who 
have a completely free fruit that can be easily traded. We do 
not want to shut that down. So you have got to figure out how 
to do that.
    Mr. Farr. Yeah, yeah, you do. Thank you.
    Mr. Aderholt. Okay. We have been joined by the ranking 
member of the full committee, Mrs. Lowey, so let me recognize 
her now for any questions she might have.

                             SEQUESTRATION

    Mrs. Lowey. I thank you, Mr. Chairman.
    I apologize, Secretary Vilsack, but there are about three 
or four conflicting hearings this morning, and I want to thank 
you for your leadership.
    I just want to say, I am deeply concerned about the future 
of the Department of Agriculture. As you pointed out in your 
testimony, which I did read, despite your best efforts the 
upcoming negative effects of sequestration cannot be 
forestalled. And I note with grave concern that already over 
15,000 very low income rural residents, mostly elderly, 
disabled, and female, will not receive rental assistance. I can 
only wonder what is next and to what extent USDA's ability to 
fulfill its mission will be further compromised in the future.
    Your testimony expresses the Department's commitment to the 
WIC program, which I have strongly supported. It also notes 
that discretionary budget authority for 2013 is $1 billion 
below 2009 levels. As you know, unlike SNAP, WIC is funded out 
of the discretionary budget authority, has to compete against 
other programs for funding year in and year out. If a solution 
is not found to turn off the sequester, and I sincerely hope we 
can do that together, do you foresee a situation similar to one 
that the Department is encountering with its rental assistance 
program for the WIC program where some need just goes unmet? 
And if WIC will not have to go without, what program areas 
will?
    Secretary Vilsack. Well, WIC is a priority for us, and I 
believe that this budget, in our view, will adequately fund WIC 
for 2014. But you have mentioned rental assistance and that is 
a problem and that is going to continue to be a challenge for 
us in terms of the housing needs of the poor and elderly in 
rural areas. There is no question about that.
    You ask what gives. Well, we do not have as much resources 
in other areas of our budget that will provide help and 
assistance to the wide range of people we are helping in rural 
America. But our budget does, in our view, adequately fund WIC, 
but I will tell you, we are concerned about rental assistance. 
This fall we will see, as you mentioned, 15,000 folks will not 
get rental assistance. The question then is how does that 
impact those properties and do they ultimately get to a point 
where they cannot make their payments or do we get into 
foreclosure circumstances? It is a consequence of the way in 
which the sequester is crafted and the fact that we have very 
little flexibility in what we do.
    Mrs. Lowey. Well, I am glad your comments are on the 
record, and I do hope we can work together on both sides of the 
aisle to resolve the sequester, because to see the potential 
impact on people who really cannot take it is devastating.

                   HEALTHY FOODS FINANCING INITIATIVE

    I also want to mention the Healthy Foods Financing 
Initiative. There are no funds proposed for the Healthy Foods 
Financing Initiative in your budget. This was a major 
initiative of the administration to utilize private and public 
capital to build supermarkets in low income neighborhoods 
without access to fresh foods. There was no funding proposed in 
the fiscal year 2014 budget. Especially I was surprised that 
one of the program's main goal was to leverage public dollars 
for private capital to create taxpayer savings. How are we 
going to address this issue?
    Secretary Vilsack. Well, a couple of things. First of all, 
we can use some of our regular program resources--our Business 
and Industry Loan program, and the Value-Added Producer Grant 
program--to help fund and support food hubs and grocery stores 
and mobile units throughout rural areas to provide access to 
food.
    Secondly, we are attempting to reach out to those who have 
an interest in this to encourage them, the private sector, to 
respond. I will give you an example. We reached out to Whole 
Foods and suggested that Whole Foods ought to consider their 
responsibility, particularly in inner-city America. And to 
their credit, they responded by going into Detroit. They are 
going to ribbon cut in June a facility in inner-city Detroit, 
which they have basically created a new model, if you will, for 
their company that will try to respond to the food desert. Wal-
Mart is doing something akin to that. There are a number of 
other groceries chains that have been responding.
    And so we think through our regular programs and through 
our efforts to educate and raise the awareness level, the food 
atlas that we have that basically identifies where these food 
deserts are, we think a combination of that will try to respond 
to some of the concerns. Now, you know, in a perfect world, we 
would love to be able to have resources for the Healthy Foods 
Financing Initiative to partner with the Treasury Department 
and HHS, who do have resources, and the New Market Tax Credits 
available for that purpose. But in the meantime, we are going 
to work to educate people about those programs and hopefully 
facilitate more development.
    Mrs. Lowey. I just wonder, you can get back to me, if there 
is any way of getting the information. Are there any farmers 
markets that go into these areas or are they----
    Secretary Vilsack. Oh, absolutely, absolutely. We have had 
a 175 percent increase. And I will tell you a program that we 
have in Chicago. It is not a farmers market, per se, but we 
have, working with Mayor Emmanuel, we have retrofitted some of 
their old transportation buses, and they basically are like the 
old ice cream truck, but except instead of ice cream, they have 
got fruits and vegetables. We have equipped them with EBT cards 
that SNAP beneficiaries could use, and they have available to 
them fresh fruits and vegetables that they could purchase, that 
travels around the neighborhood.
    We are doing a similar thing in rural areas because 
oftentimes the food desert issue is tough if you are 10, 15 
miles away from a grocery store. If you have some kind of 
mobile unit circulating around, it creates at least some 
access.
    Mrs. Lowey. Well, that is great, and thank you so much. We 
wish you continued success.
    And thank you, Mr. Chairman.
    Mr. Aderholt. Thank you.
    Mr. Fortenberry.

                         SNAP PROGRAM INTEGRITY

    Mr. Fortenberry. Mr. Secretary, I would like to return for 
a moment to the SNAP program. It is one of the largest programs 
in the government, and the head of the Food and Nutrition 
Service was here recently and we had a lengthy conversation 
about that fact as it provides an important safety net for many 
vulnerable persons. That is why it is all the more important 
that we ensure the integrity of the program, and given that the 
fraud and abuse rate is low and it has fallen significantly in 
the last few years, particularly with the advent of the 
Electronic Benefit Transfer, nonetheless there are still some 
difficulties there with trafficking among retailers, that 
problem, plus the lack of measures, aggressive or appropriate 
measures, let's put it that way, to ensure eligibility among 
some recipients.
    And in that regard, I think you alluded to it earlier, that 
the Inspector General recommended some changes to the program 
that the Department has accepted that will allow for, I think 
it is a 10-State model, to share data to ensure that those who 
need the benefit are actually receiving it, that there is not 
false identification, false Social Security numbers being used 
as well.
    A rough calculation based upon her testimony recently was 
this could save us hundreds of millions of dollars potentially. 
So I think that is what you were alluding to earlier as you are 
discussing this.
    Secretary Vilsack. Well, there are a series of steps. One 
is we have asked in this budget for additional resources to 
hire additional data mining experts; additional certification 
personnel to make sure that we are doing a good job of making 
sure that the people qualified for the program actually get it; 
additional investigators. I will tell you that last year there 
were over 800,000 reviews and inspections of individuals, and 
there were several thousand reviews of grocery stores where we 
basically saw trends or concerns.
    There is also the issue of the definition that we will be 
addressing in the 5-year farm program. You know, what grocery 
stores ought to be qualified to provide SNAP and are there 
areas where we see high liquor sales, high cigarette sales that 
we often see connected to the kind of conduct that we do not 
want, are there ways in which we can assure that grocery stores 
are the ones benefitting from this program and that people have 
access. And so there are a variety of ways in which we can 
address this.
    And it is not just SNAP. It is also--we need to look at 
integrity in our school programs, we need to look at integrity 
in our WIC program, in our TEFAP program, so you will see 
throughout the budget that there is additional resources for 
evaluation, for additional review, because we take this issue 
of integrity, as you point out, very seriously.
    Mr. Fortenberry. Well, the Inspector General alluded to the 
fact that the Department accepted their recommendations, and I 
think that was the earlier conversation. I did not hear it all. 
But to ensure again the integrity of data and to double-check.
    Secretary Vilsack. Right. It is integrity. It is also just 
errors, just innocent errors that can also cause additional 
expense.
    Mr. Fortenberry. Again, because of the size, the total 
expenditure of the problem, even a small drop in fraud actually 
saves us lots and lots of money.
    Secretary Vilsack. Right. And honestly, it is not just the 
SNAP program. It is not even just the nutrition programs. I 
think we have a responsibility, as the Chairman alluded to, to 
taxpayers. I mean, there is also an issue we are taking very 
seriously on crop insurance, because the percentage of error 
and fraud rate is higher in crop insurance than it is in SNAP. 
Obviously, those programs are different in terms of size, but 
if even you reduce the error rate in crop insurance, you are 
talking about tens of millions and potentially hundreds of 
millions of dollars in savings as well. So, it is incumbent 
upon us to continue to be focused on integrity.

                        FARMLAND VALUES INCREASE

    Mr. Fortenberry. We had a hearing several years ago on the 
land price increases on the Ag Committee. The basic finding was 
that this is not substantially due to leveraging of credit; 
therefore, the conditions leading to a potential bubble are not 
exactly the same as they were in the 1980s.
    Now, we have seen land values continue to escalate. I am 
sure, in your neighborhood, farmers are raising their eyebrows 
as to how much these farms are selling for. Now, given that the 
returns in the market for everything else is so low, you 
probably have large amounts of, in effect, cash being plowed 
into these investments, which have a small return but 
nonetheless very stable return. Is that the findings of the 
Department still, that the potential for a land valuation 
collapse is mitigated by the fact that this is not being 
leveraged aggressively by credit?
    Secretary Vilsack. Well, let me briefly answer this and 
then maybe Dr. Glauber could elaborate. I do not think we are 
faced with nearly the same circumstance we were faced with in 
the early 1980s where people were over-leveraged. 
Notwithstanding that, I think there are concerns in terms of 
land value and in terms of cash rent issues and the ability of 
young people to get into this business or to be able to 
maintain the business.
    Doctor, I do not know if want to----
    Mr. Glauber, Yeah. I would just say, you are absolutely 
right, we have seen this dramatic increase in farmland prices. 
I think it is fully consistent with the fact that we have had 
very strong farm income and low interest rates. I think both 
those have been very big factors in seeing the sorts of 
increases that we have seen, particularly in the Midwest.
    Should that slow, you know, we are projecting farm income 
to flatten a bit. I think over time people are expecting 
interest rates to rise a little bit, so that certainly would 
have some impact on that growth in land prices that we have 
seen. But you are absolutely right. I think the good thing and 
the big difference in what we saw in the 1980s is the fact that 
real estate debt has not been going up. The leveraging, I 
think, banks have been very prudent about lending and people 
have basically been doing that with cash on hand, buying land 
rather than, you know, leveraging their assets.
    Mr. Aderholt. Mr. Bishop.

                        ARS RESEARCH FACILITIES

    Mr. Bishop. Thank you very much.
    I want to return back to the ARS and the research, and I 
appreciate Mr. Farr's take. You know, of course, Mr. Secretary, 
you mentioned the multiyear facility plan for capital 
investment which obviously the research facilities across the 
Nation have contributed significantly in making us among the 
best in the world with agricultural output and production. But 
as you are aware, there are a considerable number of facilities 
that are in pretty bad shape, in great need of improvement. Of 
the 25 facilities that ARS ranked as being in the worst 
condition, the agency recommended immediate allotment of 
capital investments for less than a third of them. And of 
course, I know that our fiscal environment is very challenging, 
and for these facilities, particularly given the research value 
that they hold for the commodities that they support, what 
options do we have for them, and what options do we have for 
the facilities that are not slated for incremental funding and 
capital improvements, given the research value that they hold?
    I have a facility, for example, in Byron, Georgia, which is 
the Byron laboratory, which we talked about peanuts and poultry 
already, but we have got some other P's, pecans and peaches, 
that that laboratory fully supports. And Mr. Farr mentioned the 
partnership and perhaps some incentives for involving State 
universities and private, I should say, industry interest in 
combining with you and partnering in developing support in 
these research activities.
    Can you explore any options? Are there other options that 
we could look at? For example, we have got one of the 1890s in 
our district, Fort Valley State University, that is interested 
in partnering or acquiring somehow the Byron facility because 
it is so vital to the peach, as well as the pecan research, and 
we have got a gene bank there in Byron that is second to none 
in the world for pecans.
    Secretary Vilsack. Well, Congressman, first of all, you 
know, let's be clear about this. The more opportunity in 
research that we can do, the better, as far as I am concerned, 
and that is why, you know, we are making the case that we need 
to invest more in research.
    There are some facilities that probably have outlived their 
usefulness and where research that is important can be done in 
some place that is more efficient and more effective, and then 
that means what happens to that facility if we close it. And I 
will tell you from the experience of the labs that we have 
closed, we work with universities, we work with land grant 
universities, we can work with historic black colleges, we can 
work with our university partners to take over that facility.
    And in fact what we have done with several of these 
facilities is also to encourage them to use this as a beginning 
farmer and rancher development opportunity because oftentimes 
these facilities are surrounded by land, and the question is, 
what happens to that land? Well, that land could be made 
available in a beginning farmer or rancher program and in some 
cases tied to returning veterans. So we are exploring creative 
ways to utilize those facilities, perhaps not at our expense, 
but to make sure that they continue to have some useful 
purpose. And we would be more than happy to work with any 
college or university for any of these facilities that 
ultimately have to be closed.
    Here is the economic reality. We cannot, based on the 
budget as it exists today and based on the fact that our 
discretionary budget is below where it was in 2009--so I am 
dealing with not 2013 or 2012 or 2011 or 2010, I am dealing 
something below 2009--as long as that continues, and I suspect 
it will, we are going the have to make tough choices. You can 
disagree with our choices, fair enough, but you are going to 
have to make those same choices because there are only so many 
dollars.

                           2501 PROGRAM AUDIT

    Mr. Bishop. Let me jump in on the 2501 Program audit. The 
Inspector General completed an audit of the Office of Advocacy 
and Outreach, which is a part of your office and was 
established to assist farmers and ranchers who have moderate-
sized operations. You are familiar with that. I am a very 
strong supporter of the 2501 Program and welcome all of the 
additional efforts which are aimed at improving the 
administration of that grant assistance program.
    The IG's audit cited a number of missteps in administering 
the program on the part of some of the employees, as well as a 
general lack of management facilities in the grant-making 
process. Assuming that that recommendations are put in place 
and carried out fully, and I noticed that the OAO staff 
acknowledged and accepted all of the IG's recommendations, are 
you confident that moving forward, the program will be managed 
in a proper manner and will be able to carry out its function, 
particularly given the fact that I think it is proposed that 
veterans will be included as a group that will be able to take 
advantage of it, which means that you will have more people 
accessing that limited program with basically fewer resources.
    Secretary Vilsack. Congressman, I requested that audit, 
personally requested that audit, and as a result am personally 
assured by the team that is now engaged at OAO that those audit 
recommendations will be followed and that our program will be 
much tighter and much better, perhaps more competitive, but 
nevertheless much better managed than it was. And I accept 
responsibility for the fact that it was not managed as well. 
That is why I asked for the audit, and I think we have made 
changes already to institute many of those audit 
recommendations.
    Mr. Bishop. Thank you, sir.
    Mr. Aderholt. Mr. Yoder.

                        WIC PROGRAM ELIGIBILITY

    Mr. Yoder. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your continuing conversation 
here this morning. I want to talk with you a little bit about 
the WIC program and the recent GAO report that came out earlier 
this year regarding the amount of Americans that are 
participating in the program and some eligibility issues and 
implementation amongst the States. I do not know if you are 
familiar with the report, but according to the report, over 60 
percent of the States use income only within the last 30 days 
when the standard for WIC eligibility is annual household 
income. States also only allow the income of the mother and 
child to be counted instead of the income of every member of 
the household. I am sure you are familiar with that.
    And then the adjunctive or category of eligibility, many 
States have increased their eligibility threshold beyond 185 
percent of the Federal poverty level that the WIC program sets 
as the maximum threshold for eligibility. In fact, the GAO 
finds that 13 States use SNAP eligibility at 200 percent, 25 
States set Medicaid eligibility over 185 percent, some States 
set their Medicaid expansion of SCHIP as high as 300 percent, 
and yet those folks are automatically eligible then for WIC.
    And what the result of all this is, is over half of the 
infants in this country are now enrolled in the WIC program, 
and GAO finds that, according to the standards of WIC, that 
would not be the case. And so I guess my question is--well, let 
me first case say, I guess, the GAO also finds that the FNS has 
never examined these reports for State and local WIC agencies' 
compliance with Federal regulations despite over one-third of 
the States having problems in this area and that the last time 
FNS provided guidance to the States on income eligibility 
determinations was in 1999, some 14 years ago.
    My questions are, Mr. Secretary, what does FNS intend to do 
with these reports and how will increased technical assistance 
and training to the States on income eligibility determinations 
and what specifically will be included in any new income 
eligibility determination guidance that the FNS issues to the 
States?
    Secretary Vilsack. Congressman, I appreciate you raising 
the question, and I will try to be responsive, but I suspect 
that we will have to supplement my response with additional 
information, which we will be happy to provide.
    As I stated earlier, this whole issue of integrity is 
important to us, and we are focused on a couple of things in 
reference to WIC. Our focus primarily with the States has been 
in the past their inability to focus on proper providers of 
WIC. We have seen circumstances in situations in States where 
grocers take enormous advantage of the WIC program and 
essentially hike up the price of WIC products and then provide 
discounts on other products in an effort to try to get people 
into their store. And so that has been a focus of our efforts 
in a couple of States, to sort of stop that practice.
    You know, we obviously have a responsibility to make sure 
these programs are managed properly. I will be more than happy 
to talk to my team about the steps that we are specifically 
taking as it relates to those studies, and my team will get 
back to you very quickly with that response.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                         PROGRAM IMPLEMENTATION

    Mr. Yoder. I appreciate that, Mr. Secretary. I think 
certainly this is a report that was, I think, disturbing to all 
of us. We want to ensure and work with you to make sure that 
those who are most needy receive the services, and we also want 
to make sure that these programs are being implemented 
uniformly in States, and this State implementation that is 
occurring that has a lot of States essentially misapplying the 
rules and FNS not following up is a big concern to a lot of us, 
and we hope that you will make this a priority because as we 
work to find the resources in this budget to make sure we meet 
your priorities--and you talked about a lot of them, ag 
research, and we talked about crop insurance programs 
certainly, and you have mentioned integrity in whole sorts of 
programs. The GAO has some specific things that your 
Departments could implement that would save taxpayer dollars, 
ensure that those dollars are getting to people who need them 
most, and make sure that we are, you know, providing a system 
that is effective and consistent across State boundaries.
    Secretary Vilsack. That is a legitimate concern, 
Congressman. And this is by no way an explanation, and I do not 
even know if it is accurate everywhere, but as a former 
governor, I know that when you are faced at the State level 
with difficult budgets, oftentimes what happens is staffing 
levels get reduced, and departments of human services are 
places where these programs are being administered, and 
essentially sometimes it is--and honestly, I frankly think that 
is one of the challenges and risks we have as we reduce 
workforce, and we have done this at USDA. I mentioned 5,000 
staff years. You get to a point where the oversight of the 
program is not what it needs to be. And we need to keep a very 
wary eye on this.
    I am particularly concerned about rural development in my 
area where we have got a portfolio of $183 billion and yet we 
have seen a substantial reduction of 2,000 staff years at rural 
development since 2009. So, I do not know that that is the 
reason, it may not be the reason, but it is an area that I 
suspect is some of the reason that you have got the concerns.
    Mr. Yoder. And I appreciate----
    Secretary Vilsack. We should look into that.
    Mr. Yoder. I appreciate that point, Mr. Secretary, and in 
this case you have got a GAO report that has done some of that 
oversight for you, so hopefully you guys can dive into that and 
maybe come back to us with some responses of how we can meet 
some of the challenges laid out there.
    Secretary Vilsack. Fair enough.
    Mr. Yoder. Thank you, Mr. Secretary.
    Mr. Aderholt. Ms. Pingree.

                    SNAP BENEFITS AT FARMERS MARKETS

    Ms. Pingree. Thank you, Mr. Chair.
    Thank you, Mr. Secretary.
    To follow up on somewhat of a different perspective on the 
SNAP program, I was really pleased that one of the USDA's key 
performance measures for fiscal year 2013 was to increase the 
amount of SNAP benefits redeemed at farmers markets. For a 
whole variety of reasons we have been tremendously supportive 
of that. As you mentioned earlier, the number of farmers 
markets is growing every day. People's access to them is 
increasingly available. And it allows people who have limited 
economic means often to procure fresh vegetables and fruits and 
educate their families around using them.
    So, I am just interested to know how successful you have 
been in meeting the goal. Are there additional resources that 
are needed to help those efforts? I think it is one of those 
things just, I have to say again, it is widely supported by 
people of all political stripes and ages and rural and urban, 
and it is one of those things I know in my communities, when we 
talk about making it easier to use your SNAP benefits at a 
farmers market to buy fresh healthy food, people just say, 
``wow, what a great idea'', let's make sure we are doing plenty 
of that.
    Secretary Vilsack. Congresswoman, I think you would find 
that with the existing resources, we have been able to expand 
that opportunity to thousands of farmers markets and we have 
seen obviously a significant increase. And one area, in 
particular, is among senior citizens. Oftentimes when we talk 
about SNAP, we talk about young families, as we should, but 
there is a percentage of SNAP beneficiaries who are senior 
citizens who oftentimes do not have access to those fresh 
fruits and vegetables, and we have seen a rather significant 
increase in the number of seniors that are eligible.
    One of the things we are going to keep an eye on is the 
impact of sequester on the number of people we can provide help 
and assistance to. We are concerned that we are probably going 
to see a slight downturn in some of that assistance because of 
sequester, but we are going to continue to be committed to that 
effort.
    You know, we think it is a great community builder. We 
think it is an opportunity for smaller producers to have 
additional markets, and obviously it is an opportunity for 
people to be able to buy fresh fruits and vegetables. I would 
say that one of the things that we are looking at is, the way 
in which SNAP is currently configured, oftentimes your SNAP 
card is filled in at the beginning of the month and it is 
sometimes difficult in the middle or the latter parts of the 
month to be able to have anything on your SNAP card to be able 
to buy fresh fruits, and some things do not keep 30 days. So we 
are looking at ways in which we could potentially alter the way 
in which the SNAP card is administered so that, you know, maybe 
you get half of it at the beginning of the month and half of it 
in the middle of month so that you have an opportunity to buy 
more fruits and vegetables that will not spoil.
    Ms. Pingree. And I would say, just to follow up on that, I 
know, you know, one of the issues that you have been certainly 
doing some work on, but it is not completely solved, is farmers 
markets themselves being able to take SNAP cards and the 
electronic technology to do that. And I know there has been 
some pilots around that, but in a very rural State like ours, 
that can be complicated for the administrators of the farmers 
markets or the individual farms.
    While you are thinking about how benefits are distributed, 
we have had a lot of people talk to us about the idea of SNAP 
beneficiaries being able to participate in CSAs. That is just 
growing very fast. Again, seniors, people in rural areas who 
sort of planned ahead, but because of the way the funds are 
administered, it is very hard for them to have any SNAP money 
available to do something like that up front, but perhaps we 
can get creative about making that possible, because, again, 
that is a dependable source of fresh fruits and vegetables that 
come monthly, weekly, biweekly, something into a person's home, 
and you know, encourages eating those foods, and also keeps 
people healthy and gives farmers really a great new market.
    Secretary Vilsack. That latter part, latter point, is an 
administrative challenge but maybe there is a way in which 
those CSAs could be affiliated with an enterprise that already 
is SNAP eligible. That is a possibility.

                     RURAL WATER AND WASTE PROGRAM

    Ms. Pingree. One other quick question, since I have some 
time. This is on another area, the rural water and sewer 
projects. So I see that the budget proposes elimination of 
rural water, sewer grants in favor of low-interest loans. As 
you know, USDA is the single largest source of grant funds for 
community facilities, but in many cases small communities 
simply do not have the economies of scale to absorb 100 percent 
of the loan financing, and I represent 125 communities and many 
of them are small rural communities.
    Can you provide some additional detail on what those 
communities are supposed to do under the new structure, what is 
the backlog for the demand on this financing, and how much of 
that is loan versus grants?
    Secretary Vilsack. Well, we are reducing the grant portion. 
We are not eliminating the grants. There is still, I think, 
roughly $320 million or so in grant money and about $1.5 
billion total between grants and loans. We think with the lower 
interest rates, it basically makes that loan program a bit more 
attractive and a bit more feasible to use.
    Having said that, there is a significant backlog of these 
projects, and it is one of the reasons I traveled to New York 
City last week to meet with investment banks to see whether or 
not we could in some way, shape, or form, educate them about 
projects that are in rural areas that they would not otherwise 
think about that would provide a potential return, and in fact, 
also reaching out to companies that are looking to fulfill 
social responsibility requirements and potentially utilizing 
the water programs as a way of doing that and still get a 
slight return for their investment.
    The key here is making sure that as we reach out to 
investment bankers, that we can sweeten the pot enough that 
they become interested, that their return is consistent and 
competitive, which we are going to try to do. And I think this 
is part of our strategy to figure out creative ways to leverage 
our resources so that we can stretch them further and do more 
projects, even though we may have fewer dollars to deal with. 
So this is our effort.
    Ms. Pingree. Great. Well, I will be interested in hearing 
if that yields results. So thank you for trying to be creative 
there.
    Thank you Mr. Chair.
    Mr. Yoder [presiding]. Mr. Farr.

                 NUTRITION ASSISTANCE PROGRAM INTEGRITY

    Mr. Farr. It is very interesting that we are able to in 
this committee sort of present the philosophies of two worlds 
out there, the world that I grew up in, which was war on 
poverty, Peace Corps, sort of a trust that dreams could be 
fulfilled, and another side of the world that is more 
suspicious. You know, we are security minded and we got to make 
sure that people do not cheat and that, you know, the wrong 
folks do not get benefits.
    I think you are right in the middle of that war, and I see 
it, frankly, all carried out in our food assistance programs, 
whether they be WIC or SNAP or the programs in schools. And the 
war I see is that you are fighting a tradition which the 
beneficiaries of that, of our policy on feeding the public, 
feeding poor people and feeding kids that are from low income 
families, is that the war is what you are going to feed them, 
whether you are going to move to a nonregulated, nonsubsidized 
industry and the specialty crops, which is all the nutritional 
stuff, or whether we stick with the old program, which is the 
traditional commodities and so on. And, you know, when you can 
sell a chicken McNugget at a school level cheaper than a head 
of lettuce, you know that something is wrong with all the 
processing you have to go through and all handling you would 
have to do to get that chicken McNugget to its place versus the 
minimum amount of handling for lettuce.
    So, you know, it is a war on the diet. It is also a war on 
this issue of trust. I think people find the abuses and say, 
you know, taxpayers' money should not be spent on those abuses. 
Some would argue, well, in light of all the things the 
government spends on, that is kind of de minimis, why are we 
spending so much time and money trying to catch the cheaters 
because the cost of administration is so great?
    So in this, you know, in this program, I think you are in 
the position where you can solve both sides, because they are 
not going to go away. One side is not going to give up to the 
other. So it is going to have to be how do we use technology, 
how we educate the electorate and people like us as to the 
benefits. I mean, one of the things that I think the Department 
does a poor job is showing all of the people who receive the 
WIC funding, I mean, the stores, where that money ends up in 
that private economy out there. You are talking about starting 
up businesses for farming practices, for vets and things, where 
are they going to have that market? And oftentimes it could be 
a small market, it could be stopped by, you know, you can be 
selling the WIC food next door.
    This is what a young gal did in organic. She went right and 
set up her stall next to the WIC office and she is booming. She 
is in her second generation. The women walk out the door and 
there everything they are allowed to buy is right there in the 
farmers market, and that is what she makes her whole living on. 
And so there is a benefit for those expenditures in the private 
sector and it can grow businesses, and we do not take advantage 
of taking about that, where the SNAP money ends up and where 
the WIC money and where the school lunch program.
    But I think on the fact that, you want to make sure that 
there is security, but you do not want so much security that 
the administration of that outweighs the benefit, and I think 
that is the dilemma that Congress has got itself in. They want 
this accountability, which is going to be very costly.
    So my question to you is, are you working to develop 
technologies using bar codes, using all this kind of stuff? 
When you think about it, the person who has that SNAP card is 
bar coded, because you know who that person is, because they 
qualified for the card, and on that card there is a sign. And 
the food they are buying, I do not know whether it is 
registered, but everything you buy in the store is now bar 
coded. So the food is bar coded, the person is bar coded.
    Mr. Farr. I don't know whether the seller is bar-coded. You 
know, there is that information. Can we use technology as 
banking and financial institutions do to catch the cheats 
rather than just this high kind of concentration on labor 
reviews?
    Secretary Vilsack. Well, I think we are doing that. And you 
are probably right, we don't do a good enough job explaining 
that to folks. But we are using technology.
    The data-mining utilization is allowing us to basically 
track where there is high-risk areas that allow us to do 
investigations and reviews, which have led to literally 
hundreds of stores no longer qualifying for SNAP and thousands 
of people disqualified from the program because we were able to 
identify through data mining and through a review of the 
information where there were problems. And that is one of the 
reasons why the fraud rate is at historic lows and why the 
error rate is at historic lows. And it is one of the reasons 
why we are going to continue to do more of that. It is one of 
the reasons why we have asked for additional resources in this 
budget to be able to do more of that.
    So, yes, we are doing it. We obviously need to do a better 
job educating folks about it.
    Mr. Farr. You mentioned in a speech recently that the 
nutrition programs are under attack. Could you outline how you 
are going to respond to that attack. Is that what you just 
said?
    Secretary Vilsack. Well, there are several responses to it, 
and, again, I probably need to do more of this. But we talked 
about the fact that every dollar that is spent in the SNAP 
program generates between $1.80 and $1.90 of economic activity.
    I was in a grocery store in South Dakota not long ago 
talking about the fact that when people are able to purchase 
more with SNAP, they actually do purchase more; that 95 percent 
or 97 percent of the resources are spent within 30 days; that 
that rolls around in the economy because more groceries have to 
be stocked, shelved, packaged, processed, trucked, shipped and 
produced, all of which create throughout the supply chain jobs. 
So we obviously need to do more of that.
    Part of the challenge that I have as the Secretary of 
Agriculture is that the portfolio of agriculture is so broad. 
You know, I am going out to your State today, unfortunately not 
to talk about SNAP, but to talk about forest issues, which 
obviously are very, very important. And we are also going to 
have the opportunity to talk with the mayor of Los Angeles to 
talk about urban forests. That is not an issue that gets as 
much attention as it should.
    We just do a lot at USDA, and we are going to continue to 
try to do the best we can to educate folks, but we obviously 
need to do more in this area.
    Mr. Farr. My time is up.
    Mr. Yoder. Mr. Bishop.
    Mr. Bishop. Thank you very much.

                           ANIMAL ANTIBIOTICS

    I would like to shift the subject to animal antibiotics. 
According to the Infectious Diseases Society of America, nearly 
2 million Americans each year develop hospital-acquired 
infections resulting in 99,000 deaths, a steadily increasing 
number due to antibacterial-resistant infections. The Director 
General of the World Health Organization last year warned that 
things as common as strep throat, or a child's scratched knee 
could once again kill.
    Currently medically important antibiotics sold for food 
animal use constitute more than 70 percent of the total 
reported sales of medically important antibiotics in the U.S. 
It is my understanding that the Department plans on launching a 
biotherapeutic discovery program, which would be aimed at 
developing and providing alternatives to animal drugs and, in 
particular, antibiotics. Can you share with us your thoughts in 
this area, and are you coordinating with the FDA, the CDC and 
others in the development of this?
    Secretary Vilsack. Congressman, first of all, as you know, 
the FDA is promulgating some guidelines and some rules in this 
area, and we have been working with them in the promulgation 
and the establishment of those guidelines and rules. And, in 
fact, we have jointly gone out into the countryside and had a 
series of events where we are educating producers about 
precisely what they are or are not requiring at FDA.
    We think part of our responsible approach to this issue is 
for us to continue to do research to find if there are 
alternative ways in which we can deal with disease, animal 
disease, so that we can continue our responsibility to protect 
our animals and to increase productivity. That will always be 
part of our mission. And this is an area that we feel very 
strongly about.
    In an effort to try to use scarce resources most 
effectively, we prioritize our research, and this is an area, 
animal production and productivity, which is one of the 
critical areas of responsibility and a critical area of 
emphasis at USDA.

                          ORGANIC AGRICULTURE

    Mr. Bishop. We have a burgeoning interest in Georgia in 
organic agriculture, and we have got a number of, at least a 
few, very successful organic producers in our area, and they 
are beginning to look at this and to raise concerns as to what 
the impact will be on their industry, because they develop a 
niche product for sophisticated palates, as they put it, people 
who really want to have--to consume the kind of food that is 
healthy, and environmentally friendly, and ultimately good for 
everyone.
    So that is an issue that is really becoming--moving to the 
forefront, and I appreciate, and I am sure that they will 
appreciate, the Department's entry into this and interest in it 
as you develop this research, because it is really, really 
important for this segment of the population and of the 
producers.
    Secretary Vilsack. Do you want me to respond to that?
    Mr. Bishop. If you would like; if not, I don't want you to 
talk for the sake of talking.
    Secretary Vilsack. Just one aspect of this, and that is one 
of the challenges at USDA is to make sure that we respect and 
appreciate all forms of production. And part of maintaining 
that value, that high value that you referred to, is making 
sure that we do a good job of protecting the standards that 
create that high value, and we are very committed to that.
    Mr. Yoder. Any other questions?
    Ms. DeLauro. If I can.
    Mr. Yoder. Ms. DeLauro.

                     SEQUESTRATION AND BUDGET CUTS

    Ms. DeLauro. Thank you very much.
    Mr. Secretary, I know in your testimony you allude to the 
across-the-board cuts imposed by USDA, but what I want to do is 
to try to get some more detail. If could you briefly tell us by 
agency how sequestration and the budget cuts will be handled, 
and specifically which agencies you expect to have to furlough 
employees and for how long. How will the recipients of 
programs, for instance one that you mentioned, such as rental 
assistance, be affected by the sequestration?
    Secretary Vilsack. Congresswoman, basically 1,500 fewer 
farmers will receive credit as a result of sequestration. 
Between conservation planning and conservation resources, 
roughly 15,000 producers will not be able to get the kind of 
conservation help that we would have expected them to get. We 
probably have somewhere between 100 to perhaps as many as 200 
fewer research projects that will be funded. We will obviously 
do fewer business----
    Ms. DeLauro. On the research projects for 1 second, that 
ties in with the research facilities in particular communities, 
or districts, or States, et cetera?
    Secretary Vilsack. It is more of the NIFA program, the 
competitive grant program, which obviously impacts or 
potentially could impact a wide variety of universities and 
communities that are serviced by those universities.
    In the area of rental assistance, we understand and 
appreciate that come September, or perhaps as early as August, 
we will run out of resources in that rental assistance fund, 
and we will basically have to say to roughly 15,000 recipients 
that we are not going to be able to provide the rental 
assistance that we would normally provide.
    Ms. DeLauro. What happens to those folks?
    Secretary Vilsack. Well, they just don't get the rental 
assistance, and the question then is what happens with them in 
their apartment complex, and what happens to the owner of the 
apartment complex if they don't get the kind of support that 
they were banking on to be able to maintain the project? So we 
are just going to have to see. I don't know that we have a 
really good answer to what happens other than we are going to 
be out of money, and that is a consequence.
    As you know, Congress did address the poultry inspection 
issue, and so the food inspections will continue.
    Ms. DeLauro. Yes.
    Secretary Vilsack. It provides adequate resources, so we 
don't anticipate furloughs there. If we furlough workers, it 
will be in primarily two areas, in Rural Development and in the 
Farm Service Agency offices. The amount of time somewhat 
depends on, you know, our ability to transfer resources from a 
couple of accounts, but it could be somewhere between 4 to 7 to 
as much as 10 days of furloughs in those areas. Obviously if 
folks are furloughed, then work isn't going to get done.
    The reason why the numbers aren't greater than they 
otherwise would have been was because 2 years ago we started 
this process of our Blueprint. We understood that we were going 
to be faced with difficult times, and we have reduced travel, 
we have reduced our footprint, we closed offices, we have 
reduced our workforce, we have used early retirement incentive 
programs. We have done everything you would expect an 
enterprise to do to try to be as efficient and as effective as 
possible, so it minimized the impact on our workers.
    The goal here was to try to avoid as much furloughing and 
RIFs, reductions in force, as possible without sacrificing 
service, but with the sequester and the additional--not just 
the sequester, but the additional 2\1/2\ percent cut that was 
put on top of sequester--maybe other agencies and departments 
of government got hit that hard. If they are, I am not aware of 
them. And I suspect, although I don't know this is accurate, 
the discretionary budget authority for most of the departments 
is not below 2009 levels, which is the case at USDA.
    Ms. DeLauro. Thank you for describing that. I think it 
still is relatively unknown with many of my colleagues the 
depth of the cuts. And as you talk about rural areas, as you 
talk about the FSA offices, I can remember on this committee 
several years ago when there was the move do some consolidation 
on FSA offices, and there was such an enormous outcry that we 
couldn't get to consolidation.
    Now when you are going to look at places just without 
staffing, and they may close up, I am not sure, I am not sure 
that there is a granular understanding of what this means in 
reality to the population of people that you are talking about. 
And we are talking about end of fiscal year, and this is in not 
end of the year December, but we are talking September and 
having to really come down with this hammer on these various 
populations. It is really pretty extraordinary.
    Secretary Vilsack. One of the populations that will get 
impacted that may not be on anybody's radar screen, but we have 
mentioned farmers markets and things of that nature, is tens of 
thousands of fewer seniors and fewer folks will be able to take 
advantage of those farmers market opportunities as well. That 
obviously will have a rippling affect in those communities and 
for those producers. So, you know, I don't think we have seen 
that rippling effect, I think it is going to take a while for 
it to be fully appreciated, but it is coming.
    Ms. DeLauro. I would like to work with you, Mr. Secretary, 
on outlining all of those things, because I think we need to 
call it to the attention of everyone who serves in this body. 
And you know what? It also being made to the attention of the 
people they represent. Thank you.
    Mr. Yoder. Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    One piece of advice if you are going to California, I think 
what Washington has failed to do is to ask California how they 
handled the furloughs. We did it for about 4 years, and we 
closed a lot of offices on Fridays and things like that. I 
think the State is, you know, in a lot of key issues where you 
can't really afford to furlough people. Researchers even came 
in on their day they were furloughed and kept working even 
though they weren't getting paid.
    Secretary Vilsack. We can't do that.
    Mr. Farr. I know. And they didn't order it; that was just 
the workers' intention.
    The point is that I think there were a lot of lessons 
learned. It is a big State, budget the same size as yours, and 
you might get some advice while you are out there.
    Mr. Yoder. Thank you, Mr. Secretary. Appreciate your 
testimony today, and the meeting is adjourned.


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                                         Wednesday, April 17, 2013.

                USDA RESEARCH, EDUCATION, AND ECONOMICS

                               WITNESSES

CATHERINE E. WOTEKI, UNDER SECRETARY, RESEARCH, EDUCATION AND ECONOMICS
EDWARD B. KNIPLING, ADMINISTRATOR, AGRICULTURAL RESEARCH SERVICE
SONNY RAMASWAMY, DIRECTOR, NATIONAL INSTITUTE OF FOOD AND AGRICULTURE
MARY BOHMAN, ADMINISTRATOR, ECONOMIC RESEARCH SERVICE
CYNTHIA CLARK, ADMINISTRATOR, NATIONAL AGRICULTURAL STATISTICS SERVICE
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. Good morning. Welcome to the Subcommittee. 
Thank you for joining us on the ag appropriations Subcommittee 
this morning and, of course, for the discussion on USDA's 
fiscal year 2014 budget request for research agencies.
    I want to welcome Dr. Catherine Woteki, Under Secretary for 
Research, Education and Economics. And also joining the Under 
Secretary today we have Dr. Cynthia Clark, Administrator for 
the National Agricultural Statistics Service; Dr. Mary Bohman, 
Administrator for Economic Research Services; Dr. Ed Knipling, 
Administrator for the Agricultural Research Service; Dr. Sonny 
Ramaswamy, Director of the National Institute for Food and 
Agriculture; and welcoming back Dr. Mike Young, Mr. Mike Young, 
for USDA's Budget Director.

                           Opening Statement

    Thank you all for being here and for your presence before 
the subcommittee today. In particular we are interested in 
NIFA's budget proposal for AFRI and sustainable agriculture, 
organic, specialty crop and integrated research programs. We 
need to hear NIFA's explanation for why it did not comply with 
congressional direction regarding its budget proposal for these 
programs. This is an important part of answering the question 
of whether USDA is effectively meeting its broad mandate in 
research.
    [The information follows:]


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    Mr. Aderholt. At this time I would like to recognize the 
gentleman from California, Mr. Farr, for any opening comments 
or statements he may have.
    Mr. Farr. Thank you very much, Mr. Chairman.
    Yesterday, the Secretary pointed out how important it was 
to invest in research to keep the seed corn of intelligence in 
America, and how these are the folks that manage all that, and 
I look forward to it.
    I am just curious. One of the programs that the Secretary 
outlined, and I think I am very appreciative of his focus on 
it, is rural poverty in America and how we take the poorest 
areas, which have always been applying for grants or not even 
having the capacity to apply for grants, and focus on more of a 
strategic strategy. And I just wondered how all your research 
has been able to prioritize those areas, and perhaps telling us 
what are the poorest areas and how we might--because there is 
infrastructure issues. If you are going to publish a lot of the 
stuff, we know these rural areas don't even have broadband, 
don't have access to the Internet. And I hope that we are going 
to be using all of the capacity of our intellectual brain 
trusts here to help solve some of these problems.
    Then I have some specific questions about specialty crops 
in my district.
    But I thank you for having this hearing.
    Mr. Aderholt. Thank you, Mr. Farr, for your comments.
    Mr. Aderholt. At this time I would like to recognize Dr. 
Woteki for your opening statements for the record. Then we will 
go into questions. I look forward to hearing from you.

                           Opening Statement

    Dr. Woteki. Thank you, Mr. Chairman, and good morning to 
you and to Ranking Member Farr. We are pleased to appear before 
you to discuss the President's budget request for fiscal year 
2014 for the Research, Education and Economics mission area. 
Each of the agency Administrators and I have prepared written 
testimony that we would like to submit for the record, and I 
will briefly summarize the content of those five sets of 
testimony.
    There is a common theme that runs through our testimony, 
and that is the support that these research agencies provide to 
our Nation's farmers, producers and consumers. We achieve that 
through a combination of cutting-edge research as well as 
public education and scientific literacy programs. We also, in 
the implementation of our programs, work closely with the land-
grant universities in an historic partnership that we 
celebrated last year, the 150th anniversary of the Morrill Act.
    But the challenges that are facing American agriculture are 
large, and they are also very clear, and those include 
expanding our ability to deliver safe and nutritious food to a 
growing population, both in the United States as well as 
globally; keeping agriculture production profitable; bolstering 
our ability to continue to export agricultural products; 
reversing the obesity epidemic; and ensuring that our natural 
resources remain available and abundant for future generations 
while responding to the threat of a changing climate.
    Investing in agricultural research is critical to the 
innovations that keep our agricultural sector productive and 
that ensure positive benefits to our economy. Investments in 
agricultural science increase productivity that is essential 
for the long-term prosperity of our Nation. In fact, for every 
dollar that we invest in agricultural research, there is an 
overall return to the U.S. economy of $20.
    For the Research, Education and Economics mission area, the 
budget request for 2014 totals $2.8 billion. For the 
Agricultural Research Service--ARS the request is $1.28 
billion, and the budget makes allocations of $4.6 million to 
centralized information technology systems in ARS. It provides 
funding for priority initiatives that will improve production 
efficiencies through sustainable agriculture, helping farmers 
mitigate the effects of climate change, protecting crops at 
high risk of infestation from insects, and also continuing the 
development of alternative fuels and building on ongoing 
research on the earth sciences.
    Last year in this Committee's report, they directed the 
Agricultural Research Service to develop a study and to 
prioritize the Agricultural Research Service's infrastructure 
investments. We provided that report to the committee last 
fall, and this budget requests $155 million for the number one 
priority on that infrastructure renewal list. It is a 
replacement facility for the Southeast Poultry Disease Research 
Laboratory in Athens, Georgia.
    The second agency's request is the National Institute of 
Food and Agriculture--NIFA and the budget proposes a funding 
level for NIFA of $1.29 billion. This would fund the capacity-
building programs at land-grant institutions as well as 
competitive grants programs.
    For fiscal year 2014, the President's budget requests an 
increase to a total of $383 million for NIFA's flagship 
competitive grants program, the Agriculture and Food Research 
Initiative. To improve transparency and accountability, the 
President's budget provides $7.8 million to consolidate and 
modernize NIFA's grant management systems.
    The President's budget reorganizes several science, 
technology, engineering and math programs, what we call STEM 
programs, into the Department of Education and the National 
Science Foundation, and this budget reflects transferring 
NIFA's STEM education programs to those agencies. NIFA, 
however, will continue to support secondary and post-secondary 
students in other ways.
    The budget requests $78 million for the Economic Research 
Service--ERS--to provide for economic analyses on all aspects 
of the agricultural enterprise, from scientific investments to 
food access to agricultural trade. And within the ERS budget 
request is a proposal for $2.5 million for research innovations 
to improve policy effectiveness research and to strengthen 
behavioral economics research in the statistical use of 
administrative data.
    For the National Agricultural Statistics Service, the 
budget requests nearly $160 million that would enable the 
agency to fully fund the Census of Agriculture and complete 
that census sets of reports, as well as to reinstate several of 
the surveys that have had to be suspended this year 
attributable to sequestration and rescission.
    Under the strong leadership of Secretary Vilsack, we are 
continuing to leverage the appropriated funds that we have by 
streamlining our business processes and identifying 
efficiencies. Collectively the agencies appearing before you 
have, for example, reduced our travel expenses by 52 percent 
below the 2010 level.
    So, Mr. Chairman, we look forward to answering whatever 
questions you and members of the Committee may have, and we 
look forward to working with you to continue to support a 
world-class level of science and education at the Department of 
Agriculture.
    Mr. Aderholt. Thank you for your testimony.
    [The information follows:]


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                         NIFA RESEARCH PROGRAMS

    Mr. Aderholt. I know that since we will have several appear 
that will be speaking, the microphones are one-directional, so 
when you do speak, if you will just grab the microphone and 
speak into the microphone so that the reporter can make sure 
that they hear what you are saying as they take down the 
dictation.
    Let me start out by mentioning, as it was alluded to 
earlier, Dr. Ramaswamy, the fiscal year 2013 House Committee 
report and the statement of managers accompanying the 
conference agreement directed the NIFA to include proposed 
funding levels and expected publication dates, scope, 
allocation level for each request for award for five research 
programs, including the Ag and Food Research Initiative, 
sustainable agricultural, organic, integrated and specialty 
crops. A similar change was included in the House and Senate 
versions on the farm bill. This is a very strong indication of 
congressional intent, yet NIFA did not comply.
    The question would be simply why was that not the case, and 
why did they not comply with the directive?
    Dr. Ramaswamy. Good morning, Chairman Aderholt.
    Mr. Aderholt. If you want to move that over towards you a 
little more.
    Dr. Ramaswamy. Good morning, Chairman Aderholt. Thank you 
very much for including us in this briefing on the hearing on 
the budget.
    In response to your question, indeed we submitted the 
scope, and the RFAs were submitted with the explanatory notes, 
and that includes all of the RFAs to be coming out, the scope, 
the dates. That has been provided with the explanatory notes, 
sir.
    Mr. Aderholt. What about the other aspect of it? What is 
the problem there?
    Dr. Ramaswamy. Essentially in the explanatory notes we have 
provided, so we have got the AFRI funding levels, the SARE 
funding levels, they are all in there. And, as you know, the 
mandatory programs that included the Specialty Crop Research 
Initiative, the Organic Research and Extension Initiative and 
the Biomass Research and Development Initiative are not 
included because the farm bill expired, and we do not have 
funding, we do not have authorization for it. So the 
explanatory notes are restricted to AFRI and SARE funding.
    Mr. Aderholt. So when do you think that you can get this 
information to us?
    Dr. Ramaswamy. So the explanatory notes are available 
already. Maybe I should seek Mr. Young's comment on this, the 
explanatory notes. They were submitted on Monday?
    Mr. Young. The day the budget came out, yes, sir.
    Dr. Ramaswamy. Yes, the day the budget came out then.
    Mr. Aderholt. Of course, the Subcommittee had directed last 
year, and, of course, that was before I took over as chairman 
of the Subcommittee, but my understanding was that there was a 
request for that, and that was not met, and that is where the 
concern is. We would like to maybe get that as soon as possible 
to clarify the question on the information that we would like 
on that. So we will be getting back with you to clarify that as 
we move forward.
    Dr. Ramaswamy. We will, sir.

                 INSULAR AREA FACILITIES AND EQUIPMENT

    Mr. Aderholt. The fiscal year 2013 committee report 
directed the National Institute of Food and Ag to review the 
state of facilities and equipment for the insular areas and 
report to the committee by January of 2013 with its findings 
and recommendations. The Committee does not ask for this type 
of information without reason. We need it to form our funding 
and allocation decisions. What is the status of the report, and 
when will we receive it?
    Dr. Ramaswamy. So the report has been completed, and we 
went through----
    Mr. Aderholt. It has been completed?
    Dr. Ramaswamy. Yes, sir. We had staff that went, actually 
visited some of these insular areas. The report has been 
completed, and it is under departmental review process. The 
agency itself has completed it, but the department is reviewing 
it right now, sir.
    Mr. Aderholt. And can you tell us anything about the state 
of the facilities in the insular areas?
    Dr. Ramaswamy. Yes. The bottom line is that there are two 
recommendations that we are making. The first of the 
recommendations is indeed the facilities, the research 
facilities, need very significant updates, and new facilities 
need to be built as well in those areas. And this is across the 
board in all of the insular areas, and the report itself will 
contain additional information in there. But the bottom line is 
they are desperately in need of very significant improvements 
in their research facilities, and indeed for education as well, 
their teaching facilities as well.
    The second challenge that we have got is often times these 
facilities, we need to make sure that we have clear title, that 
the institutions have clear title, so that if we were to invest 
dollars out there, and if new facilities are constructed, that 
the institutions will have clear title as well because of the 
ownership issues that we have got.
    Mr. Aderholt. That is some of the recommendations that will 
be forwarded?
    Dr. Ramaswamy. Yes, sir.
    Mr. Aderholt. I see my time is up. Let me recognize Mr. 
Farr.

                    ARS CAPITAL INVESTMENT STRATEGY

    Mr. Farr. Thank you, Mr. Chairman.
    The report that you have identified 21 capital investment--
you have a capital investment strategy, and that 21 facilities 
of ARS need upgrading improvement. I know I am on one of those. 
What is the budget for those 21? The only one you put in this 
budget is the chicken research facility.
    Dr. Woteki. Correct, Mr. Farr. The Agricultural Research 
Service estimates that for that first tranche of capital 
improvements, it would require in the range of $100- to $150 
million annually to complete those replacements or upgrades of 
facilities.
    Mr. Farr. For all 21?
    Dr. Woteki. Yes.
    Mr. Farr. You have done something different with the 
chicken research facility. You put it all in there. Normally in 
the past it has been Congress appropriates little by little, 
and then you have to wait years to accumulate the total amount 
and then spend it. I mean, I think the idea of getting it built 
is a smart thing, but if you are doing $150 million a year, 
does that mean all those problems would be addressed? How long 
would it take? How many years?
    Dr. Woteki. Well, I think first it is good to point out 
that for a laboratory system of the size of the Agricultural 
Research Service, that our buildings and facilities are a 
continuous project. And you are correct that this year the 
approach that we have taken for the poultry research lab 
replacement is a one-time----
    Mr. Farr. I understand that. The question is----
    Dr. Woteki [continuing]. Which is different from the 
approach we have taken in the past.
    Mr. Farr. So how long would it take you at $150; you 
haven't asked for the $150 million, so----
    Dr. Woteki. The years beyond?
    Mr. Farr. Yes.
    Dr. Woteki. Well, we are going to begin preparing the 
outyears budgets, and we will continue to include requests for 
infrastructure replacement and renewal for ARS.
    Mr. Farr. So I guess the question is would that $150 
million take care of the 21 priority capital investment 
strategy list, or do you need more than $150 million?
    Dr. Woteki. We need annually in the range of $100- to $150 
million in order to complete our first tranche----
    Mr. Farr. How many could you complete with $150 million of 
the 21?
    Dr. Woteki. Well, each project is going to be of varying 
size and scale, and I would like to ask if Dr. Knipling can 
provide you with some additional information on the plans for 
the outyears beyond 2014.
    Mr. Farr. Yes. I am glad you have gone through the system. 
I think it is smart. The military uses that, and we suggested 
that you develop a priority strategy for capital outlays. It 
has always just been done by earmarks. This is now based on 
merit. The question is now you have prioritized 21 facilities 
that need attention in addition to some that you are closing.
    If you are going to propose now that Congress appropriate 
or put into the capital fund $150 million a year, how many of 
those 21 can you rebuild or upgrade or whatever the plans are 
for them with $150 million? How far down the list can you get?
    Dr. Knipling. This year, as has been pointed out, $155 
million for the priority number one facility. Of course, we 
will have to wait year by year to see what the President's 
budget will be, but it was our intent and the recommendation of 
the Capital Investment Strategy Report that we seek a line item 
so we can systematically year after year----
    Mr. Farr. I know all that. Just tell me how long.
    Dr. Knipling. The 21 top priority facilities, that is the 
lowest-condition facilities in need of modernization that are 
also housing our highest-priority facilities, we have sequenced 
those over a period of 9 years or nine funding increments at 
roughly $100 to $150 million apiece. As we move through that 
queue list, other facilities in the priorities would move up in 
the queue list. We see this as an ongoing, somewhat forever 
process to modernize our facilities in a systematic manner on 
about a 40-year cycle.
    Mr. Farr. So is it going to be your proposal to, as you are 
doing with the facilities, just put all the money into one 
facility a year?
    Dr. Knipling. In some cases, lower-cost facilities, we 
might do two, three or four per year. For example, the report 
does call for one facility this first year; the second year, 
two facilities; the third year, I think there are three 
facilities. It depends on the facility itself and the scope and 
the cost of modernization.
    Mr. Farr. I just want to know if I am going to live long 
enough to see the Salinas facility, which was a Quonset hut 
built in 1941; can't even get the researchers because the 
conditions are so bad, can't get the equipment because you 
can't house it in the buildings that can't be heated and cooled 
and all the things that high-tech equipment needed to be, in 
the middle of the richest agricultural center in the world.
    Dr. Knipling. The Salinas facility is on that priority 
list. I believe it is in the fourth cohort of that 21 list.
    Mr. Farr. I hope I am alive.
    All right, thank you, Mr. Chairman. My time is up.

                   IMMIGRATION POLICY AND FARM LABOR

    Mr. Aderholt. Mr. Valadao.
    Mr. Valadao. Thank you, Mr. Chair.
    In the USDA's 2012 report on the potential impacts of 
changes in immigration policy on U.S. agriculture and the 
market for hired farm labor, a hypothetical increase in the 
supply of temporary nonimmigrant, foreign-born farm workers 
would lead to an industrywide increase in total output and 
exports. There were more substantial increases with more labor-
intensive sectors, such as fruits, tree nuts, vegetables and 
nursery products. These findings were based on a 156,000-person 
increase over the 15 years and the employment of temporary 
nonimmigrant agricultural workers, such as the current--those 
currently in the H-2A program.
    Your model was based upon the base year number of 48,336 
workers in H-2A from 2005. This simulated event would indicate 
a significant increase in H-2A equivalent visas, yet still far 
below the total number of foreign-born agricultural workers. If 
we continue to grow the supply of legal temporary workers past 
the 156,000 number to match closer to that actual demand for 
all agriculture workers, would we continue to see these 
increases in agricultural output?
    Dr. Bohman. Thank you.
    You are referring to a study conducted by the Economic 
Research Service, and your report jives with what my 
understanding of the study is, that an increase in temporary 
workers has a benefit to all U.S. agriculture, and especially 
labor-intensive products. And it does use the model of the U.S. 
economy, and all models become less and less reliable as you 
push out further and further beyond the existing reality. But I 
believe it is a robust result that labor shortages 
disproportionately have negative impacts on labor-intensive 
products. It is kind of common sense. The model confirms that 
and quantifies the effects, and it would find similar results 
as you expanded the number of workers. But I would put a caveat 
that, as with any model, the further you get from the current 
status, you have to take into account decreasing reliability.
    Mr. Valadao. One more. In that same 2012 report, the USDA 
also simulated a decrease in the unauthorized labor supply. 
This would have been caused by some sort of unspecified policy 
implemented, which basically means some sort of immigration 
reform that would directly affect farm workers. In the 
simulation, a 34.1 percent reduction in employment of 
unauthorized workers, the USDA found a 3.7 to 4 percent 
increase in the employment of U.S.-born and foreign-born 
workers, foreign-born permanent resident workers.
    Besides many of them staying at their current employers, 
where would the rest of the now authorized labor be heading 
according to your predictions? Would we expect an exodus from 
farm labor? If so, how many?
    Dr. Bohman. Yes. So in the second scenario in our research, 
we looked at a simulated decrease in unauthorized labor across 
the entire U.S. economy, and there were impacts, as you 
describe, on the agricultural sector, especially on labor-
intensive products that saw a loss in their labor supply, a 
decrease in production and exports.
    What happens to the overall labor is that you see some 
increases in wages where you have a shortage, but you also see 
a restructuring of the economy. As there is a loss of these 
unskilled workers, there is an overall movement downwards on 
the skill level of the U.S. labor force such that on balance 
you see a small decrease in total U.S. gross national product 
or income because those effects outweigh any increases in wages 
for the group of people who move into those jobs.
    Mr. Valadao. Thank you.
    Mr. Aderholt. Ms. Pingree.

                              LOCAL FOODS

    Ms. Pingree. Thank you all for your presence, and your work 
and your testimony this morning. I appreciate the work you do 
for farmers and for the USDA.
    My first question is about the USDA's fiscal year 2014 
budget. I see it calls for a request in increase in the funding 
for AFRI, Agriculture and Food Research Initiative, to $383 
million, an increase of $117 million above fiscal year 2013, 
which I think is a good thing in the budget.
    One of the target areas that the funding would be used for 
is nutrition and health, specifically in developing and 
increasing the consumption of healthy foods. Since I am of the 
belief that local foods by nature give people the opportunity 
to have healthier food than other processed foods, and 
vegetable, fruit and nut farms account for about 65 percent of 
local food sales, does the Department have any plans to help 
support local food sales? Should Congress go ahead with the 
increase in funding? And are you planning to conduct any 
further research on the various aspects of local food systems?
    Dr. Woteki. Let me initially respond to your question, 
Congresswoman. Through the AFRI program we have been providing 
competitive grant support. As you indicate, we are asking for 
increases in nutrition and health, and that increasing--the 
purpose of these research programs is to provide the evidence 
base for program decisions and for policy decisions.
    We support research that goes to improve a farmer's ability 
to produce fruits and vegetables, nuts, other health-promoting 
foods and the local markets for them through a variety of 
different mechanisms that include actually all of the agencies 
that are reflected here, from the statistics that the National 
Agricultural Statistics Service develops, through the kind of 
economic analyses that ERS has done on local markets and 
farmers' desirability to enter into the kind of production that 
it is going to provide for those local markets for them.
    AFRI is a way that competitive grants are provided. There 
are also formula funds that go to support the State 
agricultural experiment stations and the extension services 
that have also played a role in providing the research base as 
well as the education for farmers desiring to get into these 
types of production operations. And ARS, through its laboratory 
infrastructure, also provides for some long-term infrastructure 
and long-term research that is supporting fruit and vegetable 
production.
    So, in essence, all four of the agencies in the mission 
area have been playing a role in providing the background 
evidence base for programs and policies in support of local 
foods.
    Ms. Pingree. I appreciate your answer and appreciate that 
that has already been part of your work. Would you anticipate 
if there is increased funding, you will be able to see more of 
the same here?
    Dr. Woteki. Yes.
    Ms. Pingree. Great.
    Dr. Clark. If I could add, there are questions on the 
Census of Agriculture relating to producers who sell to local 
markets, and if there is funding in the future, we would be 
able to target that population and do a follow-on survey to the 
census of agriculture.
    Ms. Pingree. So you are currently asking those questions is 
what you are saying?
    Dr. Clark. Yes, the questions are on the survey.

                         LOCALLY ADAPTED SEEDS

    Ms. Pingree. Great. Great.
    One other quick question, I don't have a lot of time, but I 
am actually concerned about farmers' dwindling options for 
locally adapted seeds. I also am of the belief that for 
agriculture to be successful in the long term, farmers need 
access to seeds that are adapted to local climate and pest 
conditions, and I think all of you know scientifically there 
are climatic changing conditions and pest challenges that are 
constantly changing.
    The 2008 farm bill required USDA to make conventional plant 
and animal breeding a priority within the AFRI program. Can you 
talk a little bit about what the USDA is doing to promote 
breeding programs for locally adapted seeds and public 
cultivars, and also whether or not you intend to include an 
AFRI subprogram for this purpose in the 2014 AFRI request for 
applications?
    Dr. Woteki. Again, there are two agencies that are 
involved, the intramural program administered through the 
Agricultural Research Service that provides germplasm 
collections that are very important for plant breeding and to 
achieve, as you very well described, locally adapted seeds. So 
that ongoing germplasm preservation activities and providing 
germplasm to researchers and breeders is an important role for 
ARS.
    Again, through the programs that the National Institute of 
Food and Agriculture administers, competitive grants as well as 
the formula funds that go to the State agricultural experiment 
stations both play a role in providing funding for conventional 
plant breeding as well as for plant breeders that are using the 
new genetic technologies as well.
    Ms. Pingree. Great.
    Dr. Ramaswamy. If I might add just a bit more. So within 
the National Institute of Food and Agriculture, over the last 4 
years we have provided well over $50 million in support of 
conventional plant breeding, and very specifically, for actual 
development of cultivars and germplasm and others, we have 
provided approximately $20 million. The other amount is for 
developing technologies and methods that are needed as well to 
help enable that.
    Then for the 2013 fiscal year that we have got, we have an 
RFA, request for application, that is out that is allocating $5 
million for conventional plant breeding. And as we go forward 
in 2014, we expect to allocate similar amounts of money for 
plant breeding as well. We are very concerned, like you are, 
about this effort.
    Ms. Pingree. Great.
    Thank you, Mr. Chairman. I have gone over my time. I 
appreciate it.
    Mr. Aderholt. Mr. Rooney.

                          SEQUESTRATION IMPACT

    Mr. Rooney. Thank you, Mr. Chairman.
    On March 11th, NIFA released a statement regarding the 
impact of the sequester. In it, you stated that there would be 
a potential reduction of $13 million for AFRI competitive 
grants, reductions around $37 million for capacity formula 
funding, and reductions of over $10 million for other research, 
education and extension programs.
    In the continuing resolution, funding for AFRI was 
increased by $10 million, but as a discretionary program AFRI 
is still subject to the USDA's 2.5 percent reduction within the 
next 6 months. As you know, programs for research at land-grant 
universities like the University of Florida will be funded, 
although those will be cut by 7.61 percent.
    My first question is can you provide examples of how the 
sequester has negatively impacted AFRI research initiatives, 
specifically at land-grant institutions like the University of 
Florida?
    Mr. Bishop. Will the gentleman yield?
    Mr. Rooney. Yes, sir, I yield.
    Mr. Bishop. Let me add something to his question. Would you 
also include the 1890 colleges and universities--I think Mr. 
Chairman has one in his district, Mr. Nunnelee has one in his 
district, and I have one, of course, in Georgia--the impact of 
sequestration on those who have traditionally been undercut 
when it came to resources.
    Dr. Ramaswamy. Congressman Bishop, I appreciate that add-
on, and, Congressman Rooney, in response to your question, 
indeed the sequester is going to have a very significant 
impact. Within the AFRI program with the reduction that we are 
looking at, we think that we are going to be unable to provide 
funding for about 100 new grant proposals.
    In addition to the sequester that you referred to, the 
other thing that happened was the mandatory programs were also 
lost, and that was about $130 million for specialty crops, for 
organic, and biomass development, and beginning farmers and 
ranchers development. So between the two, the loss due to the 
sequester as well as the loss of the mandatory programs, we 
project out that we are not going to be able to do about 200 
grant proposals.
    To give you an example, one of those programs that we have 
lost in the mandatory programs is the Specialty Crop Research 
Initiative. Last year the University of Florida was awarded a 
grant for approximately $9 million on Huanglongbing, the citrus 
greening challenge that we have got that particularly Florida 
is facing a very significant challenge with that particular 
organism. So I imagine that we are not going to be able to do 
that kind of research.
    And coming specifically to institutions like Fort Valley 
State and Alcorn State University and others, again, their 
competitiveness is going to be reduced as well, because the 
funding rate, depending on what panel that you are in, what 
area of endeavor that you are submitting grant proposals to, 
ranges between about 6 percent and about 22 percent. So with 
the fewer dollars that we have got, the competition is going to 
be significantly keener. So that is going to certainly have 
ramifications.
    Mr. Rooney. Obviously that is horrible news with regard to 
the greening issue as far as my district is concerned and my 
alma mater.
    But just one follow-up. If Congress, if we fail to pass the 
USDA budget for 2014, how will this impact NIFA's and in 
particular how will it impact AFRI?
    Dr. Ramaswamy. Oh, wow. If the budget for NIFA, USDA and 
NIFA, is not passed, that is approximately $1.29 billion. AFRI 
itself is proposed for $383 million, and $383 million, in our 
estimate, is very simply approximately about 1,000 grant 
proposals we will not be able to do, anywhere between 500 and 
1,000 grant proposals we will not be able to do in the 
competitive grants arena.
    Then if you go to the capacity funding that is distributed 
by formula for the experiment stations to undertake research 
and extension to translate that knowledge and deliver it to the 
end users, that is going to be a loss of--together in all the 
capacity areas, that is a loss of well over $700 million. And 
that is going to have a huge impact on the 1890s, the 1862s, 
the 1994s, the Hispanic-serving institutions, the non-land-
grant agricultural colleges. We are going to lose capacity. And 
research in many ways you can't stop and start again, because 
there is a lot of development work that goes on, and that would 
be a very, very significant impact on America's global 
preeminence in the food and agricultural enterprise, and God 
forbid that something like that happens.
    Mr. Rooney. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Aderholt. Mr. Bishop.

                NATIONAL AGRICULTURAL STATISTICS SERVICE

    Mr. Bishop. Thank you very much. Let me welcome all of you, 
and I apologize for my delinquency. I had another conflict.
    But one of the casualties of sequestration appears to be 
the National Agricultural Statistics Service plan to suspend 
pecan production estimates and forecasts effective immediately, 
and, of course, I am concerned about that. The entire pecan 
industry relies heavily on these reports as well as the monthly 
cold storage report, which we understand will continue.
    Unlike other U.S. tree and nut crops, pecans are grown 
across a wide swath of 15 States, and the industry is segmented 
and has not been successful in establishing a marketing order. 
Therefore, the industry has very limited means to determine the 
size of the crop in any given year, and the numbers that are 
provided by NASS are critical to the pecan industry's ability 
to operate in an extremely volatile marketplace, both 
domestically and internationally.
    Can you have your staff review options such that possibly 
those pecan reports might be reinstated?
    Dr. Woteki. Congressman Bishop, we share your concerns 
about NASS having to suspend a number of surveys and the 
reports that come from them during this year, 2013, because of 
the sequestration and the additional rescission. The agency has 
very limited options in the way that they can absorb this very 
significant cut coming at halfway through the fiscal year.
    The one point that I think is very important is that the 
2014 budget request would allow NASS to reinstate the surveys 
that are the basis for the pecan report as well as a number of 
others that have had to be suspended this year because of the 
sequestration.

                            GENOME RESEARCH

    Mr. Bishop. Thank you very much for that, but it is really 
going to have a devastating impact on the industry this year 
because they don't have any way of tracking what the market is 
going to be.
    Do you have a sense of how many major commodities still 
exist where we have not completed genome research or 
established a genome? What ARS resources are going to be 
dedicated to genetic research in fiscal year 2014, in 
particularly peanuts? Both the University of Georgia and the 
University of Florida have been working on peanut genome 
research for some time, and, of course, the cuts are going to 
impact that. Can you speak to that quickly?
    Dr. Woteki. Well, we have had a partnership with a number 
of Federal science agencies to support the genome sequencing 
and assembly for major crops and livestock species, and we have 
also initiated some additional genome initiatives to sequence 
the major pest species as well as major diseases as well.
    Dr. Knipling, are you familiar with where we are on the 
major commodities?
    Dr. Knipling. In the case of food animals, livestock, there 
are five major species, but when it comes to crops, there are 
literally hundreds of species. But we are systematically 
sequencing the genome of the major crop species.
    Mr. Bishop. I am particularly interested in peanuts.
    Dr. Knipling. I don't know particularly about peanuts. I 
will provide that for the record. But I would say this is a 
major initiative across the whole spectrum of crop production.
    [The information follows:]


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         1890S AND HISTORICALLY BLACK COLLEGES AND UNIVERSITIES

    Mr. Bishop. Thank you.
    Let me just return to the issue of the 1890s and the HBCUs. 
Can I get you to, for the record, and you probably don't have 
that information handy at the moment, but out of all of the 
competitive nonformula research grants provided by NIFA, how 
many grants were awarded to 1890 universities, and what 
percentage of the total funding did that represent? Over the 
last, I would suggest, 5 years, were there any HBCUs awarded 
nonformula competitive NIFA grants? Are there any examples of 
current ongoing collaborative research projects between 1890s 
and 1862s?
    If there have been competitive grants awarded, I surmise 
that it has been minimal, and I have a continuing concern that 
the 1890 universities--as to why the 1890s have not been able 
to enjoy the same kind of wealth of resources from research 
that the 1860s have been able to enjoy.
    And, of course, I obviously am interested in Fort Valley 
State University in Georgia. And, of course, I hail from 
Alabama, and there is Tuskegee, Alabama A&M, there is Florida 
A&M, there is Alcorn A&M, Mississippi. And I notice that the 
Evans-Allen program for the 1890 institutions was supposed to 
be funded at the fiscal year 2011 level of $50.9 million, and 
that has actually been flat every year since fiscal year 2011. 
Shouldn't this program be spared from sequestration?
    Dr. Woteki. Let me very briefly say we would be happy to 
provide for the record information on the competitive funding 
that has been provided to the colleges of 1890, either as 
individual faculty members as well as those that are ones in 
which there have been multiple faculty from multiple 
institutions that have been successful in the competitive 
grants program.
    [The information follows:]


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                          SEQUESTRATION IMPACT

    Dr. Woteki. And with respect to the sequestration, our 
flexibility in deciding how to apply those cuts was essentially 
lacking. We have very little flexibility in how we can take 
those cuts because they are applied across each line within the 
budget. So in the case of the National Institute of Food and 
Agriculture with many, many line items in the budget, each one 
of them was affected across the board in the same manner.
    Mr. Bishop. You did it proportionately?
    Dr. Woteki. They include the same 5.1 percent for the 
sequester and the 2.7 percent for the rescission, yes.

                            REE ACTION PLAN

    Mr. Aderholt. Thank you.
    Dr. Woteki, last year you released the Research, Education, 
Economics Action Plan. This built upon the previous roadmap, 
which USDA was required to develop by the 2008 farm bill. While 
USDA has a very broad research mandate, neither Congress nor 
USDA can fund every worthwhile or interesting project. I 
support your efforts in trying to make a priority of the 
certain research mission that you are tasked to do at USDA.
    So could you tell us what are some of the USDA's most 
recent research accomplishments, perhaps maybe the top four or 
five?
    Dr. Woteki. Well, thank you, Chairman Aderholt, for 
recognizing how important the action plan has been to us, and 
the work that we have done in developing that plan has helped 
very much in sharpening up our priorities, and has helped us in 
building the budget requests that we have submitted as part of 
the President's 2014 budget.
    We are finishing up the first annual report from the action 
plan, and we will be happy to sit down with you and members of 
the Committee to review that when we get the final department 
approval for release, which we are expecting in the next month 
or so.
    The research accomplishments are in five major areas that 
address the five major priority areas in the Secretary's 
strategic plan and that relate to, first of all, food security 
for production of agriculture here in the U.S. as well as 
contributions globally; improving food safety; human nutrition, 
with a major emphasis on obesity prevention; the fourth area in 
biofuels and bioproducts; and the fifth area in adaptation and 
mitigation of climate change.
    So the report that we are putting together is providing 
highlights of specific accomplishments of just 1 year of 
operation under the action plan. And, as I said, we will be 
happy to sit down and talk it through with you. It includes 
data about the publications as well as patents and licensing 
agreements in each of the priority research areas. It also 
includes very specific examples of research accomplishments for 
each of the goals and subobjectives. So there is quite a bit of 
depth and detail that are associated with it.
    Mr. Aderholt. Were you going to say something?
    Dr. Ramaswamy. I will give you one quick example. Just in 
the State of Alabama, one of the impactful research 
accomplishments is in the area of precision agriculture. So 
Auburn University and Tuskegee University, partnered with 
Alabama A&M University as well, and other institutions, the 
University of Georgia, for example, have developed a precision 
agriculture approach that is saving in pesticide use, in the 
amount of fertilizer applied, and the labor that is involved as 
well. And we are estimating that just for the State of Alabama, 
it is going to be a savings of about $20 million-plus as a 
result of that research enterprise, the discoveries that have 
been made. That has been translated and then delivered to the 
end user. So there is that continuum of the research to the 
discovery to the delivery process that we support.
    Mr. Aderholt. That is a good example. I have actually been 
able to see that firsthand, and it is very impressive.
    Dr. Woteki, any other example that you could share with us?
    Dr. Woteki. Oh, the problem is trying to decide what are 
just a few of the top ones. We have had over this past year 
publications on the genome sequencing as it relates to wheat. 
That is a major step forward as part of an international 
research activity. That has included ARS as well as university-
based researchers.
    We have had the production for the first time of a foot and 
mouth disease vaccine that is the result of ARS research. That 
is the first time that a vaccine for foot and mouth disease can 
be produced in the United States because it does not include 
the live or attenuated organism, but rather is based on genetic 
technologies that use only a part of the organism.
    So there are a number of international efforts in 
understanding climate change as it relates to agricultural 
greenhouse gas production and ways that we can mitigate those 
agricultural greenhouse gas production. So there is a wide 
variety of research accomplishments.
    Mr. Aderholt. Thank you very much. My time is up.
    Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman.
    I was just noticing, I have been at this Committee for a 
number of years. I don't think we have ever had a table where 
everybody held a doctorate. This is the smartest group of 
witnesses we have ever had. The problem is Mr. Young is at 
every single table, and he is the only one up there without a 
doctorate. So, Mr. Chairman, I think we ought to honor him 
today with an honorary doctorate in fiscal policy wonk.
    Mr. Aderholt. That will be considered.
    Mr. Farr. We will get him up there as a coequal to his 
peers.
    Thank you for your talent, and thank you for your service 
to the United States Government. We really appreciate it.

                             METHYL BROMIDE

    Look, I came to Congress and, I think, in public life 
trying to push the envelope, and it seems to me that you gather 
all the data of how we ought to be pushing the envelope to 
change. But I have some real issues. ARS, for example, Mr. 
Knipling, the crop protection, you have $16 million allocated 
this year for soil microbial ecology. I mean, since I have been 
in Congress, we have spent $150 million trying to figure out 
the alternatives to methyl bromide, and we haven't found 
anything yet that works and can get accepted. I mean, the 
methyl iodide couldn't pass California muster, and our 
farmers--because I have probably one of the biggest users of 
the strawberry industry for methyl bromide.
    Can we get a better bang for our buck? I mean, I am just 
frustrated. You know, our enemies have been able to invent 
nuclear bombs faster than we can find an alternative to methyl 
bromide.
    Dr. Knipling. We indeed share those concerns, Mr. Farr. We 
have both a science issue and opportunity as well as a 
regulatory issue, as you know, with methyl bromide.
    Mr. Farr. We all signed those agreements 20 years ago. I 
point out that we have signed these protocols. That is when we 
started putting money into finding an alternative. Why have we 
been so ineffective in finding something that works?
    Dr. Knipling. Methyl bromide, of course, was a very good 
technology, and the alternatives in terms of other chemical 
fumigants have had their--as you alluded to, had their 
regulatory or efficacy issues as well. In fact, some of the 
alternatives that have been developed are no longer available 
because of regulatory concerns at either the State or Federal 
level.
    Mr. Farr. Well, that is the point. You are inventing things 
and finding things that can't be used. That doesn't help the 
farmer.
    Dr. Knipling. The alternative approach to chemical 
fumigants are some of the natural controls, the soil biology, 
the soil health, the plant health. And so some of these 
traditional methods that----
    Mr. Farr. Yeah, we have cut the organic research budget.
    Dr. Knipling. This is not so much an organic issue per se, 
but the genomics, the pest resistance through genetic 
improvement and plant breeding, the sustainability of the 
environment, the integrity of the environment in terms of soil 
health, soil biology, these are the alternatives that we are 
working on, and that is the route we are going to need to go 
because of the regulatory loss of methyl bromide and other 
chemical fumigants.
    Mr. Farr. Well, let us catch up to modern times and modern 
farming practices. Where are you doing this research?
    Dr. Knipling. Principally in California and Florida, but a 
number of other States are contributing to it as well. But in 
terms of genetic resistance, genetic resources, host plant 
resistance, soil biology, it is a nationwide network, and much 
of that, those basic discoveries, would have broad application 
to other crop-production systems and areas regardless of where 
the discoveries are made.

                 SUSTAINABLE AGRICULTURE/CLIMATE CHANGE

    Mr. Farr. I understand you are also going to--you are 
proposing $15.8 million for agricultural sustainability with 
prioritizing sort of the weather effects, climate extremes, and 
temperature, and precipitation rate and things like that. Where 
are you going do to do that?
    Dr. Knipling. That would be, again, across our network of 
laboratories. This is a part of a broad strategy to develop 
adaptations to changing climates. But, again, the approaches 
are largely through crop production and animal production, 
genetic improvement systems so that they can sustain their 
capacity under a changing climate condition, changing water 
conditions and----
    Mr. Farr. Are you working with NOAA weather on that?
    Dr. Knipling. Indirectly in terms of the data of climate, 
but the science----
    Mr. Farr. We have a major NOAA weather station in Monterey, 
and we have an ag research station in Salinas right next to it. 
This would be ideal. We have 85 crops that are looking for this 
kind of information. It is the highest priority among the 
ranchers there, because if they know dew points and things like 
that, they don't have to apply as much herbicides, pesticides 
or any other fertilizers. And so this is where you have another 
Federal agency that is doing research.
    Dr. Knipling. Yes, indeed. Actually another part of this 
budget request that is different than the one we have been 
talking about, but it actually is part of a USDA participation 
in an earth sciences data network across all of the Federal 
agencies. And again, our role, our niche within that USDA 
perspective would be on-the-ground environmental data as it 
relates to crop production and sustainability systems. But, 
yes, we are connected with NOAA and the other Federal agencies 
in that regard.
    Mr. Farr. I hope you will look into finding a collaborative 
between those two stations, because they have expressed 
interest to me on the ground to work together. They just 
haven't had anybody in Washington paying attention to it.

                           ORONO, MAINE, LAB

    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair.
    You have already talked a little bit about some of the 
challenges with ARS labs, and I just want to talk about the one 
in Maine. So I was disappointed to see in the fiscal year 2014 
budget proposal included the closure of the ARS plant and soil 
lab at Orono, Maine, which is our land-grant college. The lab 
has done exceptional work in fields like wild blueberries, 
potato blight research that we don't think is duplicated 
anywhere else in the country.
    So I am just wondering if you can give me any additional 
details about the proposal. Do you intend to continue to 
utilize the facility at the University of Maine? Can you 
clarify any of the details?
    Dr. Knipling. Yes, I can address that. Yes, we have an ARS 
federally owned laboratory on the campus of the University of 
Maine. We do not plan to close that laboratory or reduce the 
funding resources for it, but we do intend to and propose in 
this budget to change the orientation and the use of that 
facility to strengthen our North Atlantic salmon aquaculture 
program. We have a facility on the coast at Franklin, Maine, 
and the Orono facility would now be used as a companion 
facility to that and a complement to focus on the fish health, 
aquaculture health-related aspects of the program at Franklin.
    So, no loss of resources, no loss of the facility, but a 
new proposed use of the facility.
    Ms. Pingree. I am sure there are always challenges and 
change. Obviously there are still a lot of people interested in 
the potato and blueberry industry who don't want to see the 
change, although I also represent a tremendous number of people 
interested in the aquaculture industry. So I appreciate the 
fact that you are thinking broadly and thinking of ways to be 
able to keep the facility working.
    Dr. Knipling. I would just add that we have significant 
blueberry and potato research investments at other places, 
including in the Northeast, and much of that research and much 
of what we do at one place does have some broad applicability 
to other production areas.
    Ms. Pingree. I certainly won't argue with you, because I am 
just glad to see that you are working on possible ways to 
utilize the facility and infrastructure, but nobody else grows 
wild blueberries. I think that is really very unique to Maine 
and a growing industry.
    So there are some differences, but I do appreciate that you 
are--and, of course, Maine potatoes are better than anyone 
else's potatoes. But that is a matter for another day.
    Mr. Farr. Do wild blueberries go with wild salmon?

                         LOCALLY ADAPTED SEEDS

    Ms. Pingree. Well, that is a whole different Committee. 
Bringing back the wild salmon has nothing to do with the 
aquaculture salmon. But luckily I am on both, so I get to 
discuss it in Fish and Wildlife as well.
    I just want to go back and clarify this a little bit, nit-
picky, but I am sure I don't have a lot of time on this 
question round. But we were talking before about the AFRI 
program and the locally adapted seeds. And I guess I was trying 
to specifically say whether you had any plans to include an 
AFRI subprogram in the 2014 request for applications, because I 
do understand, to the extent that much of this is somewhat new 
to me even though I was on the Ag Committee before, but now 
drilling down a little, I know that in the request for 
applications, you know, what you state is more likely going to 
be related to what proposals come to you.
    Dr. Ramaswamy. Congresswoman Pingree, yes, indeed, we will. 
In the 2014 RFAs that we are planning on, and hopefully with 
your help, we will be able to get the funding that we need as 
well to address these very challenging questions that need to 
be addressed.
    And specifically we have what are called challenge areas 
and foundational areas within the AFRI program, and within the 
foundational area we will specifically have RFA that will be on 
plant breeding, conventional plant breeding, a very specific 
RFA. We still don't know how much money is going to be 
allocated to it. You know, it depends, again, on what you all 
are going to be doing.
    And as I said in the 2014 RFAs, we have indeed provided a 
specific RFA for plant breeding, and that has been allocated $5 
million.
    In addition to that, in the challenge areas, you know, 
which are about, you know, adapting to climate change and 
developing better, more healthy foods and things of that 
nature, there is opportunity for conventional plant breeding, 
classical plant breeding, to be incorporated in that as well, 
and we have got a number of projects that we have provided 
funding for over the last few years specifically in the area of 
using those conventional plant-breeding methods.
    Ms. Pingree. Great. Thank you for your clarification.
    Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Good morning, everyone. Thank you so much for joining us.
    Dr. Ramaswamy, I understand you are a Cornhusker.
    Dr. Ramaswamy. Sorry, I am a Wildcat.
    Mr. Fortenberry. Did you spend some time at the University 
of Nebraska though?
    Dr. Ramaswamy. No, I was at K State, but I spent a lot of 
time in Nebraska chasing bugs.
    Mr. Fortenberry. That is the origin of the Bugeater mascot 
from a long time ago.
    Dr. Ramaswamy. You got it.
    Mr. Fortenberry. Thank you all for coming this morning.
    My grandfather was a county agent, and my mother was a 4-H 
extension agent. My grandfather said that is the best job in 
America. And if we think about, again, where our real economic 
strength originates from in this country, you can definitively 
point to the land-grant system as a major factor in taking 
science and research and extending it into the hands of those 
who are going to produce and grow food and all of the other 
benefits that accrue from their production.
    So with that said, I want you to know that I believe that 
this is important, and it is a story that we have not told 
aggressively enough to the rest of the Nation that really our 
main, I think it is fair to say, backbone of economic strength 
flows forth from our ability to produce off the land and 
steward this important natural resource, and the traditional 
way in which we have done that through partnerships with land-
grant institutions, through the USDA has been essential to that 
whole process. But because so few people farm anymore directly 
related to the land, I think the Nation has not heard that 
story aggressively enough, and I think it is all of our 
responsibility to tell it.
    And I said this to the Secretary yesterday and actually 
commended him for the job he does in trying to present in a 
robust fashion the benefits of agriculture to the rest of the 
Nation. That goes way beyond safe and abundant food, but is 
also related clearly to economic policy, environmental policy 
and conservation policy, even national security policy.

                AGRICULTURE AND FOOD RESEARCH INITIATIVE

    With that said, we have got in the budget here is $106 
million increase for the Agriculture and Food Research 
Initiative. And now why is that one elevated over others in 
such an aggressive manner?
    Dr. Ramaswamy. Thank you very much, Mr. Fortenberry, and I 
couldn't agree with you more about the importance of the land-
grant enterprise that we have got in America. In fact, when 
Abraham Lincoln signed the Morrill Act into law, he said--
allegedly he said that this is going to be the economic engine 
for our Nation. And sure enough that has borne out to be true. 
And only in America will we spend just a tad over 6 cents of 
every dollar that we earn on food compared with Western Europe; 
on average they spend over 10 to 15 cents of every dollar that 
is earned. An unbelievable enterprise that was unleashed by the 
land-grant institutions.
    So I agree with you very much, and it is indeed a well-kept 
secret. Most people don't understand it, don't know what it is 
all about, and this is the 98-plus percent of the population 
that doesn't get it. And we are two generations removed from 
the farm in America, and so it becomes more and more important 
for us to try to convey this message that we have got.
    Specifically in response to your question about the 
proposed increase, so there are three principles that we wanted 
to adhere to, one of which was to increase funding for 
competitive grants, and, as you stated, it has been proposed to 
be increased by over $100 million.
    The second thing that we wanted to do was to, in quotes, 
``stem the flow,'' as it were, in loss of capacity in America. 
And in the land-grant context, we have got the capacity funds 
that are distributed based on formula for experiment stations, 
Cooperative Extension Service. Your grandfather was a member of 
that fantastic community. And so we wanted to make sure that we 
could at least get to the 2012 level in maintaining the 
capacity. And so that was the second principle.
    The third principle was we wanted to make sure that our 
minority-serving institutions were protected as well. And 
indeed the proposed budget reflects that for the National 
Institute of Food and Agriculture.
    Within AFRI specifically, we wanted to focus at the core of 
everything that we do, it is the farmers and ranchers. They 
have got to be at the core of everything that we do. There are 
a lot of externalities that impact them. There might be 
insects, pathogens, weeds, climate change, greenhouse gases, on 
and on and on; also the economic factors that we have got as 
well. But at the core of it, it is that farmer and rancher, it 
is about producing food, it is about putting food on the table.
    That is what this budget is all about. And there is a 
disconnect between what we invest in America and the complexity 
of the challenges that we are trying to address as well. And so 
the request for this increase in the Agriculture and Food 
Research Initiative reflects that principle, that we want to 
make sure that we are providing this knowledge that is 
necessary that can be translated to innovations. Those 
innovations create these solutions to the problems that we 
face.
    Mr. Fortenberry. I think the challenge here, and I think 
you actually touched upon it, is to find that balance to ensure 
that the institutions, land-grant institutions, can actually 
have the capacity to absorb such a program in their 
foundational activities. And I think that is the creative 
tension, if you put it that way, if you want to put it that 
way, that I hope you are looking for, clearly you are looking 
for. All right. Thank you.
    Dr. Ramaswamy. Yes, sir. Thank you very much.
    Mr. Aderholt. Mr. Bishop.

                              PEST CONTROL

    Mr. Bishop. Thank you very much.
    While I recognize that the eradication of cotton insects 
and pests is primarily the role of APHIS, I notice that NIFA 
proposes to spend $11.9 million in fiscal year 2014 for 
research projects focused on improved pest control.
    While the APHIS Boll Weevil Eradication Program has 
successfully eradicated the boll weevil from all U.S. Cotton 
areas except for the extreme lower parts of Texas and the Lower 
Rio Grande Valley bordering the Mexico, the Lower Rio Grande 
Valley continues an active battle to eradicate the boll weevil, 
and unfortunately that area serves as the only barrier between 
boll weevils in Mexico and boll weevils coming into the United 
States. Our southern cotton producers are very concerned that 
if we don't get a handle on this situation in Mexico, that we 
could ultimately see a reinfestation in the United States.
    So what kinds of pest-control projects are you currently 
funding? And do any of these projects include the study of 
pests which potentially come across the border from other 
countries, particularly Mexico? And, of course, primarily I am 
interested in the boll weevil.
    I had the opportunity at the Southeastern Farm Show in 
Moultrie, Georgia, to preach the eulogy of the boll weevil 
about 15 years ago. Everybody was very happy, but now we are 
wondering if a resurrection is on the horizon.
    Dr. Woteki. Let me kick off by saying we do maintain, both 
in the intramural programs at ARS as well as the extramural 
programs at NIFA, active research programs with respect to 
invasive species, whether they are plants or insects, and the 
identification of control strategies that can be implemented 
over the short to medium term, as well as longer-term 
biological control approaches that include the identification 
of natural predators that are present in the countries and the 
continents from which these invasive species originate prior to 
their coming into this country, where there may not be any 
natural predators.
    Let me ask Dr. Knipling to talk about what ARS is planning 
with respect to cotton and boll weevil research, and then Dr. 
Ramaswamy on the integrated pest management proposals that are 
included in the budget.
    Dr. Knipling. Well, I would certainly acknowledge that 
invasive species of all types are a very large portion of our 
research portfolio.
    There is a very interesting story with the cotton boll 
weevil, and it literally goes back 50 years. Even though APHIS, 
in cooperation with the grower organizations and the State 
departments of agriculture, have been responsible for 
implementing the Boll Weevil Eradication Program across the 
entire Cotton Belt starting in Virginia and North Carolina and 
working toward the Southwest. Virtually all of that operation 
was based upon technology developed by scientists in the 
Agricultural Research Service and the land-grant universities.
    One of the key successes in that was development of the 
boll weevil pheromone, that is the sex attractant, and that has 
been used as the basis for trapping and monitoring, and that is 
still used. The sterile insect technique was also deployed. It 
turned out not to be as successful for that insect as it did 
for others, but it was used in peripheral areas where the boll 
weevil population was low, such as up into Tennessee, even 
Kentucky, southern Illinois, as part of the eradication 
program.
    Understanding the biology of the boll weevil and its over-
wintering habits and the critical timing of the technology 
including insecticide technologies, so it was a portfolio of 
technologies that were all based upon science, and it was 
deployed in a very orchestrated way across the entire Cotton 
Belt.
    We continue to have at College Station, Texas, a cotton 
insect research program in support of the boll weevil program, 
and I think we are on the threshold of achieving it.
    As you point out, it is going to be very important to 
maintain a barrier and a capacity in Mexico to keep it from 
reinvading the United States. Incidentally, it is not a native 
insect to the U.S.; it is native to Mexico and Central America. 
But with other pest-management programs, we have had 
collaborative arrangements with Mexico and other foreign 
governments to establish programs that go into their country as 
well. So that would be perhaps a next step beyond eradication 
in Texas.
    Dr. Ramaswamy. So I have also been to Enterprise, Alabama, 
which is where the shrine to the boll weevil was established 
many, many years ago. So if you all have not been there, you 
might want to check it out. It is pretty cool.
    Very specifically within NIFA, in addition to what Dr. 
Woteki and Dr. Knipling said, we have got several different 
lines that we are going to be providing funding. We have 
consolidated all of the various programs that we had in the 
plant protection, pest management area into basically two 
lines. One of them is we call it crop protection, slash, pest 
management, and over $20 million is going to be invested in 
developing new methods, new technologies to deal with insects, 
and weeds, and pathogens and things of that nature, including 
the invasive species.
    A second area that we have kept aside is--we have listened 
to stakeholders--we have kept aside the IR-4 program, the Minor 
Use Pesticides Program, and that is another area that is about 
over $11 million that we are going to be investing--we propose 
to invest in coming up with new technologies to deal with 
pests.
    The third area is in the other funding programs that we 
have got: for example, earlier Congresswoman Pingree asked 
about conventional plant breeding, the approaches that are 
available to us in the plant-breeding domain of dealing with 
insects, and pathogens and things of that nature is another 
opportunity for us to develop new methods and new technologies 
as well.
    Finally, the Sustainable Agriculture Research and Education 
program, SARE, has now been consolidated into one line. We had 
under the research enterprise and the extension enterprise two 
separate areas, and we have brought it all together. It is over 
$22 million that we are proposing. And then within the SARE 
program we will have great opportunities to develop new 
technologies to deal with pests as well. So we are certainly 
very concerned about this, sir.
    Mr. Bishop. My time is expired, and I thank you.
    Mr. Aderholt. Mr. Yoder.

                    WHEAT AND BARLEY SCAB INITIATIVE

    Mr. Yoder. Thank you, Mr. Chairman. Thank you all for 
coming today. I appreciate having you here.
    Dr. Ramaswamy, I, for one, am pleased to hear of your 
association with K State. I don't know how the rest of the 
folks here were, but as a proud Kansan----
    Dr. Ramaswamy. Being a Jayhawk yourself.
    Mr. Yoder. Okay. You are familiar with that. Our sister 
institution down the road there in Manhattan, we are proud of 
them and their role in agriculture in the State, and they have 
got some really exciting projects going there, and very pleased 
with what they are up to.
    Certainly as a Kansan, we know Kansas is the biggest wheat 
producer in the country, and I wanted to ask a little bit about 
the U.S. Wheat and Barley Scab Initiative. The 2013 budget for 
ARS included $4.7 million for this, which, through a 
competitive grant program, is providing funding to over 100 
State university research projects in 22 States to address the 
substantial economic threat to the U.S. wheat and barley crops 
from the fungal disease.
    As you know, the disease reduces crop yields and quality, 
reducing returns to both growers and grain end users, with a 
substantial negative impact to the job-generating wheat- and 
barley-based agriculture economy. It also produces health-
threatening mycotoxins, which are a food safety hazard.
    I noted in the budget that the budget was actually--that 
the research is reduced by just under $1 million; I think 
$880,000. So what is the status of the research, and why are we 
reducing expenditures there?
    Dr. Ramaswamy. So I am going to refer to my colleague Dr. 
Knipling to respond to that, because it is being managed by the 
Agricultural Research Service. But I will come back and respond 
to your question as well, because we are doing several things 
in that realm, in the scab area as well.
    Mr. Yoder. Great. Thank you.
    Dr. Knipling.
    Dr. Knipling. Yes. The wheat scab is a fungal pathogen, 
Fusarium. It also affects barley. It debilitates, reduces the 
crop production, but it also leaves behind a toxin which has 
some food safety, feed safety implications, and export and 
marketing implications as well.
    This problem really came to light in a big way in the 
1990s. Since about the year 2000, ARS has been investing about 
$10 million a year at various of our laboratories. About half 
of that is in the intramural program, and the other half is 
roughly the $5 million that you referred to as the cooperative 
agreement, a program with universities.
    We made tremendous progress over the last 12 to 13 years. 
The problem is probably not more than--in terms of losses to 
producers and to the marketplace, probably not more than 20 
percent of what it was 15 years ago.
    So under these budget circumstances, we are always 
challenged to refocus our resources to higher priorities. We 
are proposing to reduce the investment by about half. We will 
still maintain about $5 million at our laboratories, but to 
focus the other half on some of the priorities that we have 
been talking about in this hearing, some of the other crop 
production, sustainability, adaptation to climatic change, 
variability and so forth. This work will still relate to wheat-
production systems, crop-production systems, but taking a 
different approach. But we will maintain the base program of 
about $5 million at our laboratories.
    Dr. Ramaswamy. If I might add to that, I had one of my 
colleagues do a quick search for me. At the land-grant 
university community, the funding that we receive from ARS that 
is provided to the land-grant universities, there are about 40 
projects, almost 40 projects, that are attributable to scab 
work. That is almost all of them are in collaboration with our 
colleagues in the Agricultural Research Service as well. The 
funding is provided with our capacity funds, the Hatch funds, 
that provides funding for agricultural experiment stations, as 
well as the Smith-Lever funds for Cooperative Extension Service 
as well, so that the research is actually transmitted and 
delivered to the end users.
    In other areas within the Agriculture and Food Research 
Initiative, we have provided funding for wheat researchers over 
the last 4 years that is about improving wheat genetics, and 
they have incorporated within those enterprises as well the 
effort to deal with the scab, and other pathogens and insect 
problems and wheat problems as well.
    So we do have a tremendous presence in the scab and other 
diseases. We have got this thing called the Karnal bunt disease 
and Ug-99 coming from Uganda, you know, of tremendous concern 
to us, going back to Congressman Bishop's question about 
invasives, and we cannot take our eyes off this lest we are 
unable to produce the food that we need to be producing for us 
and for the world.
    Mr. Yoder. Thank you.
    Thank you, Mr. Chairman.

                           NUTRITION RESEARCH

    Mr. Aderholt. Let me focus a little bit on the nutrition 
research programs. USDA is responsible for human nutrition 
research. This research is used to support programs and 
functions, such as food assistance programs and dietary 
guidelines. ERS, ARS and NIFA all fund programs on this topic.
    Let me address to three of you, Dr. Knipling and Dr. Bohman 
and Dr. Ramaswamy, maybe you could all each comment on this, 
and, first of all, when you make your comments, the focus of 
your particular agency on human nutrition, what questions you 
are trying to answer, how is the information used by other 
agencies and programs, and if there is any overlap?
    So let us start with you, Dr. Bohman.
    Dr. Bohman. Well, thanks.
    The Economic Research Service has had a longstanding 
program understanding the diets of American consumers. Our data 
on food availability and what people eat extends back over 100 
years.
    A current focus is on the eating patterns of Americans, and 
we have been vested with this committee and others' help in 
funding in building a consumer data system. We are purchasing 
data, such as scanner data from private suppliers, conducting 
surveys, and integrating this with other data that is available 
from the Federal system, such as the National Health and 
Nutrition Examination Survey, or NHANES.
    So from this work we are looking at what people eat; what 
are the characteristics of the people who eat them, income, 
demographics, where they live; and understanding the actual 
pattern of American diets, as well as the cost of different 
diets.
    We published some research this year on the cost of healthy 
food, which showed that it depends on how you measure it. By 
calorie, less good food such as potato chips look cheap, but if 
you measure by portion size, you find that an apple could be 
thought of as cheaper than a bag of potato chips. It costs less 
per portion size.
    So this work is supporting the nutrition community, who use 
this to interact with the people they work with, us, people who 
eat the food, but also we work closely with CNPP, the Center 
for Nutrition Policy and Promotion, who developed the dietary 
guidelines, and they use the work that we do and the databases 
we have in their work on dietary guidelines.
    So I think it is well integrated. We have people who are on 
their committees. We interact with them to make sure that the 
work we do meshes with the kinds of recommendations that they 
need to make. So I think it is a good case of collaboration 
where we each have our different roles, but we are supporting 
each other.
    And then we also work closely with the Food and Nutrition 
Service, and some of our work on nutrition there is to look at 
the dietary outcomes or the health outcomes of people on the 
major nutrition programs such as SNAP. We have ongoing work to 
look at whether people who participate in SNAP eat healthier 
diets than nonparticipants at the same levels of income.
    We also work on the school lunch program and have been 
working with FNS to jointly fund and develop research programs 
that look at students' choices in the school lunch program and 
how you can use relatively inexpensive techniques to change the 
way those lunches are delivered, and improve the choices that 
students make, and decrease the amount of waste. And that is 
using behavioral economics, which is one of the things in the 
2014 budget that we propose to increase with our initiative. We 
meet quarterly with the Food and Nutrition Service to make sure 
that what we are doing supports their programs.
    Mr. Aderholt. Mr. Ramaswamy.

                           OBESITY PREVENTION

    Dr. Ramaswamy. Yes, sir. Thanks very much.
    And so the National Institute of Food and Agriculture, as 
my colleague Dr. Bohman said, we participate in these 
interagency conversations, collaborations and partnerships. So 
in addition to the agencies within USDA, outside of USDA, we 
also partner with the National Institutes of Health in looking 
at the possibility of leveraging resources, both intellectual 
and monetary resources.
    Very specifically for 2014, in the nutrition area, our 
focus, we are proposing over $35 million to be invested in this 
enterprise. And our focus really is on preventing childhood 
obesity, and we are focused specifically at the age group of 2 
to 19 years of age. And the idea is to focus on basically three 
things.
    And so when you go back to issues related to obesity and 
chronic diseases that we have got, it is the food, it is 
behavior, it is lifestyle. These are the three things, along 
with genetics, that contribute to the challenges that we have 
got in chronic disease. So our focus is going to be on issues 
related to behavioral, cultural issues, environmental factors 
that impact this occurrence of childhood obesity and how do we 
prevent that.
    Within USDA basically, the idea is not just discover great 
knowledge, publish it in some scientific journal, and pat 
yourself on the back that you have done something great, but 
you have got to take that knowledge, translate that, get those 
innovations, and get those solutions to the problems that we 
have got.
    So within the funding program, we will have these--what we 
call integrated research and extension and education grants 
that we will be offering as well. Well over 50 percent in our 
past experience has been well over 50 percent of these 
integrated-type efforts that we have got. So there is a 
continuity; the continuum between the discovery process and the 
delivery process is going to be undertaken as well. That is a 
very critical piece that we are working on.
    The last thing that I wanted to share with you as well, we 
have got this Expanded Food and Nutrition Education Program as 
well, and that is approximately about $60 million-plus that we 
will have as a result of the sequestration this year. And that 
is targeted at a very large population, particularly 
underrepresented populations. About 80 to 85 percent of the 
participants in the EFNEP program are minority populations. And 
again, we are working with them to help them develop better 
knowledge so that they can incorporate.
    And there are some really wonderful long-term studies have 
been undertaken, for example, at the University of Wyoming. 
Things that were done 5 years ago are now being looked at as a 
follow-up in the form of a longitudinal study. And indeed, what 
they are getting, the knowledge that they are getting, is 
helping them develop better ways thinking about the food that 
they are eating. And so there are some very interestingly good 
data that are coming out of this as well. That is on the 
ground.
    Mr. Aderholt. Quickly, Dr. Knipling.

                         ARS NUTRITION CENTERS

    Dr. Knipling. Yes, human nutrition is a very significant 
part of ARS's research portfolio, approximately 10 percent of 
our total program, and it is kind of a culmination of the food 
chain. In fact, we operate a network of six major nutrition 
centers around the country that focus on different aspects of 
human nutrition, but all of which have a diet-health 
relationship. We are increasingly relating this back to the 
food-production system.
    This budget actually proposes a $10 million enhancement of 
the research programs at the six centers, and to focus on 
strengthening the science basis for the other USDA food 
assistance programs; to strengthen our nutrition monitoring 
surveillance program, what is called ``What We Eat in 
America'', and understanding the data associated with that so 
that we can relate it to some of these other programs that my 
colleagues have spoken about.
    Mr. Aderholt. Mr. Farr.

                         NUTRITION INFORMATION

    Mr. Farr. I want to make a comment on that. I mean, you 
point out that a record level of obesity in Americans is 
affecting heart disease, diabetes, cancer incidents, all 
related to obesity. You certainly have the knowledge in knowing 
what causes it, but I think you do a lousy job of trying to get 
Americans to change our culture.
    The fast-food industry grew up in my lifetime. The first 
fast-food McDonald's, I think I was 26 before it was available. 
It was kind of interesting to go down and buy a 19-cent 
hamburger, but it wasn't something people would do every day.
    The new generation have grown up with fast food. I think 
the fast-food industrial complex is winning the war, and you 
are losing it. I love that now you have the MyPlate available 
in schools, but MyPlate ought to be in every fast-food 
restaurant. They ought to show exactly what nutritional value 
it is in what they are serving.
    We have got to do something differently with the 
information that you have, because if we are just going to try 
to keep it in scientific circles, and it is not getting into 
the lifestyle of people. I have tried, I am trying to lose 50 
pounds, and I am not going on any diet. I am just going to try 
to eat healthy foods. And I will tell you it is really hard. 
You can't just go and get fresh stuff. And here in Washington, 
you know, you have to go to one of these corner stores, it is 
just not available. And until I got into this, I never realized 
how difficult it is to eat healthy.
    It is also the amount of portions that everybody gives you. 
I have to take in a restaurant now and sort of scrape half the 
plate away and say, I am not eating that, and then I have to 
cut what I am going to eat in half.
    I mean, it is a whole new learning process, and I am 
dedicated to trying to figure this out, but I find that what we 
have--all the information you have gathered and all the 
information in the census you have, it is very difficult in 
educating people and changing essentially our production, our 
sales process. I mean, as I said yesterday to the Secretary, in 
a country where Chicken McNugget is cheaper than a head of 
lettuce, there is something wrong with all the processing that 
you have to do to take a live animal and turn it into a Chicken 
McNugget versus just cutting a head of lettuce and delivering 
it to a place.
    So if we are going to really fight this war on obesity, we 
have got to ratchet up our game plan here. And I hope, Dr. 
Woteki, that you--you point in your closing statement that you 
proposed to have research capacities and build extensive new 
partnerships and networks with other Federal, with State, and 
with local agencies, with universities and with international 
scientists. I don't have time, but I want to know what your 
plan is to build that, because I think that all of these 
entities work in such silos. I know at the State and local 
level they are in silos. I want to bust those silos, and I want 
to know what plan you are going to have to do that, and 
particularly a plan for getting all this nutrition information 
out so it is user-friendly in every place that people have to 
make decisions about food.
    So having said that, I want to ask some questions that 
aren't even related to that.
    Dr. Woteki. I have some answers related to that, though.

                           NATIONAL ARBORETUM

    Mr. Farr. Wait a minute. I see that clock there is ticking. 
So I want to know about our National Arboretum, one of my 
favorite things. As you know, recently USDA published the newly 
completed strategic plan for the U.S. National Arboretum. What 
are the Department's plans for implementing this plan, which 
emphasizes Arboretum's role in discovery, education and 
accommodating over 1 million visitors a year? What are you 
going to do to implement your study?
    Dr. Woteki. Well, the strategic plan for the Arboretum has 
been out for public comment, and it has gotten, from what I 
have been told, a substantial amount of support from the 
Friends of the National Arboretum.
    The budget constraints that we are facing this fiscal year 
are affecting every one of ARS's locations, including the 
Arboretum. So with respect to the sequestration and the 
rescission, this will result in a 7.8 percent cut to the 
National Arboretum, which is going to have some ramifications 
for them.
    Mr. Farr. That is labor? Do we have to cut back because of 
labor costs; big, high costs?
    Dr. Woteki. Well, it is essentially a cut to all of the 
operations, and each site that ARS has has a different 
structure of labor as well as funds that are used to support 
the research program, and also, at some sites, some funds that 
are used to support research with collaborators and 
universities.
    The Arboretum does have very high proportionately labor-to-
program costs, and they have a number of decisions that they 
are going to have to be making about how they are going to 
absorb these cuts.
    Mr. Farr. Do you speak with your colleagues, say, at the 
University of Davis, where we have joint facilities, State 
employees working with Federal employees, because the State of 
California has gone through cutbacks and through furloughs and 
been able to handle it. I mean, everybody was worried, and it 
has had an effect, but I think Washington has been ignoring 
that we have a major--government has been through years and 
years of furloughs, and we can learn some lessons from them, 
particularly in the research department. I don't know how they 
handle all this, because you are right, you can't just drop 
research and then start it up later.
    But I hope that we can learn some lessons from your 
colleagues in that area.
    I have a couple of other questions, Mr. Chairman, but I 
guess my time is up.
    Mr. Aderholt. Mr. Fortenberry.

                            DROUGHT RESEARCH

    Mr. Fortenberry. I don't want to be impolite if I cut any 
of you off, but I want to get to three things, so I will try to 
pack them. So if we could confine our conversations and move it 
along quicker, that would help.
    I want to talk about the drought. You all know the 
circumstance where I live in Nebraska, and in many places 
particularly in the Midwest. Is it time to institutionalize, if 
you will, drought mitigation and research capacity? We are 
doing this work, we have strung it along, but to formalize 
structures in that regard, is this under consideration?
    Dr. Woteki. I can say that referencing our action plan, 
that the whole question of water, water availability, as well 
as the development of adaptation and mitigation strategy is an 
important subgoal within our research activities. It is 
reflected, as well, in intramural and extramural research 
programs to develop, for both crops and livestock, resilience 
to drought conditions. So this is a priority for us, and it is 
reflected in the action plan as well as in the research plans 
of both ARS and NIFA.
    Mr. Fortenberry. Well, we have spent about $15 billion of 
payouts through crop insurance basically to mitigate the 
effects on income, which is important and helpful. We have 
advanced technologies in irrigation for proper stewardship of 
water. But there is a point where you can only do so much to 
mitigate the revenue damage to producers.
    Driving through rural Nebraska the week before last, I was 
straining my neck looking at at the level of the farm ponds, 
and I was pleased to see that some water had been replenished 
from the winter. But one of my producers in the area told me 
that is just the water table, Jeff; there is still a ways to 
go.
    So hopefully we are a little bit better off this year just 
in terms of the weather patterns thus far, but, again, getting 
underneath this with a sustained research model that helps 
mitigation, thank you for suggesting that is a priority.

                         NUTRITION INFORMATION

    Let us move also to the nutrition side. We have got 
obviously a growing awareness of the correlation between health 
outcomes and nutrition. We all know that intuitively. We know 
it by common sense. This has been a major priority of the 
Department. But I think, again, we have lost some important 
institutional dynamics that used to be ordinary.
    For instance, it might sound anachronistic and old-
fashioned, but the whole concept of home economics as it was 
integrated into school systems, taught with regularity, brought 
into the home with regularity, and there is a lot of 
sociological factors at work here that perhaps make it more of 
a challenge, particularly with the fragmentation of family 
life. Many kids have sedentary lifestyles. I mean, I used to 
ride my bike home or walk home when it was warm. Neighborhoods 
are such that perhaps you can't let children do that anymore. A 
lot of children are on their own, unsupervised, they have to 
stay inside. So all of these things are contributing to 
lifestyle difficulties. But also, Congressman Farr has pointed 
out some other dynamics in just what we eat, which become 
simpler and easier.
    So all of these factors go into these problematic outcomes. 
But I think we ought to wave the flag here again and say, look, 
we have got bodies of research, and in the past we have had 
this well integrated into school systems that not only are 
evident in the cafeteria, but actually are integrated into 
children's education. Let us wave that flag again.
    Dr. Woteki. To respond partially to your question and to 
Mr. Farr's nonquestion about what are we doing with respect to 
our research findings and the changing of the culture, I would 
just like to make two major claims, and one is that the 
research programs that Dr. Bohman, Dr. Ramaswamy and Dr. 
Knipling described in human nutrition are very important in 
establishing the evidence base for program and policy decisions 
that the Department makes as well as that other departments 
make. And a good examples of that is the research base that has 
informed the new regulations on competitive foods that have 
been proposed for the schools as well as for the school lunch 
standard. So we can see where our research programs are having 
applications in program and policy decisions.
    The second point I want to make is that we have been 
working over this past year with Under Secretary Kevin 
Concannon, who is responsible for the food assistance programs 
within the Department, and also with Dr. Howard Koh, the 
Assistant Secretary for Health at the Department of Health and 
Human Services, to establish an interagency----
    Mr. Fortenberry. Just to break up the silos, as Sam Farr 
said?
    Dr. Woteki. Exactly, exactly. To coordinate our work on 
human nutrition, both from the research perspective and from 
the education perspective.
    We are also participating with colleagues from the Centers 
for Disease Control and with the National Institutes of Health, 
along with the Robert Wood Johnson Foundation, a number of 
leading academics in the national coordinating committee on 
obesity research so that we are able to bring together all of 
the agencies' expertise on this along with the research 
community and the Robert Wood Johnson Foundation to examine 
what is coming out of these various research programs, and how 
can they also be used more effectively in policy development.
    Mr. Fortenberry. Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.

                        ANTIMICROBIAL RESISTANCE

    Ms. Pingree. Thank you, Mr. Chair.
    And I will go off in another direction, although it is all 
interesting to me. I want to talk a little bit about 
antibiotics and livestock and research around that. In 2011, 
the GAO issued a report showing data collected by USDA and HHS 
lacked crucial details necessary to examine the trends from 
relationships between antibiotic use in food animals and drug-
resistant bacteria in animals and the growing problems with 
that. Given the concerns about health and food safety and the 
implications of antibiotic-resistant bacteria, funding for this 
research is critical to fully evaluate the use of antibiotics 
in food animal production.
    I was encouraged to see that the President's budget 
included funding to ARS to develop alternatives to antibiotics 
to combat antibiotic resistance in livestock. Could you talk a 
little bit more about the work? Is there coordination with the 
FDA on the topic of the antibiotic resistance in general? And I 
know some of the research is going on. And can you also talk a 
little bit about the outreach to farmers and the public on 
results and recommendations?
    Dr. Woteki. We are also concerned about the emergence of 
multidrug resistance--they are linked to food-borne pathogens--
and have, both in ARS as well as in NIFA budget, proposals that 
would increase our funding available to address antimicrobial 
resistance in food animals.
    We do participate, to your second question, in the 
Interagency Task Force on Antimicrobial Resistance, and that 
task force has developed a public health action plan in which 
our agencies are responsible for a number of actions that are 
based on our research programs.
    The Agricultural Research Service, as a case in point, 
under this action plan is working to identify strategies for 
minimizing microbial contamination of food. A lot of that 
strategy has focused on carcass rinses that can be used in 
poultry production, as well as carcass and hide rinses that can 
be used to reduce the levels of food-borne pathogens in cattle 
as they are presented for slaughter.
    The ARS also evaluates the development, the persistence and 
the transfer of antimicrobial-resistant organisms and the 
resistance genes among those. This is kind of a fundamental 
understanding that we are developing of how these traits are 
passed from one organism to another. And ARS also does some 
very important research that is focusing on the sampling 
program for the National Antimicrobial Resistance Monitoring 
System. So we are a contributor to that.
    Both the intramural and the extramural programs are also 
focusing on the development of alternatives to the use of 
antimicrobials in livestock rearing. Some of those projects 
have focused on the development of vaccines for the pathogens. 
Others are developing novel products that can be fed to animals 
that would provide for growth promotion, but would not use or--
you know, essentially would replace antibiotics. And some of 
these include pre- and probiotics and other active substances 
that can be safely fed to animals, promote growth, but it would 
substitute for the use of antibiotics.
    So a new focus of research has been to understand, using 
some of the new techniques of what is called the microbiome 
approach--to understand the population ecology of 
microorganisms in the gut of food animals, how those are 
affected by feeding of antibiotics, and out of those studies to 
try to identify what are some new and promising approaches that 
can be used to develop alternatives that would, again, provide 
for the growth promotion effects, but that would substitute for 
the use of antibiotics that are now very important for human 
medicine.
    Dr. Bohman. May I add something on the economic side? So 
ERS and NASS conduct an annual farm financial survey, the 
Agricultural Resource Management Survey, and we have included 
questions about farmers' uses of the antibiotics and have a 
research program underway to look at the implications for costs 
of farmers who do use antibiotics; for those who do and don't, 
what are complementary strategies that they have been 
employing; and we are building models to help understand the 
implications of alternatives.
    Dr. Ramaswamy. If I have the time, I could add one.
    So within NIFA, the request for applications, we are going 
to be doing a $5 million effort in antimicrobial resistance 
area. And that is going to look at life cycle analysis, what 
happens to farm animals from, in quotes, ``cradle to grave,'' 
as it were, looking at all of the different facets where you 
might have the--critical control points where you might have 
microbes coming in and going out, how do you deal with it.
    In addition to that, you asked the question about outreach 
itself. Our grant proposals will require that the knowledge 
that is going to be developed is to be translated and delivered 
to the end user as well. So the Cooperative Extension Service 
involvement in this is a very critical piece of it.
    Mr. Aderholt. Mr. Yoder. 

                PUBLICATION OF TAX PAYER-FUNDED RESEARCH

    Mr. Yoder. Thank you, Mr. Chairman.
    I just have a brief question about the publication of 
taxpayer-funded research. And I am a cosponsor of legislation 
in the House that would require research that was funded by 
taxpayer dollars to be--that is published in a journal to be 
published online after a certain period of time so that other 
taxpayers and other taxpayer-funded entities, other 
universities can access the research. And we are constantly 
advising Federal agencies, universities to figure out how to do 
more with less. This is an opportunity to save research dollars 
across the universities in our country. So it is a very 
positive bill, it is a bipartisan bill.
    And I am pleased to see in February a memo from, or the 
mandate from the President, I guess an administrative 
directive, entitled Increasing Access to the Results of 
Federally Funded Scientific Research was issued by the Office 
of Science and Technology Policy on February 22, 2013.
    I guess what I want to know is how are your respective 
departments preparing to deal with this, and what does the 
future look like in terms of access to research that is funded 
through your departments?
    Dr. Woteki. We are working with our colleagues in the other 
science agencies to respond to the President's directive to 
develop two plans by the end of August of this year. One on how 
we would provide open access to scholarly publications that are 
the result of the Federal investment in research, and secondly, 
how we will provide public access to the data that were also 
the result of federally funded research projects.
    We are, as I said, working with the other science agencies, 
the National Science Foundation, the National Institute of 
Science and Technology, you know, across the board, and we will 
be holding in a month's time essentially a workshop to get 
opinions from researchers at universities, scientific societies 
about the implementation of this directive from the President.
    So it is a closely coordinated activity. We are very 
mindful of the individual researcher in a university and the 
need to have a coordinated approach, because that individual 
agronomist or animal scientist may receive funding to support 
research from the National Institute of Food and Agriculture, 
perhaps from the National Science Foundation, perhaps from 
other Federal agencies, and that any requirements that we place 
on them have got to be ones that are going to be coordinated, 
and that will have the least burden possible on the individual 
investigators.
    Mr. Yoder. And so that is certainly an important 
consideration related to how the researchers have to provide 
this information, and in particular in legislation that we were 
pursuing, that research not published, then they don't have to 
publish their works. There are certain rules regarding notes. I 
know there is a lot of intricacies that go into it. Obviously 
classified documents can't be produced, and we know there are 
certain things that we are researching even regarding 
bioterrorism and those sorts of things. So I appreciate your 
sensitivity to that.
    So you are working through that process. When would 
taxpayers, constituents be able to research and be part of a 
fully operating system? What would that timeline look like?
    Dr. Woteki. Well, we have done some internal discussions 
for the purposes of trying to answer that question of how long 
would it take for us to have a system that would be up and 
operable.
    Given that we have been asked to develop a plan, we will be 
submitting those plans, as I said, in the month of August, and 
our expectation is that we would not be able to fully implement 
a new system for probably 18 months beyond that. There will be 
probably budgetary implications for the development of the IT 
systems that would handle these new reporting requirements. We 
would also have to allow the opportunity for the granting 
agencies in their requests for applications to have the new 
requirements specified.
    So the new system would have to be phased in over time, get 
the IT systems in place, and then also provide the time for the 
appropriate notification in the grants, the new grants that 
would be brought in under this new approach.
    Mr. Yoder. Great. Thank you for your answer.
    Dr. Ramaswamy. I might add just one quick thing. We did the 
``back of the proverbial envelope'' calculation. We figured it 
would cost $100 per publication to be made available in 
perpetuity.
    Mr. Yoder. Each time?
    Dr. Ramaswamy. Yes, sir.
    Mr. Yoder. Okay. Thank you.
    Thank you, Mr. Chairman.

                         CENSUS OF AGRICULTURE

    Mr. Aderholt. Dr. Clark, let me turn to you for just a 
minute on the Census for Agriculture. I understand the 2012 
Census of Agriculture is underway. Your agency is collecting 
and compiling information received from producer surveys. Could 
you give us just a quick overview and update on that, and also 
what the response rate from the producers has been?
    Dr. Clark. We are very pleased that we have a good response 
rate at this point. We are at 69 percent. That is about 2 
million of the 3 million that we have mailed. We have been able 
to get 270,000 from our Web reporting, which is much more than 
we expected. This will save us costs, because anything that 
comes in through the Web does not have to go through a keying 
operation, and we don't have to do the follow-up.
    We just have had two follow-up mailings. So we finished our 
mail data collection in March, and we are going to field 
follow-up now for the important operations that we still want 
to collect data from, the large operations, the minority farm 
operations, the ones that we want to make sure that we meet our 
coverage goals. And we will be calling counties that have less 
than a 75 percent response within their county so that we can 
provide an equitable amount of data for each of the counties in 
the United States.
    We have a unit in our operating center which we established 
about 18 months ago in St. Louis that is working on the 
editing. We may have some slowdown in the operations because we 
only hired half the number of people that we had initially 
planned to hire for this Census. We are down in our staffing 
because of the budget reductions.
    So we are still hoping that we will be able to publish our 
results in February. The main things that we have had to change 
because of sequestration and rescission include reducing--or 
suspending the conduct of the Census in Guam, the Virgin 
Islands, Samoa and the Northern Mariana Islands, and we will 
not be producing two special products, ZIP code tabulations and 
county profiles. But we were pleased that we did get the 
anomaly, which was the additional funding to do the Census, to 
do the data collection for the Census, but that was not at the 
level that we had originally hoped for, so we did have to make 
some accommodations in the Census.
    Mr. Aderholt. Thank you.
    Mr. Farr may have a follow-up question, so let me go ahead 
and turn it over to you.
    Mr. Farr. Why do it every 5 years? The national Census is 
every 10 years.
    Ms. Clark. Well, because agriculture changes a lot in the 
interim. The Census of Agriculture is part of the economic 
census of the United States. It started in the Census Bureau in 
about 1840, and until 1997 was conducted as part--by the Census 
Bureau. It was moved in 1997 to the Department of Agriculture, 
and there have been some positive benefits of doing that. 
Because of the integration between the Census of Agriculture 
and the agriculture estimating programs, we have much better 
coverage of our population because we now have a better list 
frame that we use for both the census and also for agriculture 
surveys.
    So that is the rationale, and it is part of our economic 
underpinnings for information and policy, which is needed on an 
ongoing basis.

                            RESEARCH FUNDING

    Mr. Farr. I have a question of Dr. Woteki. You have a $2.8 
billion program, your four mission areas sitting next to you. I 
couldn't figure out exactly because it is broken out in so many 
different ways, but for your whole Department I would be 
interested in seeing how much of the funding goes for 
competitive grants in all of the departments, how much goes for 
just formula funding, and how much is for in-house research. 
That is sort of extracting, you know, the labor costs. If you 
could break that out. I think I am always interested in moving 
more of it to competitive, but I would just like to see what it 
all is. I know it is pretty easy to see within the ARS, which 
is about 50-50.
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         SUSTAINABLE AGRICULTURE RESEARCH AND EXTENSION (SARE)

    I have a concern. The President's budget last year included 
individual requests for the SARE program. The requests were 
separated into an extension component and research and 
education component. This year the President's budget includes 
a single request for $22.7 million for both.
    What is the amount that you will--and I hope that we want 
to keep them, both components, funded--what is the amount that 
you will allocate for extension component and for research 
component of the 22.7?
    Dr. Ramaswamy. Congressman Farr, indeed we are proposing an 
allocation of $22.7 million for the SARE program. You know, you 
can't separate the research from the extension. We wanted to 
bring it all under one line. In that amount we have a proposal 
for an actual increase of almost $3 million compared to last 
year.
    Mr. Farr. For extension or for----
    Dr. Ramaswamy. Well, complete integrated SARE program. When 
you look at these things as being integrated, you cannot 
separate the discovery process from the delivery process. At 
the institutions and other organizations where SARE funding is 
provided, researchers and extension folks, they all live and 
work together. Sometimes it is the same individual that does 
that work as well. So----
    Mr. Farr. Well, often when you combine programs, you know, 
one suffers at the expense of the other. They are both 
important, as you pointed out. So I think that as long as you 
are committing to keep both going----
    Dr. Ramaswamy. Yes, sir. You have our commitment. 
Absolutely. Positively.
    Mr. Farr. All right. Well, I just want to conclude by just 
saying I think this hearing has been, for me, of all the years 
I have been on the Committee, this has been a very interesting 
one. I could sit here all day, because I think of you as being 
the brain trust for the information that Congress needs to set 
policy.
    But I have been very critical of the government the longer 
I get here about how much of our information stays in academic 
circles and in our traditional ways, and at the same time 
society and sort of the--as the Secretary was talking about is 
how do you initiate new people? If the average age of farmers 
in the United States is 66 years old, where is the next 
generation of farming coming? What are the kinds of policies? 
And he was talking about using research lands that we are 
giving up to allow start-up farms for veterans and things like 
that. Those are the really exciting kinds of things that I 
think Congress would be very interested in.

                        APPLICATION OF RESEARCH

    I would just hope that in your areas, because you are all 
policy wonks, is how do you take the data that you are doing 
and apply it? We need the application process brought to us. We 
got all this information. How are we going to get it out there 
so it works? Because it is exciting stuff.
    I love data, but I don't like data that is not applied, and 
I think that is where we lack the thrust to do better 
application of information that we have gained, particularly in 
this health area. I mean, I think there is going to be a big 
push to move wellness into the Department of Health, because I 
think wellness is going to be the future of medicine in 
America. We know a lot about disease; we are just beginning to 
learn about what it takes to stay well and healthy.
    So please push.
    Mr. Aderholt. Mr. Fortenberry.
    Mr. Fortenberry. Well, Congressman Farr is actually 
anticipating some of my comments, because I wanted to go back 
to our conversation, Dr. Woteki, about how we elevate the 
stature of the Department in reviving, if you will, its past 
and its integration into broader areas of society so that we 
are extending good research and proper formation around things 
that are good for people, the very purpose of which we have 
these policies.
    We have made some advances in the last few years, 
particularly in the area of wellness. That whole word is now, I 
think, a generally accepted term. It has been integrated into 
workplaces in a lot of areas. There is an increased focus, 
obviously, on the right balance for school lunches, although we 
have got to make sure kids aren't hungry. Those are the primary 
emails that I have gotten of late.
    At the same time, again going back to our very prominent 
past where we called things home economics, and we had really a 
fuller program integrated into schools, I think, to your point, 
new policy research should be built upon, again, the past, 
because we already have a great body of knowledge that has 
worked well in previous times, and we are under stresses 
because of, again, sociological change as to how to adapt, but 
I don't think we should be afraid either to talk about that 
sociological change and how it is related to these outcomes in 
health.
    I completely agree with what Congressman Farr said. This 
correlation between nutrition and health is, again, intuitive, 
but there is a growing recognition that we must grasp this in a 
serious manner and make it an integral part of broader policy 
in the country. But you have already done that for well over 
100 years.
    So, again, elevating the role of the Department in the 
arena, we are going to call it health, but, again, because of 
the correlation between nutrition and health, to me is 
absolutely essential.

                              NEW RESEARCH

    It is related to the last point I wanted to make, and I 
wanted everybody to respond to this right quick, and you are 
welcome to respond directly to what I just said. But I like a 
simple question that simply asks this: What is old that we can 
get rid of that no longer makes sense, and what is new, 
emerging trends where we need to be entrepreneurial and 
creative in policy thinking, that actually address what the 
underlying purposes of our whole expenditures are here, namely 
a good, vibrant, healthy, economically sound country in order 
that people can find the fullness of their capacity?
    So, again, what is old that we need to let go of or 
rethink, and what are emerging models that we need to focus on?
    Dr. Wotecki. Well, very quickly, with respect to the what 
is new that will also have an impact on the greater public as 
well as on the design of programs is the small, but very 
important initiative that is in the ERS budget, the $2.5 
million that is focused on behavioral economics as well as the 
use of administrative data to evaluate programs. That small 
$2.5 million budgetary request is essentially a reorientation 
of programs within ERS to pursue research that we think is 
going to help develop those policy nudges to move the public in 
the right direction.
    Mr. Fortenberry. It is a very good point. Nudge is another 
word. I think that will become the space, the public policy 
space, or the word du jour in the public policy space as to how 
we creatively think of policies that incentivize and are 
consistent with what people would naturally desire in order to 
achieve these outcomes.
    Dr. Wotecki. Yes.
    Mr. Fortenberry. Good. That is interesting.
    Dr. Wotecki. And with respect to what is old, we do have 
within the mission area and within each of the agencies a 
periodic review of our programs, and this budget does reflect 
the new directions in which we think our programs should be 
going as well as a deemphasis on areas that are either mature 
research, or in which the problem has been largely addressed 
and that we think we need to reorient our funds towards higher-
priority projects.
    Mr. Fortenberry. Well, in any organization, particularly in 
a large one like yours, there is a tendency for stasis. It is 
understandable in any large organization, because you have done 
good work in the past, it has worked, it made sense, and there 
is interest around it. But we all have to figure out ways to 
deliver smart and effective government services while saving 
money. That is just where we are. So thank you very much.
    Mr. Aderholt. I know you wanted to hear from the rest of 
them, but maybe they could submit that to the record and each 
respond what the old and--what needs to be thrown out and what 
needs to be looked at as new.
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    Mr. Aderholt. Ms. Pingree.

                        APPLICATION OF RESEARCH

    Ms. Pingree. Thank you, Mr. Chair. I know we are trying to 
wrap up here, and I appreciate the chance just to make one last 
what I think is a fairly brief comment to follow up on some of 
what I was talking about in my last question. I do also want to 
associate myself with the remarks of Mr. Farr. I think that it 
is wonderful to have you all as a research brain trust, and it 
has been very interesting for me to hear from all of you today.
    Mr. Fortenberry, I just want to make sure that I concur 
with you. Home economics was one of my favorite subjects in 
school, and were we able to sponsor a bill to bring that back 
in, I would be all in favor of that. I don't know how our 
educational institutions would feel, but lots of great things 
were learned in those areas that could apply.
    Just to follow up, Mr. Farr was talking about the 
challenges that we have about new farmers and sort of what the 
future of agriculture is going to look like, and I always feel 
lucky to be from Maine, which was once an agricultural 
powerhouse State, and then it started to wane. But now we find 
in our State statistically the average age of our farmers going 
down, and the number of farms under cultivation is going up. We 
are not still the Midwest or the blockbuster States, but it is 
a nice trend to be watching. And I think a lot of it has to do 
with some of the things I talk about a lot, which is the local 
food and farming, the interest people have in where their food 
comes from, healthier school lunches, buying more from farmers, 
all kind of things that I think are a growing market, and a 
growing opportunity, and a real trend in agriculture.

                              ANTIBIOTICS

    Some of that comes from paying attention to what consumers' 
concerns are. And I just wanted to kind of editorialize on the 
issue I brought up earlier on antibiotics in animal feeds. It 
is not the number one problem, it is not the only issue that we 
are looking at, and I appreciate the fact that there is money 
in the President's budget around alternatives, and you listed a 
very long and helpful list of things that people are looking 
at.
    But I do want to say, since much of my attention is attuned 
to what is in the popular press, what consumers are worried 
about, there has been a lot of focus and attention both on the 
area of food safety, but also the resistant antibiotics, and 
then this issue about the overuse potentially in animal feeds.
    I just want to make sure that as you are going through 
that, that there really is a focus on best practices. You know, 
I don't think the consumer is comforted by the idea of carcass 
rinses. You know, I think that those are the things that make 
people nervous; that we have a problem, and we try to scrub it 
up, we try to think of a new drug, we try to just stick with 
the same system. I really am not a scientist here, and I am not 
even an agricultural scientist, but I know that some of it has 
to do with our animal practices. Some of it has to do with 
things that aren't allowed in other countries. Some of it are 
about things that I think many young and new farmers don't want 
to have to use a lot of antibiotics in their feed.
    So I just hope that a lot of your research is also looking 
at some of these ideas that in some ways go back to old ideas 
or old practices that good farmers used, because that is really 
what the consumer is looking for. Obviously, in the field of 
organic agriculture and the growing interest in feeds and 
without antibiotics in milk, that doesn't have antibiotics in a 
lot of things, that consumers are asking for that; so also 
helping farmers to understand what practices work well so that 
the necessity isn't there unless there is a disease outbreak 
and you have to use antibiotics.
    So you listed a lot of things. I just wanted to make sure 
that that is also high on your list as you are looking to 
alternatives, and that you are hearing what consumer worries 
are out there, because in the long run, that is where farmers 
have their new markets and their profitable markets, and I 
think they need to have the support and backing from you in the 
work you do so that that is clearly out there.
    I will close my remarks. Thank you again.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you, Ms. Pingree.
    And that concludes our hearing for today. I thank each of 
you for being here and your testimony. We look forward to 
working with you as we proceed on with the fiscal year 2014 
budget. Thank you.


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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bohman, Mary.....................................................   663
Clark, Cynthia...................................................   663
Gensler, Gary....................................................     1
Glauber, Joseph..................................................   393
Knipling, E. B...................................................   663
O'Malia, S. D....................................................     1
Ramaswamy, Sonny.................................................   663
Vilsack, Hon. Thomas.............................................   393
Woteki, C. E.....................................................   663
Young, Michael.................................................393, 663

                                  
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