[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 4
                                                                   Page
 USDA Marketing and Regulatory Programs...........................    1
 USDA Rural Development...........................................  279
 USDA Natural Resources and Environment...........................  487

                                ________

         Printed for the use of the Committee on Appropriations

                                ________

                         U.S. GOVERNMENT PRINTING OFFICE 

82-661 PDF                       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


                                          Thursday, April 18, 2013.

    U.S. DEPARTMENT OF AGRICULTURE MARKETING AND REGULATORY PROGRAMS

                               WITNESSES

EDWARD AVALOS, UNDER SECRETARY, MARKETING AND REGULATORY PROGRAMS
KEVIN SHEA, ACTING ADMINISTRATOR, ANIMAL AND PLANT HEALTH INSPECTION 
    SERVICE
DAVID R. SHIPMAN, ADMINISTRATOR, AGRICULTURAL MARKETING SERVICE
LARRY MITCHELL, ADMINISTRATOR, GRAIN INSPECTION, PACKERS AND STOCKYARDS 
    ADMINISTRATION
MICHAEL YOUNG, BUDGET OFFICER, U.S. DEPARTMENT OF AGRICULTURE 

                       Introduction of Witnesses

    Mr. Aderholt. The subcommittee will come to order.
    Good morning, everybody. Today we will begin our review for 
fiscal year 2014 budget request from the agencies in USDA's 
marketing and regulatory programs mission area.
    I want to welcome Mr. Ed Avalos, USDA's Under Secretary for 
Marketing and Regulatory Programs; Mr. Kevin Shea, Acting 
Administrator for Animal and Plant Health Inspection Service; 
Mr. Larry Mitchell, Administrator, Grain Inspection, Packers, 
and Stockyards Administration; Mr. David Shipman, 
Administrator, Agricultural Marketing Service; and, again, Mr. 
Mike Young, USDA's Budget Director.

                           Opening Statement

    Our hearing today provides us with an opportunity to review 
the programs, operations, and funding for a mission area at 
USDA with one of the most diverse portfolios. On the one hand 
we have GIPSA, with a dual function of regulating livestock and 
poultry markets and facilitating the marketing of grain and 
grain products around the world. We have AMS, with a broad 
charge to facilitate the efficient and competitive marketing of 
all types of agricultural products. And, lastly, we have APHIS, 
with a mix of everything agriculture, from keeping plant pest 
and animal disease out of the U.S. to regulating biotechnology 
to fighting nontariff trade barriers.
    Not only is the MRP mission varied in its responsibility, 
but the funding source for this mission is unique in that it 
receives funding from discretionary accounts, mandatory 
accounts, voluntary user fees, license fees, and reimbursable 
agreements.
    The fiscal year 2014 President's budget seeks total funding 
of $2.4 billion from all these sources, of which $925.5 million 
is for discretionary programs. Your total increase over the 
fiscal year 2013 level is $53 million, or 6.1 percent. The AMS 
request calls for an increase of 14 percent; the GIPSA budget, 
an increase of nearly 9 percent; and the APHIS, an increase of 
nearly 5.2 percent. The increased requests may be even higher 
once we factor in the savings used in this proposal to help 
offset increases.
    This subcommittee will need to determine if these proposed 
decreased levels are, in fact, real or are they accounting 
gimmicks to get in a lower bottom line. While the subcommittee 
is keenly aware of the hard budget decisions made over the past 
few years and the achievements made in budget savings across 
the mission area, it will likely be a real challenge to support 
these increased levels.
    Before I recognize you for your opening statement, Mr. 
Secretary, I would like to ask the ranking member of this 
subcommittee, the gentleman from California, Mr. Farr, for any 
opening comments or remarks that he may have at this time.
    Mr. Farr.

                           Opening Statement

    Mr. Farr. Well, thank you very much, Mr. Chairman.
    It is a very interesting hearing today. I kind of look at--
yesterday was sort of the intellectual research of capacity of 
Department of Agriculture, and today it is kind of the FAA, the 
people that are responsible for the landings and takeoffs of 
food and making sure that everything is safe in between. You 
can see they are in the security business because they all wear 
dark suits.
    All you need is your dark glasses, and we could provide you 
as security detail for all of us.
    And, again, we have our distinguished honorary doctorate 
Michael Young here, who is now--well, yesterday was given that 
honorary doctorate.
    And I want to thank you all for your service. I don't think 
this committee often, or Congress, thanks enough the 
administration.
    And, particularly, I want to thank Administrator Shipman. 
It is 37 years in government. You have been honored by two 
Presidents, Clinton and Bush, by receiving the Distinguished 
Executive Award. And I understand you are retiring in a couple 
of weeks, May 10th.
    So you have done a lot in the inspection process and 
marketing of U.S. ag products, and a distinguished career 
beginning in 1976 at the Grain Inspection, Packers, and 
Stockyards Administration, serving as Deputy Administrator for 
14 years, in addition to serving as the Acting Administrator 
for GIPSA and Acting Assistant Secretary for Marketing and 
Regulatory Programs, and more recently as Administrator of the 
Agriculture Marketing Service.
    So, on behalf of our House, we would like to congratulate 
you and thank you for your distinguished career.
    Having said that, now that I have been nice to you, I will 
wait till the questioning, and then I can beat up on you.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Thank you, Mr. Farr.
    Mr. Aderholt. I would also like to remind everyone that 
electronic devices, if you could put those on silent or mute, 
then that would be very helpful as we continue on with the 
hearing.
    Mr. Avalos, let me just say to you and also to the other 
members that are here before us this morning, this is 
appropriations season. As we move forward, there are multiple 
hearings that are going on at the same time. All of us are 
either on two or three other subcommittees, and so there will 
be Members that will be coming in and out during the hearings. 
So don't think anything about that if they leave. It is nothing 
you said; it is simply that they have to get on to another 
hearing. So just keep that in mind.
    But, without objection, your entire written testimony and 
the testimony of the agency Administrators will be included in 
the record.
    And we will now recognize you for your opening comments and 
remarks that you have before the subcommittee. Thank you.

                           Opening Statement

    Mr. Avalos. Thank you, Mr. Chairman, distinguished members 
of the subcommittee. I am pleased to appear before you to 
discuss the activities of the marketing and regulatory programs 
mission area at USDA and to present fiscal year 2014 budget 
proposals for the Agricultural Marketing Service; for Animal 
and Plant Health Inspection Service; and for Grain Inspection, 
Packers, and Stockyards Administration.
    With me today I have, of course, Mr. Shipman, our 
Administrator at AMS; Mr. Kevin Shea, our Acting Administrator 
at APHIS; Mr. Larry Mitchell, our Administrator at GIPSA. They 
have statements for the record and will answer questions 
regarding specific budget proposals within their agencies. Also 
with me today I have Mr. Michael Young, USDA's Budget Officer.
    The Administrators and I have submitted written statements 
for the record, so I will briefly highlight what our agencies 
have accomplished with taxpayer dollars that have been 
entrusted to us before presenting the President's request for 
the MRP agencies.
    The mission of AMS is to facilitate competitive and 
efficient marketing of U.S. agricultural products. AMS 
accomplishes this mission through a wide variety of activities 
in cooperation with partners to benefit U.S. producers, 
marketers, and consumers.
    In 2012, among other actions, AMS established the United 
States-European Organic Equivalency Arrangement, which opened 
up a $24 billion market for U.S. organic producers and 
handlers. AMS has also facilitated marketing of U.S. organic 
products to Argentina, Australia, Brazil, Costa Rica, China, 
Germany, and Guatemala.
    APHIS has a broad mission that includes protecting and 
promoting the health of U.S. agriculture and natural resources, 
administering the Animal Welfare Act, and carrying out wildlife 
damage management activities. Together with customers and 
stakeholders, APHIS enhances market access in the global 
marketplace and ensures abundant agricultural products.
    In 2012, among other actions, APHIS resolved more than 200 
sanitary and phytosanitary trade issues, including opening new 
markets and retaining and expanding existing markets for U.S. 
agricultural products valued at $2.56 billion. This involved 
more than 50 countries and plant and animal products such as 
beef, cherries, dairy products, grapes, live swine and cattle, 
peas and pulses, potatoes, poultry, stone fruit, and many, many 
more.
    APHIS, working with California cooperators, reduced 
populations of European grapevine moths, and the detections now 
only numbered 77 in 2012, compared to almost 101,000 in 2010. 
European grapevine moth is a threat not only to the producers 
in California but potentially to those in 30 other States.
    GIPSA's mission is to facilitate the marketing of 
livestock, meat, poultry, grain, and related agricultural 
products and to promote fair and competitive trade for the 
benefit of consumers and American agriculture. In 2012, among 
other actions, GIPSA closed more than 2,500 investigative files 
on potential violations of the Packers and Stockyards Act in 
2012, compared to 2,050 in 2011 and less than 580 in 2000.
    The 2014 budget for MRP agencies requests a total 
discretionary appropriation of $925 million. This request is 
$84 million less than the 2009 appropriations, or a decrease of 
about 8 percent. Continuing our efforts to address core 
mandates and high-priority needs while using taxpayer resources 
as efficiently as possible, I would like to highlight the 
budget request for MRP agencies.
    The request for AMS proposes an appropriation of about $84 
million and includes a small number for some very important 
initiatives.
    With additional funding to the Transportation and Market 
Development Program, AMS will help producers respond to growing 
consumer demand for local and regional food and expand their 
access to markets through product aggregation, processing, and 
distribution. Such efforts are intended to provide 
opportunities for smaller producers to scale up; for midsized 
producers to serve a scale-appropriate market segment, such as 
institutions and grocery stores; for producers of all sizes to 
diversify their sales.
    The budget also includes funding to assist the organic 
sector to ensure the integrity of the ``USDA Organic'' label 
and to foster new organic equivalency agreements while taking 
actions such as compliance monitoring and maintaining existing 
agreements.
    The budget request for APHIS proposes appropriations of 
about $801 million. Given promulgation of the animal disease 
traceability rule, the budget requests additional funding 
support to effect the implementation of this rule. This 
includes cooperative agreements with the States and the tribes, 
providing low-cost ID tags, and other needs.
    The budget also requests an increase to address the growing 
problem of feral swine, which is estimated to cost $1.5 billion 
worth of damages and threaten animal and human health, threaten 
crops and livestock, rural, suburban, urban properties, as well 
as natural resources and native resources.
    Additional resources are also requested to provide other 
efforts--for example, funding to combat the Asian longhorned 
beetle and the European grapevine moth in California.
    The budget for GIPSA proposes slightly more than $40 
million. Additional funding will allow the Packers and 
Stockyards Program to facilitate market protections for buyers 
and sellers of livestock and poultry through greater 
compliance. An increase for the Federal Grain Inspection 
Service will allow it to purchase some long-delayed scientific 
equipment which will provide advanced assessment of rice 
characteristics, effective mycotoxin and pesticide residue 
testing, and programs for the grain exporters.
    In closing, I want to note that MRP agencies have operated 
in an environment of tightened budgets. We have accomplished 
this through proactive management, if not reductions in 
staffing, internal reorganizations, office closures, 
consolidation of telecommunication services, reduction of 
travel, and reduction of other expenses.
    We have prioritized our activities and made decisions to 
eliminate or reduce programs that are not core to our mission. 
In addition, APHIS has reduced involvement in combating those 
pests where progress could not be made or where there weren't 
available means and which are overshadowed by other high-
priority threats. Successful efforts to eradicate pests such as 
the boll weevil and the screw-worm also allowed for savings.
    The budget request for MRP supports our key role for rural 
economy and producers and consumers across the Nation. It also 
reflects the comprehensive efforts we have taken to conserve 
taxpayer dollars through targeted, common-sense efficiencies.
    This concludes my statement. I look forward to working with 
the subcommittee on the 2014 budget, and we will be glad to 
answer any questions.
    Mr. Aderholt. Thank you.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Aderholt. And I also failed to mention in my opening 
remarks also that we could have a series of votes a little bit 
later in the morning. So we will just cross that bridge when we 
get there. But I don't expect until probably another hour 
before that would be the case, so we will go ahead and proceed 
as normal and see how far we can get before votes are called 
for the morning.

                        APHIS BUDGET REDUCTIONS

    For the past several years, the APHIS budget will often 
include some reductions for programs that are typically 
preferred by the House and the Senate. The agency may come up 
with either across-the-board reductions or reduction in a 
particular area that helps offset the increase.
    In my opening statement, I referred to the fact that--about 
the authenticity of some of the budget reductions to help 
offset the costs of proposed increases. One of the particular 
proposed decreases totals $12 million and is tied to the 
centralized support services.
    After so many people in Washington and even outside of 
Washington have spent the past 6 months talking about the 
shortcomings of across-the-board cuts, I want to ask why APHIS 
would decide to do something very similar by applying a $12 
million reduction across the board in nearly all accounts.
    We will, of course, support such efforts, but please 
explain how the agency can achieve this reduction after the 
business process reengineering efforts already attempted over 
the past 2 or 3 years.
    Mr. Avalos. Mr. Chairman, we definitely are operating under 
very tight budget constraints, and we have had to take many 
steps, as I mentioned in my opening statement, to cut costs and 
operate within our budget.
    But to better explain the cuts and how they were done at 
APHIS, I am going to ask our Administrator, Kevin Shea, to 
answer your question.
    Mr. Shea. Thank you, Mr. Secretary.
    Mr. Chairman, we have done several things over the past few 
years that truly are across-the-board. For example, we looked 
at how we did contracting, and one thing that really jumped out 
at us was simply cell phone contracts. We found out that we had 
many different contracts by our offices throughout the country, 
and by combining all those contracts, we saved $3 million. That 
is an example of how we get to $12 million.
    Also, we put a pretty strict hiring freeze in place, 
focused mostly on headquarters positions and administrative 
positions. So these are the kinds of employees who provide 
human resources, financial, those kinds of support services to 
the operating programs in the field. By reducing those kinds of 
positions, we saved a lot of money.
    And, also, we are saving money by reducing the number of 
supervisors. Our goal is more boots on the ground serving the 
people in your State and all the States, actually carrying out 
inspections, doing surveillance, doing testing of animals.
    So that is how we get to those kinds of numbers. So we 
truly can save money by redoing contracts, reducing 
administrative positions, and things just of that nature.

                     COST-SHARE/COOPERATOR FUNDING

    Mr. Aderholt. Also, proposed reductions for a number of 
accounts are the result of a requirement for more cost-share on 
behalf of the beneficiaries. However, the agency lacks 
consistency when applying this principle. Some programs require 
more cost-share, while other programs require the Federal 
Government to foot the entire bill for a service.
    Mr. Under Secretary, could you talk about the 
administration's policy on that?
    Mr. Avalos. Let me see if I understand your question 
correctly. Are you saying that we are asking for cooperator 
funding for some programs and not for other programs?
    Mr. Aderholt. Yeah. The agency lacks consistency in 
applying the principle of proposed cuts for a number of 
accounts, and some programs require more cost-share while other 
programs require the Federal Government to foot the entire bill 
for a service. And what is the overall policy regarding that?
    Mr. Avalos. First of all, on the budget cuts, you know, we 
did have to go across the board. It was required. Once we got 
into the specific agency, like at APHIS, APHIS took the 
initiative to--and they have been doing this for quite some 
time--to prioritize the programs that they have and tie them 
into the core mission and tie them into demand at that time. 
And using that criteria is how they determined how they would 
fund.
    Certainly, across the board--I am going to ask Mr. Shea to 
better answer this question, but I do know that, like, for 
example, in Wildlife Services, a lot of the service we provide 
is through cooperator funding. And it varies from program 
within Wildlife Services, and it varies from State to State.
    And so, anyway, I am going to turn it over to Mr. Shea and 
have him continue with the answer.
    Mr. Shea. We look at a number of criteria in trying to 
determine what the cost share is. In a really ideal world, we 
would probably like a 50-50 cost-share on most programs, and 
that could be a cost-share with both industry and States.
    But it also depends on just what the status of the pest or 
disease is. For example, when the pest or disease first comes 
in the country, we assume a larger share of the cost while the 
State has time and the industry has time to identify more 
resources to help us with that. So that is one criteria we 
might bring into play.
    Another is just how widespread the pest or disease might 
be. The more likely that a pest or disease will spread to 
another State, the more likely we will have a higher share of 
the cost.
    It is possible that sometimes a State could have a pest 
show up but not have a huge interest in that pest because they 
may not have that kind of agriculture in their State that the 
pest harms. And so, in those cases, we might take a larger 
share of the cost.
    So there are any number of things that go into it. And we 
would ideally, however, certainly like to share cost on most 
programs.
    Mr. Aderholt. I see my time is up.
    Mr. Farr.

                         LIGHT BROWN APPLEMOTH

    Mr. Farr. Yeah, I want to follow up with LBAM on that, but 
I want to, first of all, get into the fact that the IG really 
blasted your agency.
    I mean, we appropriate hundreds of millions of dollars. You 
have the responsibility of eradicating invasive species. You 
also get some money from the Commodity Credit Corporation to 
fight invasive pests. But the USDA's Inspector General last 
August found that 90 percent of the surveys that APHIS 
undertook did not result in the seizure or trace-back of a 
prohibited product and that APHIS did not take action to stop 
further shipments in 96 percent of the surveys that did result 
in seizure and trace-back. I mean, those figures are shocking.
    And I understand you took the IG's recommendations to 
heart, but I want to know, how did it get so bad in the first 
place? I mean, who fell asleep at the switch to allow that kind 
of a--I mean, just, you wonder why the agency has been funded, 
when you have that kind of a problem.
    Mr. Shea. Mr. Farr, that particular OIG report focused on 
one component of APHIS, our interdiction team. And this is a 
group that tries to go back and find out pathways. How did a 
particular pest get into the country? How did a material that 
was not supposed to be entered get into the country?
    And, frankly, my review of the subject after OIG brought it 
to my attention was that we simply were doing things the same 
old way, following the same old methods that we had done in the 
past, and we needed to change. And when the OIG points that out 
to me, I take it to heart and we do work on it. And so----
    Mr. Farr. You mean all those years, it was 90 percent?
    Mr. Shea. Well, that group has only been in place as such 
for the last 5 to 10 years, so it is not a group that had been 
in place forever in APHIS.
    And, again, the report was focused on that group's work. It 
didn't really focus on the number of pests that get into the 
country or how we follow those up. It focused on this one group 
that focused on plant pests.
    But I certainly take their report to heart, and we are 
going to fix it.
    Mr. Farr. Did this result because of the change in 
management, essentially shifting a lot of that responsibility 
to Homeland Security; therefore, as people said, they were more 
interested in looking for dope than they were for--or drugs 
rather than bugs?
    Mr. Shea. No, I can't at all lay this at the feet of CBP. 
This was an internal APHIS group involved that was doing this 
work. Now, they have to work with CBP to get information, but I 
have no reason whatsoever to cast any aspersions on CBP's role 
in this. This is our problem, our problem to solve.
    Mr. Farr. Have you plugged the hole?
    Mr. Shea. I believe we have, sir.
    Mr. Farr. Okay.
    Let me ask you, you know, I represent an area that has been 
diagnosed--diagnosed, I guess--where we have found light brown 
apple moth, better known as LBAM. This was, like, a big no-no. 
We told all these countries, we don't want anything in this 
country that has LBAM on it, don't send it to us. Now we have 
it. We did the war on LBAM, and we lost. I mean, it is in many 
counties in California, big ag counties.
    The Department is pulling back, as you indicated. You sort 
of shift these things to the State. But, I mean, you haven't 
paid the attention that this is--we don't think we are going to 
be able to eradicate it. Most growers say it has probably been 
here a lot longer than anybody ever thought and it really 
hasn't done that much of a damage. The problem is, they are 
growing in those counties that want to ship to other States and 
to other countries. And it seems like the feds have dropped the 
ball and, you know, still sort of quarantine counties, but you 
are on your own.
    And either we have to delist LBAM, which might not be a bad 
idea, or, more importantly, you are going to have to help these 
counties get their products into other States and other--
because we grow, you know, 85 different crops in this area, so 
it is not like we are just growing 1 thing. But the counties 
are quarantined, obviously, these counties, dozens of them in 
California.
    How are we going to handle this?
    Mr. Shea. Mr. Farr, our goal is your goal, and that is to 
eventually make it so that other countries and other States 
will accept products from that area despite the presence of 
LBAM.
    We have already made a lot of progress in that area. For 
example, we just finished a lot of studies that will prove, we 
hope, to Canada and Mexico and to the other States that 
strawberries don't spread light brown apple moth. They don't 
spread them because of the way they are picked and shipped. The 
moth won't be on the berry.
    Mr. Farr. What about nursery stock?
    Mr. Shea. Nursery stock is a more likely transmission 
route.
    Mr. Farr. Uh-huh.
    Mr. Shea. But, as you said, light brown apple moth has not 
spread as rapidly as we feared. It has not caused as much 
damage as we feared.
    There are a lot of reasons for that. One, a lot of growers 
sprayed their lands. That probably held the populations down. 
And one of the things that made us fear light brown apple moth 
the most was that it had such a wide host range, over 2,000 
hosts. And that, ironically, may have helped, because it spread 
the pest around a little bit, and it doesn't latch on to any 
particular product, like, say, medflies would to citrus.
    Mr. Farr. We will continue this. My time has run out, but I 
want to ask some more questions. And then I want to have you 
come into my office and really drill down into some specifics, 
because it is still very problematic.
    Mr. Shea. I would be happy to do that, because we 
definitely are on the path that you want us to be on.
    Mr. Aderholt. Okay. Mr. Nunnelee.

                     BOLL WEEVIL AND PINK BOLLWORM

    Mr. Nunnelee. Thank you, Mr. Chairman.
    Mr. Avalos, you may remember, although I wouldn't have any 
reason to expect you to remember, a conversation we had last 
year concerning boll weevil and the pink bollworm. In fact, 
this was the conversation in which Ms. Lummis thought I kept 
saying the ``paintball worm,'' because she couldn't understand 
my Mississippi language.
    But we talked about the eradication of those pests in the 
Rio Grande Valley, and my concern was that if we didn't deal 
with them in the Rio Grande Valley, they would spread east of 
the Mississippi. And we concluded our conversation by saying 
that I looked forward to hearing about success stories when you 
came back next year.
    Well, I notice your budget for this particular program is 
cut almost in half. And I presume that is because we have had 
success in the Rio Grande Valley, and I just want to hear your 
success stories.
    Mr. Avalos. Congressman, first, before I answer your 
question, I just have to tell you this. Back in my old 
marketing days, in Mississippi the marketing slogan was ``Make 
Mine Mississippi.''
    Mr. Nunnelee. That is right.
    Mr. Avalos. And every time I see you, I remember that.
    Mr. Nunnelee. Good. And we have a lot of agriculture that 
we do ``Make Mine Mississippi.''
    Mr. Avalos. Absolutely.
    Anyway, the boll weevil success story. We have pretty much 
eradicated the boll weevil from this country. We have a little 
bit of a presence down in Texas along the border, along the 
state of Tamaulipas on the Mexican side.
    And we have continued some work in Mexico trying to control 
the pest on the Mexican side so it doesn't come over to the 
U.S. side. In fact, a lot of the cotton production in 
Tamaulipas has moved more toward the interior of the country.
    So, for that reason, we were able to see this as a success 
story and cut the funding for the boll weevil program.

                BIOTECHNOLOGY REGULATORY PROCESS REFORM

    Mr. Nunnelee. Great. Thank you for that work.
    Let me shift gears a little bit, concerning the importance 
of biotech in the ag sector. Last year we also discussed the 
lag time about reports that were supposed to be completed 
within 6 months and these were taking as long as 5 and 6 years. 
And you talked about efficiencies that would be implemented 
that would help with that backlog and would take the approval 
process from 3 to 5 years to just a little over a year.
    The agency did receive an increase in funding in order to 
help meet that goal, but despite that funding increase, it 
seems moving anything through the regulatory process continues 
to be very slow. And there doesn't seem to be anything that 
shows concrete improvements in reducing these timelines.
    So I just want to know, when are we going to see 
improvement in this area?
    Mr. Avalos. Congressman, I am going to assure you that 
process improvement, creating efficiencies continues to be a 
priority at USDA.
    On the biotech issues, I am going to ask Mr. Shea to maybe 
share some of the things they have done to increase efficiency 
and to shorten that timeline.
    Mr. Shea. Thanks.
    We are seeing progress already. The most important thing we 
did in reforming our process was to assign time frames to each 
step in it. You know, it is sort of like everyone understands 
the long-range part of a program, but there are so many steps 
in between that unless you put firm guidelines and deadlines on 
each step, you have a problem.
    So since we implemented this, the first step of the 
process, which is for us to receive a petition from a company, 
work with them to make sure it is complete, that process used 
to take as much as a year. And we have already completed most 
of those within 90 days on the petitions that have gone into 
the new process.
    So we are already seeing lots of progress on the front end, 
and we are certainly hoping that the other steps will follow in 
line.
    Mr. Nunnelee. Well, we are interested in having an 
effective approval process but also an efficient one.
    Mr. Shea. Yes.
    Mr. Nunnelee. So, with that, Mr. Chairman, I yield back.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.
    And I want to welcome everyone here today and thank you for 
your testimony.
    Under Secretary Avalos, let me say thank you to you for 
your hard work on ensuring a fair and transparent market for 
American producers and through the enforcing of the Packers and 
Stockyards Act. I also want to thank you and the team, your 
team, for the quick action and clear communication related to 
the emerald ash borer in my home State of Connecticut. I really 
appreciate that a lot.
    I continue to oppose the administration's elimination of 
the Microbiological Data Program. The work carried out by this 
program has been nothing short of critical to ensuring consumer 
confidence in the safety of produce. The program has been 
critical to building State capacity for routine pathogen 
testing and provided nearly 90 percent of all available data 
related to bacterial pathogens of fruit and vegetables.
    It is simply unacceptable for this program to slip through 
the cracks and for us to lose this type of data. So I certainly 
hope the administration does not now look at the Pesticide Data 
Program through a similar lens. And we will be watching that 
carefully.
    When I read the testimonies for today, I was struck by how 
much you are accomplishing with significantly less. But I worry 
that we are now past the point of doing more with less and 
instead doing less with less, a direct consequence of 
sequestration and lower spending.
    For example, you are reducing Federal funds for the emerald 
ash borer, and the justification notes that that, and I quote, 
``if cooperators cannot increase their contributions, APHIS 
will further reduce EAB activities, impacting APHIS's 
ability,'' et cetera. As I discussed with Secretary Vilsack, 
the impact of our spending reductions are going to be felt in 
communities across the country.

                         TRADE EXPORT DISPUTES

    Let me get to a question that I have, Mr. Secretary. And I 
am going to ask, since there isn't anybody here at the moment, 
if I could get the Secretary to answer this next question, and 
then I wanted to address it again, as well. I will try to move 
quickly.
    Mr. Under Secretary, I would like to talk about trade for a 
moment. Your testimony mentions that your staff resolved more 
than 200 SPS disputes in fiscal year 2012. Can you tell me 
about the current process for resolving SPS disputes? 
Particularly, what are the strengths of this system?
    Mr. Avalos. Well, Congresswoman, thank you for the question 
on trade, because I want to emphasize that exports are a 
priority for the Administration, and APHIS plays a very, very 
important role in facilitating this trade.
    Ms. DeLauro. Uh-huh.
    Mr. Avalos. You know, we live in a world today of free-
trade agreements and trading with so many different countries, 
but, in reality, APHIS, through sanitary and phytosanitary 
issues, plays a very, very important role. And so many 
countries today will use sanitary and phytosanitary issues to 
restrict trade, they use them as a trade barrier.
    So, anyway, I am going to let Mr. Shea----
    Ms. DeLauro. But the issue is current process for resolving 
SPS disputes and particularly the strengths of the system.
    Mr. Avalos. Okay. To make sure we get your question 
answered correctly, I am going to ask Mr. Shea to answer that 
for you.
    Ms. DeLauro. Okay.
    Mr. Shea. Thank you.
    You know, the chairman earlier mentioned the fact that 
there are all misters here at the table today and yesterday 
there were all doctors. Or Mr. Farr maybe mentioned that. And 
the strength, I think, of the current process is that there are 
scientists and technical folks talking to each other country to 
country. So our Chief Veterinary Officer talks to the Chief 
Veterinary Officer for Russia or China or any country.
    And that is the real strength of it, that we are exchanging 
scientific technical information. And I think, that way, we 
focus on the science and the technology. Certainly, there is a 
place for all the other trade considerations, and someone else 
does that. But we focus on the science and technology, on the 
risk.
    Because usually what it amounts to is convincing another 
country that our products do not pose a disease or pest risk to 
them, or for us to make it clear to another country that their 
products do pose a pest/disease risk to us. So I think that is 
the great strength of it.
    Ms. DeLauro. So it sounds to me like, from both your 
perspective and the Under Secretary's perspective, that we have 
a system that meets both of our trade and our public health 
goals. Is that----
    Mr. Shea. We find that it works for us. Of course, 
sometimes the process takes longer than we would like it to.
    Ms. DeLauro. Okay. But we have a system in place which we 
really do believe has strengths.
    Look, I have serious concerns about the binding dispute 
resolution. And I talked with Secretary Vilsack about this at 
our hearing. And a binding dispute resolution for SPS standards 
presents a very real threat, in my view, to the substance of 
our food safety standards.
    You made reference to scientists talking to scientists and 
coming to a conclusion based on the science of the issue. This 
proposal would clearly threaten, in my view, the animal and 
plant health standards that are critical to the productivity of 
American agriculture if we accept something that is less than 
the standard that we believe, based on the science, needs to be 
done for our domestic purposes.
    The integrity of the standards is imperative to consumers 
as well as to producers. Americans want to know that their food 
is safe, that we are protecting the health of our national herd 
and our plant stock. Trade and exports are important, I 
understand that. But, as I said to the Secretary, they should 
not trump the public health and something that I believe the 
binding dispute process would clearly enable.
    Thank you for allowing me to go further, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you very much, Mr. Chair.
    Thank you to the panel. I apologize for not being able to 
hear your earlier testimony, and I will look forward to 
catching up and learning more about what was done previously. 
But, first, I want to make a little statement, and then I have 
a question.
    First, again, thank you to the Under Secretary for your 
time here today.
    When we were lucky enough to have Secretary Vilsack in here 
just earlier, we had a very positive exchange about some of the 
work your agency has done in recent years to curb some of the 
most egregious practices in the livestock and poultry sectors. 
As I said to him earlier this week, I personally believe that 
the consolidation of these markets, as well as vertical 
integration and the increase of our one-sided, take-it-or-
leave-it production contracts, is cause for great concern about 
the impacts on farmers and their communities.
    So I just want to thank you for the work that has already 
been done to this point and just have it on the record that it 
is my hope that the USDA will be permitted to proceed with 
those rules to address some of the most abusive practices in 
these sectors.
    I am going to go on to just another topic about that. So I 
just wanted to have that out there for the record.
    So I want to talk to you a little bit about local food and 
aggregation and distribution. That is a big interest of mine. I 
know that much of the work that is done at the USDA on local 
and regional food systems is at the AMS. And I thank you for 
all the progress that has been made so far.
    The expansion of local and regional food systems supports 
employment, generates income, bolsters economic growth in rural 
communities. And I think that is one thing that you guys 
clearly recognize. It certainly has become a critical issue in 
my home State of Maine, where I love to say the fact that the 
average age of our farmers is going down, the number of farms 
under cultivation is going up, the opportunities for finding 
new markets--which, as I understand, some of these new markets 
account for over $5 billion annually across the country, and we 
are reflective of that.
    So local food sale is no longer a niche market. It is 
increasingly where people are seeing opportunities to use their 
farmland, to come onto farmland. And I think they warrant real 
examination and support.
    One of the biggest challenges are the holes in the supply 
chain. And problems with distribution and aggregation are the 
most common issues that I hear about, talking to farmers about 
the hurdles they experience getting their local food to 
consumers.
    Again, coming from the State of Maine that had a rich 
agricultural history, has gone through a real downtown but is 
now seeing this expansion again, even I am old enough to 
remember when there was a canning facility or a bean-drying 
facility or a wareage storehouse or a trucking place. There 
were great opportunities for farmers even just 50 years ago, 
many of which have been lost, and lost in that infrastructure. 
And in rural areas, these can be really complicated problems, 
because the world has moved on and things are somewhat 
different today.

          TRANSPORTATION AND MARKET DEVELOPMENT BUDGET REQUEST

    But I was really encouraged to see that there is $4.3 
million in the President's budget in transportation and 
marketing development to start to look at these problems in 
greater detail. I think it is an area for great potential 
growth, not just in my State, but really this is happening 
everywhere, and it is a place of real need across the country.
    So I would just like to hear you talk a little bit about 
how AMS could use this funding that is proposed in the budget. 
With such great need, how are you going to prioritize the 
projects? And just hear a little more about it.
    Mr. Avalos. Congresswoman, thank you for bringing up this 
component of our budget increase, because it really is 
extremely important, not just to AMS, but to so many small, 
midsized producers all over the country.
    The core mission at AMS really involves all sectors of 
agriculture, from the large producers, small producers, 
conventional, organic, and really involves all components of 
getting the product from the farm to the consumer, the whole 
supply chain, including your shipper, your packer, your 
processor, your distributor, your wholesaler, and your 
retailer. And with this funding request in 2014, that is what 
we are trying to address. We need to find a way that we can get 
that small, midsized producer and get his product into local 
and regional markets.
    Having said that, I am going to ask Mr. Shipman, our AMS 
Administrator, to expand how they visualize using this funding 
and what they are trying to accomplish with this money.
    Ms. Pingree. Great.
    Mr. Shipman. Thank you, Mr. Under Secretary.
    Facilitating marketing is a real core part of our operation 
at AMS. And, again, whether it is small, big, large, biotech, 
conventional, organic, we are in the business of trying to 
facilitate marketing. And that is what we--we look at this 
segment now that you just mentioned and went through and 
identified. We look at that as something that we really want to 
look at and work on.
    So what some of the things that we are going to be doing is 
we want to build greater information and make that information 
very transparent so that folks that are interested in getting 
involved in this, building business plans, have the resources 
that they can go out and they can get the capital that they 
need to actually enter into this marketplace.
    So having transparent information available in terms of how 
do you aggregate the sources so that you meet that demand, that 
demand of a local restaurant that needs to know what supplies 
are available locally or regionally, what is the quality of it, 
how do you aggregate it from multiple farms and efficiently get 
it to that location on a dependable source. So we are going to 
be looking at that.
    We will be looking wholesale markets. There are wholesale 
markets out there right now that have available capacity, okay, 
that they are not necessarily using for this particular supply 
chain. Or there may be wholesale markets that already are 
moving local, regional food through, but not necessarily 
identifying it and extracting that extra value that could be 
there for the producers.
    Ms. Pingree. Uh-huh.
    Mr. Shipman. So some of this will be done through grants 
that we will be proposing in a competitive grant process. Some 
of it will be reimbursable or cooperative agreements with 
universities, institutions that do research. Again, making sure 
that all that information that is gathered is transparent and 
available to everybody in the market chain. And then really 
identifying best practices so that something that may be 
working in Maine we can transport and use in Virginia or some 
other part of the country.
    So that is generally what we are going to be looking at.
    Ms. Pingree. Great. Well, my time has run out, but I 
appreciate your thoughts. And I am sure we will follow up on 
that conversation when we get a chance.
    Mr. Aderholt. Thank you, Ms. Pingree.

           OVERSEAS TECHNICAL AND TRADE OPERATIONS REDUCTION

    I wanted to follow up a little bit on the U.S. trade aspect 
of it that has already been mentioned briefly. But, of course, 
APHIS is the lead USDA agency for fighting nontariff trade 
barriers overseas and helping U.S. exporters to open up 
markets.
    Toward the beginning of your written testimony, Mr. Under 
Secretary, you note that the administration is strongly 
committed to programs that create jobs and expand markets. 
Further on in your testimony, you go on to say that APHIS 
resolved the 207 sanitary and phytosanitary trade issue in 
fiscal year 2012, including opening, retaining, and expanding 
existing markets for U.S. agricultural products valued at $2.56 
billion.
    With these few data points alone, USDA makes a case for 
applying more of our limited Federal resources to resolve 
nontariff trade barriers, open markets, and create more jobs. 
What I wanted you to talk about a little bit is why USDA's 
decision would propose a decrease of nearly half a million 
dollars for overseas technical and trade operations in fiscal 
year 2014, especially when steady funding or increased funding 
could contribute toward jobs.
    Mr. Avalos. Mr. Chairman, again, I want to emphasize that 
exports are a priority for the Administration. Last year, we 
had the second-highest record on exports of $136 billion, and 
APHIS plays a very, very important role. As I mentioned 
earlier, as we move forward with free-trade agreements and 
trading with so many different countries, the phytosanitary-
sanitary issue becomes very, very important.
    But before I get into answering your question, you know, we 
are all talking about exports and we are giving this big figure 
of $136 billion, but I just wanted to take this opportunity to 
recognize the number-one reason we are successful, and that 
would be the producer--the producer that puts together either a 
fruit, a vegetable, a feed grain, a commodity, a livestock meat 
product that the whole world wants to buy. And they are the 
number-one reason that we are so successful in the 
international arena. Now, APHIS, we play a small but a very, 
very important role in facilitating that trade.
    But to expand on my answer, I am going to ask Mr. Shea to 
help me. Thank you.
    Mr. Shea. Mr. Chairman, that reduction would not go to any 
of our work reducing trade barriers. This reduction has to do 
with some funds we provided to Central American and South 
American countries to fight against foot and mouth disease and 
other foreign animal diseases.
    So we provided them funds to help build their capacity, to 
teach them, train them in how to fight these diseases. So that 
is where the reduction would come from, not from the work that 
our attaches do in other countries and that our folks here at 
headquarters who negotiate with other countries. It would not 
affect that.

                         LACEY ACT REQUIREMENTS

    Mr. Aderholt. Once again, USDA has proposed a decrease in 
funding for trade and technical assistance but proposed an 
increase of $725,000 for Lacey Act activities. The Lacey Act, 
of course, amend amendments where it is involved to address 
illegal logging in foreign countries.
    A question we would have is USDA's proposal to cut core 
mission activities, such as technical trade operations, while 
asking to increase funding for illegal logging in foreign 
countries. And, you know, you may want to expand on that from 
what your answer was just a minute ago.
    Mr. Shea. Mr. Chairman, as far as the Lacey Act is 
concerned, we have a very prescribed role in that and a very 
limited one. And we designed the form that folks have to fill 
out declaring what their product is, how much plant product it 
may contain, where it came from. We collect those forms and 
keep them in a repository.
    It is a really limited role, but one that costs money. And 
it is required by the Farm Bill from 2008. We are a relatively 
minor player in that Lacey Act enforcement. The bigger role 
goes to the Interior Department and Justice Department. But we 
have this piece of it, and we need some more money to carry 
that role out.

                         FREE TRADE AGREEMENTS

    Mr. Aderholt. What role does the MRP mission area have in 
the technical support of the two ongoing free-trade agreements, 
the Trans-Pacific Partnership and the Transatlantic Trade and 
Investment Partnership?
    Mr. Avalos. Our role in those initiatives are in sanitary 
and phytosanitary issues.
    Mr. Aderholt. Okay. All right. I see my time has expired.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    Mr. Shea, I would like to have you come to my office, and I 
am going to submit a whole bunch of questions for you. But I 
just wanted to point out that the LBAM pest has been 
established in California for a number of years, and I think 
what the Department ought to do is conduct a new risk 
assessment. And it seems that the pest hasn't really developed 
any serious problems with any crops, with the exception, 
perhaps, of organic berries. So when you come in, let's see 
what we can do to do that.
    And I had a lot of other questions about what you can do to 
help those crops that are grown in the quarantined counties or 
the affected counties. But I don't want to take up all that 
time.
    I do want to thank APHIS. You did a marvelous thing, and I 
want to compliment you on it. I have long, even before I got to 
Congress, fought this puppy-mill production of puppies in cages 
like chickens, and then just every time they are in heat, they 
breed them and sell them at puppy stores. And we closed it all 
down in California, but there was a loophole that people found, 
and that is that they could sell them on the Internet.
    And there was a bill in Congress, and as we introduced it, 
you took the administrative action to close that down, and I 
want to thank you for your efforts. You saved us having to do a 
whole piece of legislation. And I think you did the thing which 
you are supposed to do, and I want to publically acknowledge 
your leadership in that. I thank you very much.

                        NATIONAL ORGANIC PROGRAM

    You know, I also authored in California the organic 
legislation that Leahy authored here--in fact, he took it from 
the California model--and then worked to get the rules 
implemented for organic agriculture here, and I have been 
following it. So we have seen incredible growth since the 
Department adopted the rules.
    And yet we have seen the growth also slow down in the last 
year or 2, because USDA's strategic plan includes a performance 
objective to increase the number of certified operations to 
20,000 by 2015. That is not why it slowed down, but that was 
your goal, and I applaud you for that. But what I have heard is 
some of the small growers are leaving the USDA National Organic 
Program because of the burdensome cost and paperwork associated 
with the certification.
    What is the USDA doing to streamline the program to ensure 
a diverse size and scope of operations are able to participate 
in NOP and meet the USDA growth objectives for the organic 
sector, that is, building 20,000 certified growers by 2015?
    Mr. Avalos. Congressman, first, you are exactly right, the 
organic industry has grown tremendously and continues to be one 
of the fastest-growing sectors in the food industry. But as we 
move forward and we work to maintain consumer confidence in 
that ``organic'' label and to protect the integrity of the 
``organic'' label, many times there are some hardships, some 
obstacles that are in front of us, especially the smaller 
producers.
    And I am going to ask Mr. Shipman to explain some of those 
obstacles, perhaps, and maybe see how we are addressing that 
concern.
    Mr. Farr. Well, I think the concern here is how do the 
smaller growers, who may not have the resources to pay the 
costs and do all the background information that is necessary 
for certification--the regulatory process is growing 
exponentially, and so is the cost.
    Mr. Avalos. I will ask Mr. Shipman to help me answer that 
question.
    Mr. Shipman. Thank you, Mr. Under Secretary.
    We initiated a program just this year, what we are calling 
Sound and Sensible. We heard the same thing; we had the same 
concerns that entry into the market was becoming more difficult 
as we developed the regulations around the program. And having 
the regulations has been very important to maintain that 
integrity in the label, but we recognize that entry was more 
difficult.
    So we initiated and launched a program that we call Sound 
and Sensible. Part of it is working with all of the certifying 
agents, the 85 certifying agents, to make sure that when they 
go out to a certified operation and do their audits that they 
are using common sense. And we had a meeting just last month 
down in Florida with all the certifiers and started that 
process of really looking at what is the barrier, what are some 
of the problems that are occurring that are making it more 
difficult for operations.
    So we are looking at it from an auditing standpoint, and we 
are also looking at how can we make it more affordable and 
accessible to get into the system and stay in the system.
    Mr. Farr. Do you set the fees, or does the certifying 
organization set the fees?
    Mr. Shipman. The certifying organization sets the fees.
    Mr. Farr. And they are collecting fees to pay for the 
administrative costs----
    Mr. Shipman. Correct.
    Mr. Farr [continuing]. And then some.
    Mr. Shipman. Right.
    Mr. Farr. So we have to keep a cap on those.
    Mr. Shipman. Okay.
    Mr. Farr. All right.
    Mr. Aderholt. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.
    First, let me associate myself with Ms. Pingree's remarks 
on fairness for American producers.
    Based on some of the concerns discussed today and my belief 
that we must continue the Microbiological Data Program, it 
sounds like we should take a serious look at the Animal Disease 
Traceability Program. I can think of several places in your 
mission area, like the MDP, where the $5 million increase that 
you are requesting could be better spent.
    Let me say why. I have been involved in this issue since 
2004, where, if I am correct, the objective was to decrease the 
amount of time needed to complete tracing animals. And I fought 
long and hard to see that that was going to happen. 
Unfortunately, where we now are at with this program is--what I 
am reading here in the background is, ``The new approach, while 
advancing traceability for disease response''--we have gone 
from using the standard in the performance measure from 48 
hours in traceability to down to ``advancing.''
    I suggest that this program is really of not very much use 
in terms of what we need to do. And let's take that $5 million 
and, in my instance, let's go to the Microbiological Data 
Program, which gives us real information when we are trying to 
track down pathogens in terms of saving people's lives. This $5 
million is, in my view, useless in terms of the goal of 
achieving a 48-hour trace-back. You cannot meet that standard. 
You are not going to meet that standard.

                     SHELL EGG VIOLATIONS REPORTING

    Let me move to questions about the USDA OIG audit on the 
USDA controls over shell egg inspections. The IG found some 
alarming disconnections within USDA and between USDA and the 
FDA. I was especially taken by the IG's observation that USDA 
personnel are often the only Federal officials who are in a 
position to be aware of potential safety issues at laying 
barns, but those same officials, quote, ``are not under any 
obligation to report potential violations.''
    What have you done since the audit to improve communication 
with FSIS and FDA? What have you done to ensure that AMS does 
not apply the USDA grade mark to unsafe eggs?
    Mr. Avalos. Congresswoman, first, I want to say that we did 
take to the report very serious, and we made some changes to 
address their concern.
    I want to ask Mr. Shipman to answer your question.
    Ms. DeLauro. Thank you very much. 
    Mr. Shipman. Since that audit report and a couple others 
too, we have actually established a new cooperative agreement, 
or a reimbursable agreement, MOU, with FDA. And as part of 
that, we put in place an actual reporting system, okay, so that 
when our inspectors in the field identify something that is 
inconsistent with FDA requirements, that day they actually put 
it into a system, an automated system; it goes to FDA.
    And we can look at the system to find out what has FDA done 
with that information. If we find that there is no response, we 
can loop back. So it is a closed loop. In the past, information 
would flow one way, and you wouldn't understand what the 
reaction was. So that is probably the most important----
    Ms. DeLauro. But we are reporting the violations now.
    Mr. Shipman. Yes.
    Ms. DeLauro. Okay.
    Mr. Shipman. They are reporting, and we are following up.
    The other thing that I would like to clarify, though, is 
when you go to a poultry facility, our folks are in the packing 
area, okay. Many times, they don't even go--aren't allowed to 
go into the barns, for reasons of biological control. We are 
looking at the production of the eggs as they are coming out, 
and we are in the packing facilities, not necessarily in the 
barns.
    When we do go in the barns, on occasion, if there is 
something that is inconsistent with FDA requirements, again, it 
gets reported into this new system that has been established.

                          SHELL EGG REPORTING

    Ms. DeLauro. And I just was handed a piece of information 
that said that the weakness was--such as SE stereotyping, are 
voluntary, and they are not under any obligation to report 
potential violations.
    Are we still dealing with voluntary considerations here 
rather than some sort of a mandatory effort in terms of 
reporting information? Are we dealing with having a mandatory 
standard which then has to be reported versus a voluntary and 
you can do it or you don't have to do it?
    Mr. Shipman. In terms of the SE testing?
    Ms. DeLauro. Yes.
    Mr. Shipman. Okay. That falls under the FDA requirements. 
Okay, so in terms of the SE testing and the reporting to FDA--
--
    Ms. DeLauro. I have to ask them?
    Mr. Shipman [continuing]. You will have--it falls under 
FDA.
    Ms. DeLauro. Okay.
    Now, Mr. Chairman, you haven't heard me comment on this 
before, but I think that this is one of the clearest examples 
of why we need to have a single food safety agency. No one, Mr. 
Chairman, no one has the ultimate responsibility overall for 
food safety in the Federal Government. We have 15 agencies that 
have some piece of the safety of our food. And USDA and FDA 
have the lion's share of that effort.
    But here we are, trying to come to some policy of safety in 
terms of eggs, and we have two agencies that have jurisdiction 
and one agency--don't answer the questions for the other agency 
and back and forth, instead of where we can get a single 
determination, if there is something wrong, that the single 
agency can focus on it and get the thing resolved one way or 
another.
    Mr. Shipman.
    Mr. Shipman. Let me just add one thing.
    Ms. DeLauro. Sure.
    Mr. Shipman. FDA is the agency that requires the facilities 
to do the SE testing in the barns. Okay. If they get a positive 
test result in the barns, they do notify us so that we know 
that----
    Ms. DeLauro. But they are not required. According to this, 
it is voluntary. You do not have to deal with that.
    And I am sorry, Mr. Chairman. My time is up. My time is up, 
but----
    Mr. Shipman. Okay. We require them to give us that 
information as part of the contract that we have with them to 
grade their eggs. Under a voluntary grading program, if they 
want our services, they have to provide us with that 
information.
    But you are correct, if they are not asking for our 
voluntary grading services, then they do not have to provide 
that information to us.
    Ms. DeLauro. Thank you very much, Mr. Shipman.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chairman.
    A think a couple of these things we have been around about 
a little bit, so I will throw two topics out there, Mr. Under 
Secretary, and just get your comments.
    I think you were talking a little bit before about invasive 
species, which is a growing concern, of course. And 
particularly in the Northeast, I seem to hear increasingly 
about Drosophila, the invasive fruit fly species that is 
turning a lot of our valuable berry crops into empty shells of 
fruit.
    So there are a lot of people coping with that in our forest 
products industry, our farming industry. And I was disappointed 
to see a $27 million reduction in the President's budget for 
plant and forest health in a time when I think it is critical 
and particularly when people are looking for new ways to take 
care of pest problems.

                        NATIONAL ORGANIC PROGRAM

    Which leads me into a little bit into the thing you talked 
a little bit about with the ranking member, the National 
Organic Program. So people are looking for solutions, lots of 
different solutions. And we talked a little bit about how 
critical this program is, again, what a growing market it is. A 
lot of the growth, in everything from dairying to fruits and 
vegetables, in our State has come because of the organic 
program, the ability for organic certification.
    And I know there is, you know, a little bit of a balance in 
not making it too bureaucratic but making it a dependable and 
trustworthy label. I own an organic farm myself, so I know all 
too well what you pay and what you go through to be sure you 
are certified and why you can't screw up.
    But, that said, I am pleased to see there is a $2 million 
increase in this part of the National Organic Program. So I 
would just like to know a little bit more about what the plans 
are for doing with that, how to make it more useful to the 
farmers, and how to make sure that we are really being careful 
and protecting this label, because it means a lot. It is very 
expensive to the producers who are in it to comply with the 
laws to buy organic feed or whatever components you need to do 
what you are doing, and we certainly don't want the label ever 
not there.
    So those are my two, kind of, topics.
    Mr. Avalos. Congresswoman, on the organics, where there is 
substantial growth and continued growth, the responsibility and 
the requirements for our service at USDA also grows. In order 
to maintain that confidence in the label and maintain that 
integrity in that ``organic'' label, we have to continue the 
enforcement and compliance. So this funding request, this 
additional request, is primarily for enforcement and 
compliance.
    We are asking for a small portion of that to pursue 
equivalency agreements with several countries. We have one now 
with the European Union, but we are looking at developing 
equivalency agreements with countries like Germany, India, 
Korea, and Costa Rica.
    Ms. Pingree. Did you say we have one with the EU?
    Mr. Avalos. We do, yes.
    Mr. Shipman, is there anything you want to expand on that?
    Mr. Shipman. I would just add that, in the past year, the 
complaints that we have received have increased 54 percent. I 
think the reason for that--we are attributing the reason to 
that is that people are seeing that we actually are serious and 
we are enforcing the requirements. The market is expanding. 
These complaints come in from competitors in the marketplace; 
they come in from some of the certifying agencies. And if we 
are not able to keep up with that workload that is coming in, I 
think we run the risk of the integrity of that label degrading. 
So that is a big reason why we are requesting the additional 
funding.
    And then we do get into the international market. We have a 
number of countries, as the Under Secretary said, asking for 
equivalency agreements, to enter into negotiations. And that 
takes time, to work through that, to see if we can make the two 
systems equivalent.
    Ms. Pingree. I will just say briefly, I am sure at least 10 
percent of the 54 percent of the complaints came first to my 
office. In a State that has an active organic market, there is 
a huge range of people who say, how come that guy got away with 
that, and how come I had to do this, and why is the fee so 
high, and why do we really have to do this, and couldn't it be 
that? And it is complicated, and I am sympathetic.
    I will yield back. Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Fortenberry.

                        OLD AND NEW INITIATIVES

    Mr. Fortenberry. Thank you, Mr. Chairman.
    Good morning, everyone. Sorry to join you a little late. So 
I didn't have the benefit, obviously, of your testimony, so I 
am sorry if this appears redundant.
    A broad and wide question, first of all. We are living in 
very difficult budgetary times, as you all are quite aware, so 
it is incumbent upon all of us to think creatively, 
entrepreneurially, as to how we are going to deliver smart and 
effect governmental services with less money. And government 
budgets are always going to be under tension, and so it should 
compel us to think creatively about letting go of that which is 
old and no longer applicable, but always looking ahead and 
trying to think creatively as to how to reshape policy to 
appropriately ensure, particularly in your areas, food safety 
in a more creative fashion.
    So what is old that you are letting go of? What is new that 
you are looking to invest in, in terms of policy initiative?
    Mr. Avalos. Congressman, that is a good question. And you 
are right, we are living in a world of very tight budgets. We 
have cut expenses, we have created efficiencies, we have 
reduced staff. And we have done our part to try to address the 
government spending and the deficit and the budget.
    MRP, we have done just that. We have taken programs that we 
felt were no longer necessary--for example, in APHIS, there are 
programs where we have had success and we don't need to put the 
funding into it anymore. There are programs where we have not 
had success, and we don't have the tools to eradicate that 
pest, so we haven't put that funding into them.
    And then we have new threats that came in--for example, 
feral hogs. This is an invasive species that has spread into 38 
States, causes $1.5 billion in damage, and it keeps growing. It 
has gone from a million to 5 million. In 4 years, it will be 10 
million.
    Mr. Fortenberry. And now it is the subject of TV reality 
shows, as you have probably seen.
    Mr. Avalos. Yes, it is.
    But, anyway, so this is something new. And we have other 
pests that have come up that we are still trying to eradicate, 
so we still have to maintain that support--for example, the 
Asian long-horned beetle and the European grapevine moth. And 
you never know, on the APHIS side, when we are going to have 
another challenge. You just never know.
    And then on the AMS side, we looked at our core mission. We 
eliminated the Microbiological Data Program. That is the old. 
It is not part of our core mission. We don't have the money. 
They are great programs, okay, just as the Congresswoman was 
saying earlier. They are very important programs, but we just 
didn't have money.
    But we have new needs, as we just talked about. Organic 
keeps growing----

                        ORGANIC PRODUCER LAWSUIT

    Mr. Fortenberry. Let me segue there for a moment to a very 
specific question. We have an organic producer, who I 
represent, who was concerned about another organic producer's 
practices and informed the USDA. Subsequently and then 
consequently, that individual who told USDA about potentially 
problematic practices is being sued by the individual he turned 
in or spoke to the USDA about. The individual gathered 
information from the USDA which had inadvertently included his 
name on some document. So he is being sued and he is seeking 
recourse from the USDA but has gotten limited help, if not 
none.
    Mr. Avalos. I am not aware of the situation.
    Mr. Shipman, are you aware of this at all?
    Mr. Shipman. Yeah.
    Mr. Avalos. I am going to ask Mr. Shipman to help answer.
    Mr. Shipman. Yeah. We made a mistake. We should have 
redacted that name before it was released under Freedom of 
Information. It is really regrettable.
    I have looked at this case a number of times and sat with 
legal counsel trying to figure out how can we in some way help 
that individual. And I think we have provided some documents 
explaining exactly what occurred, but the avenue to actually 
help in a financial way, I have not found a path forward on 
that yet. It is an extremely regrettable situation, and we are 
aware of it.
    Mr. Fortenberry. Keep looking for that pathway. Because 
here is an individual who was assisting you on your mission----
    Mr. Shipman. I know.
    Mr. Fortenberry [continuing]. Who is now incurring the 
potential of significant--well, is incurring significant 
financial cost defending himself from a lawsuit that is not his 
own fault, in effect. So, thank you.
    The third--Mr. Chairman, am I okay on time? I can't see the 
monitor.
    Mr. Aderholt. Go ahead. You have about 30 seconds.

                           IMPORT INSPECTIONS

    Mr. Fortenberry. All right.
    Well, answer this in 30 seconds. Regarding imported food, 
how much do we inspect?
    Mr. Avalos. I am going to ask Mr. Shea to answer that for 
you.
    Mr. Shea. And I hate to pass the buck, but we don't inspect 
imported food. FDA would do that. I think you have a chance to 
ask him that question.
    Mr. Fortenberry. Well, I did, but you are a participant in 
this process.
    Mr. Shea. Let me say this. Through our colleagues at 
Customs and Border Protection, we are looking for agricultural 
pests. So we are looking for diseases and pests of agriculture, 
not human food threats, although, obviously, there could be 
some overlap.
    And our colleagues at CBP do look at up to 20 percent of 
shipments of things that come in on a risk basis, look at the 
flights or shipments that are the most at risk for the pests 
and diseases we are looking for. And so there is quite a bit of 
that that goes on. But food itself is just not us, and I really 
couldn't answer that.
    Mr. Fortenberry. All right.
    Thank you, Mr. Chairman.
    Mr. Aderholt. And let me say, too, we had a little bit of a 
problem with the lighting system. They were at one point all 
three green and red and yellow and all coming on at the same 
time. So I said we will just unplug it, so that is why it was--
it was getting rather confusing, and the red would come on 
right after----
    Mr. Fortenberry. I was trying to adhere to the rules, Mr. 
Chairman.
    Mr. Aderholt. Yeah. Well, our lights are out today, our 
technology is a little down, so we are going to have to go the 
old-fashioned way.

                       GIPSA PERFORMANCE MEASURES

    But let me turn to GIPSA. I know Ms. DeLauro had asked 
about this, had mentioned this in some of her questions that 
she asked earlier. But according to MRP agency testimonies, 
GIPSA may have gained an edge on some other agencies by 
starting reengineering efforts in 2006, despite fiscal 
challenges. Your testimony and budget justification contained 
indicators of improved performance over the past couple of 
years in areas such as aggregate industry compliance, poultry 
payment review, and elsewhere.
    I will direct this question to Mr. Mitchell.
    Can you provide us with a few particular performance 
measures over the past years as an indicator of your agency's 
progress?
    Mr. Mitchell. Probably our best performance measure is the 
compliance. Our in-house analysis shows that our compliance 
rate last year actually had a spike of 87 percent. We are not 
positive that that is a trend or just a spike. But a lot of the 
changes that have happened, of course, has been the automation 
of how we assembled the data to do the analysis for whether it 
is a financial integrity issue or a competition issue.
    But--I am not sure if I am answering your question 
correctly. But the automation has helped significantly, in that 
our resident agents, those people that are out there on the 
ground, those 55 individuals that work a State or a region, are 
very closely in contact with their regional offices so that the 
information that they are collecting is available for analysis 
much quicker.

            PACKERS AND STOCKYARDS PROGRAM COMPLIANCE RATES

    Mr. Aderholt. Your testimony also points out that a slight 
increase can lead to improved industry compliance, as you 
strive for 100 percent compliance levels from the current rate 
of 87 percent. Can you confirm that you are on track to exceed 
performance within the packers and stockyards area of 
responsibility?
    Mr. Mitchell. Well, of course, we establish a strategic 
plan, and our target was actually below the 87 percent. We 
always want to have 100 percent compliance, but we also know 
that if you put out goals and targets that may be beyond our 
reach, you are setting yourselves up for failure to start with. 
And, as I mentioned earlier, I believe last year's goal was 81 
percent, and we had 87.
    We don't know yet how this year will turn out. There is 
some concern, given the reductions in resources, that those 
resident agents are not in a position to travel quite as much 
as they did to the various sale barns, packer houses, and the 
folks that we review. It is a little early to tell whether or 
not we are going to meet our initial strategic plan target or 
whether we are going to be closer to last year's 87 percent.

                          FERAL SWINE PROGRAM

    Mr. Aderholt. Mr. Under Secretary, you mentioned in your 
opening comments about the--talked a little about the Feral 
swine program. And I have had people contact me in my office 
and we have had discussions about this very issue. APHIS's 
largest proposed increase is for the Feral swine control 
program. The agency is requesting $20 million and 95 staff-
years to support a multifunction program aimed at containing 
and controlling the animal population. Your budget request 
gives two primary reasons for the request: one, to reduce the 
damage caused by these animals; and, two, reduce the health 
risk posed to humans, domestic animals, and wildlife.
    If you could help me and, of course, the members of this 
subcommittee to understand the agency's primary goal or 
priority here, because the request falls under the Wildlife 
Service and not the Animal Health.
    Mr. Avalos. Mr. Chairman, as I mentioned earlier, feral 
swine has become a real, real problem in this country, you 
know, where they have reached 5 million; in 4 years, 10 
million. They went from 15 States to 38 States. So it has 
become a national problem.
    The Department of Agriculture is addressing the issue, but 
it is also a health issue. You know, feral hogs carry 20 
diseases that they can transmit to wildlife, transmit to 
livestock, and transmit to humans. And then they do extensive 
damage to crops, extensive damage to public property and 
private property, $1.5 billion in damage.
    We are at a point to where, even though we have tight 
budgets, we just can't wait. This invasive species is spreading 
so quickly and causing havoc all over the country. We really 
need a national plan to address this problem. To try to take it 
State by State would not work. We need a national plan that is 
comprehensive, that has everyone on the same page trying to 
eradicate this invasive species in some cases, trying to 
prevent the spread in other cases, but in all cases maintain 
populations at a level where we can manage them.
    So, anyway, I hope that is answering your question. This is 
a priority to us. It is primarily because of agriculture, from 
our perspective, but it is also a health benefit that is 
outside of USDA.
    Mr. Aderholt. So that is the reason it falls under Wildlife 
Services?
    Mr. Avalos. Yes, it does.
    Mr. Aderholt. As opposed to Animal Health.
    Mr. Avalos. Well, I will let Mr. Shea explain that.
    Mr. Aderholt. Sure, absolutely.
    Mr. Shea. Mr. Chairman, it falls under our Wildlife 
Services because they have the experience and the expertise to 
deal with wildlife. And this is, indeed, wildlife. So they know 
how to handle it.
    I just want to add one quick thing, if I could, in terms of 
the animal health threat. This committee provided us hundreds 
of millions of dollars to eradicate pseudorabies in swine, and 
these feral swine could spread it back and ruin all of that 
work. So that is another example of why we need to put a stop 
to the spread of feral swine.
    They are already to New Hampshire. That is how far they 
have spread in the last few years.
    Mr. Aderholt. Thank you. My time has expired.
    Mr. Farr.
    Mr. Farr. I think they originated in California because 
they have come a long way.

                           RED BLOTCH DISEASE

    Recently, we have a new virus in our wine grape area. It is 
called Red Blotch. It is primarily on red varietals of wine 
grapes. These grapevines produce clusters with reduced sugar 
content, causing delayed harvests and increasing acidity in the 
wine and the grape.
    The Department was very effective at creating a technical 
working group to combat the European grapevine moth as opposed 
to the light brown apple moth. And I want to know if you can 
put together that technical working group again to help us 
inform our State plant health officials and the industry on 
appropriate responses, on research, on surveillance, on 
recommended industry practices, and to us in Congress if we 
need regulatory activities to combat the Red Blotch Disease.
    Mr. Shea. Mr. Farr, we have learned over the past few years 
that the wine drinkers of America are a powerful, powerful 
constituency. And we have every intention of setting up the 
panel as you suggest.
    Mr. Farr. Thank you very much. That is what I wanted to 
hear. And we will get the details on that.

             ORGANIC PRODUCTION AND MARKET DATA INITIATIVE

    Let me ask you another question. The Organic Production and 
Market Data Initiative, ODI, is a multiagency organic data 
collection initiative that collects information vital to 
maintaining stable markets, creating rich management tools, and 
negotiating equivalency agreements with foreign governments for 
the growing of organic crops.
    In 2011, I cosponsored a successful amendment with strong 
bipartisan support to fund this data collection and price 
reporting at the Agricultural Marketing Service. How does the 
agency plan to continue the price data collection and 
dissemination to support the growing organic sector in U.S. 
Agriculture?
    Mr. Avalos. Mr. Shipman, could you answer this for the 
Congressman?
    Mr. Shipman. I will certainly try.
    We have continued to expand our reporting of organic crops 
through our market news reporting system. Some of the area that 
we have had cuts, our budget compared to 2010 is 20 percent 
lower this year than it was, but we have continued to be able 
to report on the organic market news reports.
    I had a figure here. I think we have over 200 organic 
reports right now that are being provided to the marketplace to 
help them do that market transparency and information.
    Mr. Farr. So despite all this sequestration and across-the-
board cuts, you are going to continue to try to collect the 
data and disseminate it----
    Mr. Shipman. We are making every----
    Mr. Farr [continuing]. In the same way that you have been?
    Mr. Shipman. Yes. We are making every effort to do that in 
all of the programs. Over the past couple years, we have done a 
lot of business process reengineering, and market news was one 
of the areas. We believe that we have been able to drive some 
efficiencies into it. While we are reducing reports, it hasn't 
been as drastic as it would have been if we hadn't made those 
changes.
    Mr. Farr. Thank you. Appreciate the use of technology in 
that, as well.
    I have some other questions. I am just going to submit them 
for the record. I have to go across the hall to Secretary 
Shinseki.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Mr. Chair, I can kind of wrap up here, too.

                              FERAL SWINE

    I hadn't given thorough consideration to the topic of the 
swine problem that you were talking about earlier, but I 
certainly am aware, having heard quite a bit about how 
significant the problem is, how much it is growing. It doesn't 
appear to me to be an issue we have had to deal with much in 
Maine, but much more confined to southern and sort of bigger 
hog-producing States.
    But I have heard about it a little bit from the side of 
people concerned about how the process goes to make sure that 
we are eradicating wild swine, that we are dealing with the 
health issues around it, and not interfering with the people 
who produce heritage breeds.
    So you hear a few horror stories about this. As I always 
say, I have a tiny little farm. We grow 18 pigs a year and sell 
them for slaughter. And they get a good price because they are 
heritage breeds, they are not the most wild-boarish heritage 
breeds. But I certainly hear and I get a lot of letters from 
people who say, don't come take my hogs. And I think there has 
been a little bit of activity.
    So how are you dealing with the issues around this very 
significant problem, particularly in areas that have a lot of 
hog production, and a lot of them become wild, and then you 
have this big issue, yet not overstep the bounds into those 
people who are legitimately--they are not letting their pigs 
loose, they are raising them in sufficient confinement and 
appropriate technique, but they are finding significantly good 
markets, either for heritage breeds or let's--you know, also, 
you know, it has become increasingly popular to have wild boar 
on restaurant menus. Much of the wild boar are just those hogs 
that got loose and somebody caught them and then they shot them 
and then they brought them in and they are making money off of 
them. Now, I don't think that is enough to fix the problem.
    But I just want to make sure that you guys fill me in a 
little bit about how you are protecting those legitimate 
producers who see themselves as protecting heritage breeds or 
getting a good market for a slightly different kind of hog.
    Mr. Avalos. Absolutely. It is a good question for 
clarification, because we are talking about wild pigs, feral 
hogs. We are not talking about heritage breeds that are being 
raised under, you know, under a fenced-in condition or in a 
pen. We are talking about animals that run wild, that run with 
no boundaries.
    And so there is a big difference. We would never, ever look 
at going to what I would call a domestic pig, even if it is a 
heritage breed, that is on someone's property in someone's 
fenced in area. We are talking about pigs that are running 
wild. So it would definitely not impact on the type of 
production you are talking about.
    Ms. Pingree. And I appreciate you saying that. And I 
believe the problem is so big you are focusing on that. But the 
next time I get an impassioned call from someone who claims 
that the reverse is happening, I will be directly in touch, 
just so you can help walk me through it.
    These things become urban and rural myths that grow out of 
proportions, and sometimes perhaps they are true. So I think it 
is important to give people confidence because they lack trust 
in their government around issues like this.
    Mr. Avalos. I would be more than happy to discuss it with 
you anytime.
    Ms. Pingree. Great. Thanks.
    Mr. Aderholt. Thank you, Ms. Pingree.
    Let me just wrap up. As you heard the buzzers, we are going 
into votes here in the next few minutes.

                     AVIAN INFLUENZA/H7N9 IN CHINA

    But your budget notes that the poultry industry is valued 
at $35 billion or more, while some economists have calculated 
the total estimated impact on the U.S. Economy could be around 
$257 billion. Not only is this industry a vital part of our 
national economy and the economies of the very district that I 
represent, north Alabama, but it provides many Americans and 
people across the world with an affordable source of valuable 
protein.
    What my question would be would be to explain a little bit 
to the subcommittee here why the President's budget proposes a 
decrease of $2.5 million, especially in light of the continued 
incidence of high- and low-path avian influenza in places like 
Mexico and the avian influenza outbreak in China that has been 
linked to, I think, at least 10 deaths or more.
    So could you speak to that a little bit, or one of your 
colleagues that may have some more detailed information on it?
    Mr. Avalos. Mr. Chairman, I am going to take a crack at it, 
and then I might have to turn it over to Mr. Shea.
    Mr. Aderholt. Okay.
    Mr. Avalos. First, on the budget reductions, it does not 
impact whatsoever on the surveillance for the commercial 
poultry industry. That level of surveillance would not be 
impacted by reductions. The reductions are a result of previous 
investments that we had internationally and on surveillance 
that we had for wild birds. So the domestic surveillance would 
not be impacted.
    Now, on the H7N9 in China, I just want to say that at USDA 
we are part of a multiagency group. APHIS, Mr. Shea had some of 
his people that are on this committee that are monitoring this 
situation in China. We receive daily situation reports.
    And the risk of spread of H7N9 from China to the U.S. is 
very low. And it is very low because the U.S. does not import 
poultry, we do not import unprocessed poultry products, and we 
do not import nondomestic birds from China.
    Do you want to expand on that, Mr. Shea?
    Mr. Shea. I would just say that some of the funding that we 
have already finished the project for was some work in 
Southeast Asia. We helped some countries there, Laos and 
others, set up their capacity to deal with avian influenza, 
again, things like technical ability, how to set up their 
laboratories. So some of the things that we spent money on, we 
feel like we have finished that part of the work. But, 
absolutely, we will not cut back one bit on surveillance.
    And this industry is especially valuable to us in the 
sense--we were talking earlier about cost-sharing--that this 
industry spends a lot of money itself. This industry works with 
us very carefully to set up the regulations. There is the 
National Poultry Improvement Plan, which is essentially a 
grower-managed group that we work with. And they get together 
every year and decide what sanitary standards are going to be 
in place on how product moves and how birds have to be tested. 
So we have complete devotion to this project, I can assure you.
    Mr. Aderholt. Thank you.
    Well, again, we appreciate your testimony this morning and 
for coming before the subcommittee to answer questions.
    As Mr. Farr had mentioned, there may be some questions that 
all of us will have that we may want to submit for the record 
that we would request your response to. And we appreciate your 
answering those.
    Mr. Aderholt. So, again, we look forward to working with 
you as we move forward on the fiscal year 2014 budget.
    And, at this time, the subcommittee is adjourned.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                         Wednesday, April 24, 2013.

       UNITED STATES DEPARTMENT OF AGRICULTURE RURAL DEVELOPMENT

                               WITNESSES

DOUG O'BRIEN, DEPUTY UNDER SECRETARY, RURAL DEVELOPMENT, UNITED STATES 
    DEPARTMENT OF AGRICULTURE
JOHN PADALINO, ACTING ADMINISTRATOR, RURAL UTILITIES SERVICE, UNITED 
    STATES DEPARTMENT OF AGRICULTURE
LILLIAN SALERNO, ACTING ADMINISTRATOR, RURAL BUSINESS-COOPERATIVE 
    SERVICE, UNITED STATES DEPARTMENT OF AGRICULTURE
TAMMYE TREVINO, ADMINISTRATOR, RURAL HOUSING SERVICE, DEPARTMENT OF 
    AGRICULTURE
MICHAEL YOUNG, BUDGET OFFICER, UNITED STATES DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. Good morning. The Subcommittee will come to 
order. I would like to welcome everyone here this morning and 
thank you for joining us. Mr. Doug O'Brien, the Deputy Under 
Secretary for Rural Development is with us; also Mr. John 
Padalino, Acting Administrator, Rural Utilities Services, Ms. 
Lillian Salerno, Acting Administrator, Rural Business-
Cooperative Service; Ms. Tammye Trevino, Administrator, Rural 
Housing Service; and Mr. Mike Young, USDA Budget Director. We 
would like to welcome you again to the Subcommittee this 
morning to discuss budget requests for fiscal year 2014 for the 
Rural Development mission area.

                           Opening Statement

    As noted in the testimony, USDA is the sole department 
charged with serving the needs of Americans who live in the 
rural parts of this Nation. It seems we have seen this budget 
request before, and it is hard to believe that once again USDA 
proposes very large cuts for programs such as Single-Family 
Direct Loans and Water and Waste Disposal Grants which matter 
most to rural Americans. Instead, the administration seems to 
have placed its focus on a new $55 million economic development 
program that has not been reviewed by Congress. As the only 
department dedicated to rural America, we have to ask if this 
budget request is truly in tune with its needs, especially the 
needs of rural Americans and those with the lowest incomes.
    Nevertheless, we look forward to your testimony, and at 
this time I would like to recognize the distinguished member 
from California, Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman. My reflection 
on this rural program that is proposed is one that I think is 
very positive, and I hope we can learn more about it today.
    Before being in Congress, long before, right after college, 
I was in the Peace Corps in Latin America and did community 
development, and one of the things you learn about the culture 
of poverty is that you have to empower people. You have to give 
access to institutions of learning so they can get an 
education, learn to read and write, they have to have access to 
water, they have to have access to medical clinics, doctors and 
so on. You will never work yourself out of the culture of 
poverty until you have a safe place to sleep, an education and 
access to health care. If you have those, you have a chance. 
Without them, you don't.
    What we do in our Federal programs is we have categorical 
funding, we did this in education, we just put everything into 
silos, and if you fit into a silo, you get some money, but you 
don't really learn to work your way out of it. I think what we 
do with all our grant programs, whether the grant comes from 
the Department of Energy or the Department of Transportation or 
the Department of Agriculture, the Department of Education, 
whatever it is, they all try to meet these underserved needs in 
America by competitive grants and you end up with this sort of 
raining down on grants within their silos, and nobody is 
pulling them all together and saying you have got a problem 
here that needs to be solved that is about infrastructure, it 
is about capacity building, it is about ability to really check 
all points.
    I think that is what Secretary Vilsack is seeing and is 
leading this rural strategy, as I call it, to try to make sure 
that you get a much better bang for your buck in the rural 
areas. Why is the rural part of America, census after census, 
10 years after 10 years, decades after decades, still dirt poor 
and still not able to be there? It is the way we sort of did 
our foreign aid program. We just sort of rained money down 
without trying to build the capacity.
    So whether it is foreign aid or aid to rural America, it 
seems to me the same idea ought to be there, that we 
concentrate all our Federal expertise in trying to develop an 
ability to empower those local communities to care for 
themselves, just like more sophisticated communities can do.
    So I look forward to this hearing. Thank you.
    Mr. Aderholt. Thank you. Also let me just remind you the 
microphones are sort of sensitive, so whoever speaks, just grab 
the microphone in your direction, that would also make sure we 
get you on record.
    So again, Mr. O'Brien, we look forward to your testimony.

                           Opening Statement

    Mr. O'Brien. Mr. Chairman and distinguished members of the 
Subcommittee, I appreciate the opportunity to appear before you 
to discuss the President's fiscal year 2014 budget proposal for 
the Department of Agriculture's Rural Development mission area. 
Before I begin, I would like to recognize and thank you and 
thank our outgoing Under Secretary Dallas Tonsager, whose 
commitment to rural America was evident in each of his 
decisions as he led the mission area through an historic time 
of opportunities and challenges.
    Since 2009, President Obama's commitment and this 
committee's support have brought about significant investments 
in rural communities that have made them stronger and more 
vibrant. Rural Development has directly invested or guaranteed 
more than $130 billion over the last four years in projects 
that have benefited not only the communities our agency serves, 
but the overall economy.
    Under the leadership of Secretary Vilsack, we are 
transforming USDA, increasing efficiencies and saving taxpayers 
millions of dollars while supporting opportunities in areas 
such as the bio-economy, local and regional food systems and 
new broadband infrastructure. The vitality of rural America has 
helped lead the way for America's economic recovery.
    The budget we present continues the administration's 
commitment to rural areas by targeting resources to citizens in 
greatest needs and where there is greatest economic 
opportunities. We capitalize on beneficial subsidy rates in a 
number of our programs such as the Guaranteed Family Housing 
and Community Facilities Direct Loans to provide historic 
program levels in these crucial programs. At the same time, we 
take care of the most vulnerable by increasing funding in the 
Rental Assistance Program.
    The budget proposal includes $55 million for an economic 
development grant program designed to target small and emerging 
private businesses in rural areas. The program will join 
several of our current technical assistance grants into a new 
Rural Business and Cooperative Grant Program. Doing so will 
enable Rural Development to better promote economic development 
while also improving the agency's current allocation and 
evaluation process.
    The budget requests $32 million of the total funding 
provided to be set aside for information technology investments 
for the Comprehensive Loan Program. Investing in modernizing 
this system will ensure that loan programs are serviced with 
up-to-date technology, safeguarding the portfolio from cyber 
threats and upgrading the management capabilities of the 
agency. This level enables us to sustain customer 
responsiveness, service our existing portfolio and maintain a 
low delinquency rate. Simply put, we need to invest in modern 
technology systems to manage our growing portfolio.
    Over the past 10 years, Rural Development's portfolio has 
more than doubled and now stands at $183 billion. I am pleased 
that the principal balances for loans and loan guarantees 
delinquent more than 1 year remains at 2.15 percent of the 
total principal outstanding. By fiscal year 2014, our portfolio 
is anticipated to be more than $200 billion.
    Growth in our programs is exciting, yet the continued 
reductions to our staff resources are daunting. Since the 
beginning of fiscal year 2012, Rural Development has reduced 
nearly 18 percent of its workforce. While reductions save the 
agency an estimated $95 million in staff costs in future years, 
at a certain point we risk the integrity of the delivery of the 
programs and the servicing of the growing portfolio.
    Over the past few years, Rural Development has embraced 
multiple streamlining efforts to reduce operating costs. We 
consolidated and reorganized our field structure, providing 
projected savings of $758,000 annually. We achieved additional 
savings of $1.3 million with reductions in printing and 
supplies. We also anticipate savings from data center 
consolidation and using specific services that cost less money.
    Despite our best efforts to prepare for additional funding 
reduction through these prudent practices, we cannot prevent 
the negative impact of reduced funding in the final 2013 
Appropriations Act. We will have to cut back on essential 
services. The reduced level of program funding will mean that 
rental assistance will not be available for more than 15,000 
very low income residents, generally elderly, disabled and 
single parent heads of household who live in multi-family 
housing in rural areas. We are working closely with property 
owners to deal with reduced income from rental assistance. 
Efforts including servicing options such as debt deferrals, 
reserve account funds to supplement operating expenses, and 
increasing occupancy and property income. We are not able to 
fully address this reduction on our own, however. The loss of 
such a substantial amount of funding will require the 
cooperation and understanding of owners and tenants.
    Finally, I would like to take this opportunity to 
personally thank the hard-working and dedicated employees who 
support rural communities. Rural Development has delivered more 
for rural America with fewer staff and tighter budgets. With 
their help, I can say that our portfolio is sound, our mission 
is strong and our service is in demand. We know because we live 
and work there that the potential in rural America is great. I 
am pleased that this budget recognizes this reality.
    I appreciate the opportunity to testify today before 
members of this committee, and I thank you for your support of 
Rural Development programs. I am happy to answer your questions 
at this time.
    Mr. Aderholt. Thank you.
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                      SEQUESTRATION IMPLEMENTATION

    Mr. Aderholt. We will go ahead and start with the 
questions. I mentioned when you do speak, just pull the 
microphone up to you just to make sure we get that recorded.
    In the first few months of this year, we have heard 
Secretary Vilsack repeatedly say that sequestration would 
require USDA to furlough the meat inspectors. You state that 
because of sequester, Rural Development will not be able to 
provide rental assistance to some 15,000 individuals late in 
the summer. We have never heard about this until sequestration 
took effect. Your testimony also states that there may be a 
need to furlough Rural Development employees unless other means 
can be found to address the funding situation.
    Yesterday it is my understanding this Subcommittee received 
the Department's interchange request to remedy this. It is 
surprising that USDA proposes further cuts to the Single Family 
Direct Loan Program given the significant reduction in the 
budget request. We will be reviewing the request.
    The question is how is USDA going to manage the reduction 
in funding for the rental assistance program?
    Mr. O'Brien. Thank you, Mr. Chairman, for that question, 
and thank you for raising the fact that the Secretary sent his 
notice of intention to interchange yesterday.
    To your question on rental assistance, what we have already 
done is sent a letter to each of the owners of multi-family 
properties that have a rental assistance contract to give them 
notice of the situation we find ourselves in this year.
    As I mentioned in the testimony, what we have done in the 
last weeks and months is work very closely with our Office of 
General Counsel to determine what servicing options we have to 
minimize the negative impact on the tenants from the reduction 
in the rental assistance number. This could include, and it 
will be a case-by-case situation depending on the particular 
property, but this could include things such as deferring loan 
payments; it could include things such as asking the property 
owner to utilize their reserve to make sure that they can meet 
their operating costs. And at the end of the day our hope is to 
significantly minimize or eliminate that negative impact this 
year on those tenants.

                            STAFFING LEVELS

    Mr. Aderholt. In the Inspector General's 2012 report on 
USDA's management challenges, it expresses concern with the 
Rural Development staffing situation. The report also 
encouraged Rural Development to strategize about its future and 
begin a succession plan because it will need to service and 
monitor its $184 billion portfolio even though staff levels are 
likely to remain level or decrease.
    What is Rural Development doing in response to the 
Inspector General's report?
    Mr. O'Brien. Thank you for that question, Mr. Chairman. We 
have taken a number of measures in the past year. To speak 
directly to the budget proposal on the table today, crucial to 
that number is the salaries and expense line. That is the line 
that, of course, funds the people that service the portfolio as 
well as provides us the opportunity to invest in modern 
technology that will allow us to analyze and manage that 
growing portfolio.
    We have, in particular, Under Secretary Tonsager has made a 
priority of investing in our Centralized Service center in St. 
Louis, which is really the back office that services most of 
our portfolio, and in particular, our housing portfolio where 
the greatest part of our growth is.
    Mr. Aderholt. Has Rural Development begun a succession plan 
and strategic workforce planning?
    Mr. O'Brien. We have a plan to deal with the growing 
portfolio. Administrator Trevino has worked with her senior 
staff, in particular, those folks in St. Louis, as well as her 
deputy administrator here to have a multi-year plan on how to 
deal with the growing portfolio. We have also worked to, for 
instance, in the Rural Business and Cooperative Service, we 
have in the last 2 years reorganized the way that we staff that 
program. We have, in essence, been able to regionalize the 
leadership of the rural business programs so that we can 
continue to deliver that program with less people.
    Mr. Aderholt. Is Rural Development working with outside 
human resources and management experts and gathering input from 
stakeholders and customers on its future?
    Mr. O'Brien. We are. We have, of course, robust 
conversations with our stakeholders on the current state of the 
programs on sort of a continuing basis. We did just recently, I 
think early in fiscal year 2012, we asked a number of experts, 
actually within USDA, but not within Rural Development, folks 
who are black belts in Six Sigma, to spend some time in a 
number of our components and again, in particular, in the 
Centralized Service Center, to provide us some recommendations 
on a path forward to make sure that we sustain and protect the 
portfolio.
    Mr. Aderholt. Thank you. Mr. Farr.

                             CYBERSECURITY

    Mr. Farr. I am not sure I understand that answer. Does this 
have to do with cybersecurity?
    Mr. O'Brien. It does have to do with cybersecurity.
    Mr. Farr. Tell me why we have to spend money in USDA for 
cybersecurity? That ought to be more of our other departments.
    Mr. O'Brien. Well, I think, our focus is protecting the 
portfolio, which, as mentioned, is growing. It is $184 billion 
right now, we predict it will be $200 billion next year. Much 
of the information, the data and access to particular accounts 
depends on the cyber network.
    Mr. Farr. So what do you have to do? Is that a line item 
that you can show in here how much money is going? What do you 
have to do, buy new equipment?
    Mr. O'Brien. Most of our investment in modernizing our 
information technology is in the program called the 
Comprehensive Loan Program, and it involves--and we would be 
very happy to work with you----
    Mr. Farr. It sure takes the focus away from what we were 
talking about yesterday in my office about trying to 
concentrate on the poorest area of the country. They don't give 
a damn about cybersecurity. They don't even understand what the 
word means. Most people in Washington don't either.
    Mr. O'Brien. Right. I understand. We, as we had an 
opportunity to discuss yesterday, Congressman, this 
administration, Secretary Vilsack is committed to finding 
solutions in areas of concentrated poverty. In fact, through 
our Strike Force Initiative, through the White House Rural----
    Mr. Farr. How much is the cybersecurity costing? Is that in 
your budget?
    Mr. O'Brien. The Comprehensive Loan Program asks for a 
dedicated line of $32 million. Not all of that, in fact, it 
would be probably a very small amount of that, would be 
cybersecurity. Most of those dollars would be investment in 
modernizing our information technology, which is antiquated, 
which, if we don't modernize, it will actually cost us many 
more dollars in the future.
    Mr. Farr. I am sure every department has to go through that 
and I am somewhat sympathetic. Again, getting back to your 
initial presentation about trying to reach out to the poorest 
of poor in this country, and the poorest communities, they 
don't even have broadband. Here they are two unrelated jobs.
    Mr. O'Brien. I might posit, and I understand your point and 
take your point, Congressman. I think part of our 
responsibility at Rural Development is making sure that we have 
a sustainable program so that we can serve areas of 
concentrated poverty into the future. One of the things we need 
to do is make sure that we protect the portfolio. If we begin 
to have increased delinquency rates so that the subsidy rates 
for our different programs begin to escalate----
    Mr. Farr. But why should that in the rural poverty budget, 
so to speak? Why isn't that just out of the administrative 
costs of the Department, not in your area? Anyway, I am going 
to be really upset with those costs because they take away from 
what I think your focus is and what your administrator is here, 
which is to deal with rural America. Rural America wants 
access. They don't really care if their access gets cyber 
attacked because, frankly, it is pretty basic and it is not the 
kind of stuff that--cybersecurity is going to jam up the whole 
system. It is not going to be something that is going to be 
after some little town in--anyway.

                       RENTAL ASSISTANCE PROGRAM

    You mention that you are increasing funding for the Rural 
Rental Program, but I understand you are also, the Secretary 
mentioned that the Rental Assistance Program will run out of 
money in August or September and about 15,000 people wouldn't 
get rental assistance who are now getting it. So why are we 
increasing it at the same time we are cutting it?
    Mr. O'Brien. Thank you for that question. It is a question 
of the final fiscal year 2013 appropriations measure, which 
after the sequester and the further rescissions resulted in 
diminished resources so we would not be able in this fiscal 
year to be able to renew every one of those rental assistance 
contracts. The fiscal year 2014 budget is designed so that we 
can meet the demand in fiscal year 2014.
    Mr. Farr. So if we respond to your request, because that 
starts October 1st, then you wouldn't have to affect these 
15,000 presently receiving rental assistance?
    Mr. O'Brien. What we plan to do and have communicated 
already to the stakeholders and to the owners of multi-family 
properties is we have some servicing options in fiscal year 
2013 to deal with the shortfall.
    Mr. Farr. So it is a yes or no answer?
    Mr. O'Brien. If the question is does the fiscal year 2014 
budget take care of the problem in fiscal year 2013----
    Mr. Farr. Yes.
    Mr. O'Brien. The answer is no, sir.
    Mr. Farr. I yield back.
    Mr. Aderholt. Mr. Nunnelee.

                        SERVICES IN MISSISSIPPI

    Mr. Nunnelee. Thank you, Mr. Chairman.
    Secretary O'Brien, thank you for being here. As you know, 
Rural Development has been very important to my State of 
Mississippi. I understand you recently have been to Mississippi 
and taken a look firsthand. I want to thank you for your 
interest in doing that.
    In your opening statement you did acknowledge that we are 
all facing challenges of increased demand for services with 
diminished resources, and we have all got to figure out how to 
deal with that, so I have got some questions as it relates to 
my State in that subject area.
    Our State currently is without an engineer, and it is my 
understanding that that vacancy did not occur because of 
sequestration, it occurred before sequestration, but I wouldn't 
be surprised to learn that the decision to not immediately fill 
the position was driven by sequestration. You have got to 
figure out how to best manage and implement. But I do want to 
make sure that your current solution maximizes our resources 
and maximizes our ability to get things approved.
    It is my understanding that the engineering decisions have 
now been moved to a different State. I don't know this to be 
the case, in fact, it may not be the case. But human nature may 
be that an individual working in-State has a stack of projects 
from the State where he or she is familiar with, and a stack of 
projects from Mississippi, and human nature may be to focus on 
what I am familiar with and get around to Mississippi when I 
have a chance.
    Do we have a way of measuring projects that are being 
approved by the engineering office where our projects have been 
moved to? And are the Mississippi projects being approved in 
the same timely manner that their in-State projects are?
    Mr. O'Brien. Thank you for that question. I do want to 
mention up front it was a great trip to Mississippi and 
Starkville to see what folks are doing there with the Rural 
Jobs Accelerator Grant in the different industries in those 
industry clusters. It was a very impressive trip, and I enjoyed 
that.
    Your question on, particularly the engineer in Mississippi, 
you are right, Congressman, that while the sequester itself, 
there isn't necessarily a direct nexus, but in essence for the 
last 2 years, we have had a hiring freeze as we have seen our 
salaries and expense line reduced in the last few 
appropriations measures, which has caused a number of holes in 
staffing in the States as well as in the national office.
    We have worked very hard for about the last 3 years in 
anticipation of reduced staffing to some degree regionalize or 
better coordinate among the States, so that a specialist such 
as an engineer, or in some other States, it might be the 
architect or in another State, it might be the person who deals 
with the information technology, can serve more than one State. 
We have had, I think, some good success at that.
    Your question on do we have a way to measure and ensure 
that a State that no longer has a person in that State, we 
certainly are able to keep track and just those States 
themselves they keep track themselves. You have a fantastic 
State director there who ensures that her State is being 
served. But I think over the next year or 2, we need to refine 
the way we do that because we anticipate that we will need to 
ensure that the States continue to receive the service that 
they need with lower staffing numbers.
    Mr. Nunnelee. Well, if we can, I would like my office to 
work with your department to get some measurable results on the 
length of time it takes Mississippi projects to get approved, 
and not just the length of time it takes these in-State 
projects to get approved where we put a sign, but the length of 
time it takes neighboring States.
    Thank you. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.

              RURAL ELECTRIC PROGRAM IN THE VIRGIN ISLANDS

    Mr. Bishop. Thank you very much. Let me welcome you all to 
our subcommittee once again. I have a question I want to start 
off with, I am going to ask on behalf of one of my colleagues 
who does not have a vote, but does have a very, very 
considerable population, and that is the delegate from the 
Virgin Islands, Mrs. Christensen. So I would like to direct 
this to Mr. O'Brien and Mr. Padalino.
    As you know, the U.S. Virgin Islands is currently 
experiencing the highest electrical rates in the Nation due to 
their 100 percent dependence on oil to generate electricity. 
Current electrical rates for the Virgin Island residents and 
businesses are 50.8 and 54 cents per kilowatt hour, 
respectively. This is compared to U.S. national average of 11 
cents per kilowatt hour. The issue is viewed by Virgin 
Islanders as an energy crisis because it threatens the 
families, particularly those at the lowest incomes, and it is 
adversely impacting businesses and causing closures and 
downsizing.
    It is my understanding that USDA officials have been 
working with the Virgin Island officials to provide assistance 
to alleviate the crisis through appropriate USDA programs, 
particularly Rural Development with the High Energy Grants 
Program. But while the support that has been provided to the 
Territory thus far has been welcomed, they are going to need a 
lot more focus and attention from both Rural Development and 
RUS.
    Can you give us an update on this situation and what your 
activities are to date, and give me some hope that I can carry 
back to my colleague, Mrs. Christensen, when I see her later 
today?
    Mr. O'Brien. I will ask Mr. Padalino to address that.
    Mr. Padalino. Thank you, Congressman, for that question. 
Last fall, I had a chance to speak with the Delegate about the 
situation in the Virgin Islands. And just for the education of 
the folks in the room, you mentioned, I think you mentioned the 
closure of a refinery there which has significantly contributed 
to the increased cost for the production, the generation of 
electricity on the island because as you mentioned, they rely 
on diesel for their generation.
    The Rural Utilities Service has been engaged with the 
Virgin Islands Water and Power Authority in developing an 
application which I think will provide some short-term benefits 
once we have a complete application and have a chance to 
consider it. What it will do is it is considering some energy 
efficiency measures on the electric grid on the Islands, which 
will help the Authority maintain costs on the bottom line and 
hopefully will result in at least a flat line of the rates 
where they are, and we can continue working with the Islands. 
One of the measures we saw from working with the Islands is 
that they are considering renewable resources for the long-
term. So those are a couple of the items we are working on.
    One other item to note, not necessarily on electric 
generation, but with the Islands, we approved a broadband loan 
last fall which we hope will help contribute to economic 
development on the Islands as well.
    Mr. Bishop. Mr. O'Brien.
    Mr. O'Brien. I think that covered it.
    Mr. Bishop. Thank you for that. I want to let you know that 
we want to be as responsive as we can. That just seems 
unbelievable to have rates that high where you have got an area 
where incomes are that low, and that certainly is going to and 
is having a tremendous impact on the quality of life there.

                           BROADBAND PROJECTS

    Since you mentioned broadband, can I get you to give us the 
status of all the outstanding broadband projects in Georgia, 
and in particular, in my Congressional District, and let me 
just ask you about Esquivita, which I think received funding 
under the stimulus. Out of all the projects approved under the 
stimulus program, how many of them are completed with 100 
percent of the funding completed and the expected broadband 
services up and running? How many are 75 percent complete? How 
many are 50 percent complete?
    Mr. Padalino. Thank you for that question, Congressman. Of 
the projects funded under the Recovery Act, 95 percent of the 
projects are under construction, in active construction and 
drawing funds on those projects. Speaking to the south Georgia 
project, I was in Texas last week speaking at a broadband 
conference and had a chance to visit with an official from the 
provider in south Georgia. One of the issues he mentioned was 
the budget amendment, and I think we have had some success in 
getting that through the agency, and we have been working 
closely with the provider on that project.
    On the number of projects that are partially operational or 
complete, we are approaching 50 percent of the projects funded 
by the Recovery Act as partially operational or complete.
    Mr. Bishop. And one of the concerns that we have is, one, I 
think this award was made under the Recovery Act, but we are 
having complaints that they still don't have service up and 
running, and that has been a good while ago, and that continues 
to concern me. The other concern I have is that with our RUS, 
it seems that RUS continues to fund new broadband projects in 
areas that are already served, and I am particularly concerned 
with areas in rural America that are not served that don't have 
any broadband services. Of course, speaking with a provider 
just yesterday, they talk about the increase in the number of 
iPads that are being used and the need for more service, and it 
means that school children are being disadvantaged 
significantly.
    Mr. Padalino. Well, thank you for that, Congressman. Last 
fall, the FCC issued a broadband deployment report that showed 
that 19 million Americans lack access to sufficient broadband, 
broadbands at speeds of four megabytes download and one 
megabyte upload, and 14.5 million of those Americans were in 
rural America.
    Depending on the financing vehicle available, the Rural 
Utilities Service considers a loan under a variety of loan 
programs that we have. Under the Broadband Loan Program 
authorized by the farm bill, we look at the financial 
feasibility of a project, and if there is one competitor out 
there, existing access, we do not fund that project if it is 
not financially feasible.
    Mr. Aderholt. Mr. Valadao.

                    MUTUAL SELF-HELP HOUSING PROGRAM

    Mr. Valadao. Thank you, Mr. Chairman. Thank you, Mr. 
O'Brien.
    The budget proposes a substantial reduction in the Self-
Help Housing Program. Currently more than 100 organizations 
across America and 10 in California participate in the Self-
Help Housing Program. These organizations support groups of 8 
to 12 self-help housing families who construct each other's 
homes, performing approximately 65 percent of the construction 
labor. Through this sweat equity, homeowners can earn equity in 
their home, decrease costs and increase investment in their 
community. Despite being the poorest families in the Section 
502 direct loan portfolio, self-help housing families have the 
lowest rates of default and delinquency.
    In California, 10 self-help housing will produce some 1,800 
units of affordable housing. With total development costs of 
$330 million creating some 5,500 jobs throughout rural 
California in fiscal year 2012, California received $6.67 
million in self-help housing funds. Now, in fiscal year 2014, 
the budget proposal is to cut the program by 67 percent, from 
$30 million to $10 million. What is the reason for such a huge 
reduction versus what you have done throughout the rest of the 
budget?
    Mr. O'Brien. Congressman, I appreciate that question. The 
Mutual Self-Help Program is one that has made a significant 
difference in many families in rural America. When crafting the 
Rural Development budget, we were able to find resources to 
increase some of our critical programs such as rental 
assistance, such as farm labor housing. At the same time, we 
looked at trying to balance the need to respond to the current 
fiscal situation that we find ourselves in. And while that is 
certainly a worthwhile program with the resources that we 
thought we needed to ask for at this time, that was a hard 
decision that needed to be made.

                        WATER AND WASTE PROGRAM

    Mr. Valadao. Then also in the Rural Water Sewer Grants, 
they were cut by 30 percent, and I think that is something that 
dramatically affects my district, especially the communities I 
represent. Why 30 percent in that department?
    Mr. O'Brien. The water and wastewater grants, of course, 
are part of a larger package that includes loans. It happened--
the way the subsidy rate was calculated for the direct loans in 
water this year, we were able to increase the program level 
significantly for those direct loans so that the final program 
level for our water programs are actually increased from last 
year.
    The grant components are critical for those communities 
that have particular need and we understand that. And as 
always, we have worked with a number of partners, both Federal, 
State and local partners, to try and make sure to put together 
a viable investment strategy for a water system, and we will 
certainly do that into the future.
    Mr. Valadao. What is the backlog for demand for this 
financing and how much of that is for loans versus grants?
    Mr. O'Brien. I will ask Administrator Padalino to see if 
you have those numbers?
    Mr. Padalino. The backlog in the Water and Waste Program 
right now is right around $3 billion. I could supplement with 
the breakdown of loans and grants that are being requested.
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    Mr. Valadao. Thank you.

                         WATER & WASTE BACKLOG

    Mr. Farr. $3 billion in backlog----
    Mr. Padalino. That is--the loans being sought in the 
pipeline are $3 billion. For this fiscal year, between loans 
and grants, we have available in fiscal year 2013 a little over 
$1 billion.
    Mr. O'Brien. And the fiscal year 2014 budget request, about 
$1.5 billion program level.
    Mr. Aderholt. Mrs. Pingree.

                      VALUE-ADDED PROGRAM REQUEST

    Ms. Pingree. Thank you, Mr. Chair. Thank you very much. 
Nice to have you here, Mr. O'Brien. Thank you for being here.
    I want to talk about a program that I care deeply about and 
that I hear a lot about in my State, and that is Value Added 
Producer Grants. Last week when Mr. Avalos was here, we had the 
opportunity to talk about increased funds that the AMS plans to 
invest in local and regional food systems. I am a particular 
proponent of those, but I think that we are seeing great 
interest around the country. They provide rural employment, 
they generate income, they are good for economic growth. Rural 
communities have the most to gain from improving our food 
systems and rebuilding our infrastructure, it is about a $5 
billion industry, so I don't think I have to tell you that 
there is great opportunities there, great need and huge 
interests.
    So I was very encouraged to see the AMS budget for the food 
system work. I was disappointed to see the Rural Development 
budget for Value Added Producer Grants. If AMS is going to 
start working on evaluating solutions to the most common 
aggregations and distributions, shouldn't Rural Development 
also be working on the holes to the supply chain? I am glad we 
are figuring out what is wrong, but we already know there is a 
lot of challenges out there, and we need the money to fix it.
    So the $15 million for Value Added Producer Grants this 
year is level funding from fiscal year 2013. I know that it is 
a substantial decrease from previous years as it has been cut 
32 percent since 2010. So you can see, I would like to see more 
money. I know this is a tough day because we are talking about 
all the places that we have to cut, but I just think there is 
great potential here. That is a very small amount of money. So 
can we talk a little bit about the opportunities or prospects 
for the future?
    Mr. O'Brien. Certainly. And thank you, Congresswoman, for 
raising the opportunities in local and regional food systems, 
economic opportunities in rural places. You certainly heard--
Secretary Vilsack spoke about those opportunities last week, 
and he has made it absolutely one of his priorities as one of 
the pillars for the rural economy.
    We have, and in fact, Administrator Salerno and I spent 
time with Secretary Vilsack just last week talking about how to 
utilize the Value Added Producer Grant to ensure that it 
supports that unmet need in the infrastructure, the local and 
regional food infrastructure, which many folks now have 
identified as really the critical component to make sure that 
farmers and consumers can really realize the opportunities 
here.
    Of course, beyond Value Added Producer Grants, essentially 
every one of the programs within the Rural Business Cooperative 
Service can support local and regional food systems, whether it 
is the Business and Industry Guaranteed Loan Program or the 
different grant programs, the Technical Assistance Programs or 
the Proposed Rural Business and Cooperative Grant Program that 
we have.
    It is a focus--we work very closely with AMS. Just last--in 
fact, I think every day this week I had a meeting with AMS 
folks, their Deputy Under Secretary with stakeholders about 
local and regional food systems. And as you know, we work 
across not only the agency, but we work with other components 
of the Federal Government to make sure that they understand the 
opportunities and how they can fill those holes and complete 
that puzzle.
    Ms. Pingree. So just given the dollar value, is there an 
argument for having such a low dollar amount when it used to be 
quite a bit higher and now we are seeing even greater need?
    Mr. O'Brien. Again, I think the Value Added Producer Grant 
Program over the years has shown some great success for groups 
of farmers and individual farmers. I think that the main 
rationale is simply the fiscal situation that we find ourselves 
in, and the difficult choices that needed to be made. We do 
believe that the number that we presented, it is the right 
balance of supporting those farmers and helping them gain that 
opportunity.
    Ms. Pingree. So just to emphasize, I thoroughly understand 
at every level we are dealing with cuts, and I have many other 
places where I am going to complain about the cuts as well and 
the effect on my rural communities and just Maine in general, 
but I would say I hope in the future this gets consideration 
for an increased amount of support because I do think there are 
huge opportunities here in rural communities. It is probably 
the thing that people talk to me about the most, is 
distribution aggregation systems.
    In my State, where there is increasing number of people 
getting re-engaged in farming after a long decline in the 
opposite direction, we really want to make sure there are 
market opportunities for them and that we can capitalize on 
this great chance for rural growth which we haven't seen in a 
long time. Thank you.
    Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Yoder.

                         RURAL ELECTRIC PROGRAM

    Mr. Yoder. Thank you, Mr. Chairman. Thanks for coming to 
the committee today. I wanted to ask a question I guess of Mr. 
Padalino regarding rural electric loans.
    I note in the President's budget recommendation, the Rural 
Utilities Service could make up to $4 billion in electric 
loans. One thing that concerns me, though, in the budget is 
that the request has very specific language about how those 
loans could be used. It states that up to $1 billion could be 
used for environmental upgrades at existing generating plants, 
and at least $3 billion would be available for generation in 
conjunction with renewables or for carbon sequestration.
    So I am from Kansas. Electric co-ops there are asking me 
how they will finance the improvements needed that are not in 
these very narrow categories, things like distribution lines 
and wires, upgrades needed for reliability, technology 
improvements, stand alone natural gas generation.
    Historically these have been fairly routine activities for 
the Rural Utilities Service to finance, but the budget that is 
being presented seems to exclude them entirely. Why is that so? 
And how do we handle those expenditures?
    Mr. Padalino. Thank you for the question, Congressman. In 
fiscal year 2012 with a program level of about $6.5 billion in 
loans, we did $4.6 billion in loans. So this year's request for 
fiscal year 2014, the President's request reflects a lower 
program level because over the past 2 fiscal years, we have 
seen lower demand. I just wanted to get that out there to 
explain the reduction there. It is reflecting the demand that 
is out in the market right now.
    In the President's request, as you noted, $1 billion is 
available for environmental upgrades to existing fossil fuel 
generation facilities. As comparison, in fiscal year 2012, 
loans made were right about $1 billion for environmental 
upgrades for fossil fuel generation facilities. So the same 
level would be available if this request is responded to as put 
in writing in fiscal year 2014 as what we did last year.
    On the other $3 billion, the request, the language that you 
mentioned reflects the President's focus on renewable energy, 
on expanding the diversity of generation facilities. We have 
seen great strides out there between wind, solar and other 
renewable energies. In fiscal year 2012, we did four renewable 
projects. Three of those are woody biomass renewables that are 
providing electricity--that will provide electricity across the 
country, and we hope to do more with that in the language in 
the President's request.
    Mr. Yoder. What do we do about the other needs that are out 
there with Rural Utilities Service? Is the administration open 
to, or can we work together to find additional flexibility in 
this language so that we could expand the uses, as opposed to 
reducing the potential and the opportunities? I think one of 
the reasons you may see a lower demand is because you are 
shrinking the uses that are available. Is that something that 
the administration is opening to expanding? Why do we have to 
have it so specific? Why couldn't we allow it to be a factor 
but not allow other categories to be supported as well?
    Mr. Padalino. Thank you for that. I think the first way we 
can engage in a collaborative way is to talk with other 
financing entities that are out there. You mentioned the rural 
electric cooperatives, and they own a financing entity that is 
engaged in addition to the Rural Utilities Service. And the 
Rural Utilities Service with the National Rural Utility 
Cooperative Finance Corporation, in many ways, are partners.
    Part of this President's fiscal year 2014 request and 
previous requests have included a guaranteed underwriting 
program that helps entities like the National Rural Utility 
Cooperative Finance Corporation to extend investments that can 
go to other generation facilities, transmission facilities and 
distribution facilities. And I would be happy to come visit 
with you to discuss the language further and see where we can 
come to some common ground.
    Mr. Yoder. I would certainly appreciate that. The purpose 
would be to support these rural communities and assure that 
they have the access needed. We get concerned when we take a 
specific, in this case, it was a very specific environmental 
purpose which may not serve the larger purpose of expanding the 
capacity to these folks that need it the most. So I guess we 
just get concerned when we shrink that capacity, shrink that 
purpose, that we might be limiting our opportunities to help 
the maximum amount of Americans. So I appreciate your efforts 
to work with us on that. Thank you.
    Thank you, Mr. Chairman.

                         RURAL HOUSING PROGRAMS

    Mr. Aderholt. Ms. Trevino, let me talk a little bit more 
about the housing issues. As I had mentioned in my opening 
statement, USDA has proposed to reduce the Single-Family Direct 
Loan Program authorization by $340 million. In your written 
testimony, you state that USDA is the sole Federal Department 
dedicated to rural America. This program helps the most 
vulnerable in rural America achieve the dream of homeownership. 
While it does require greater staff assistance than other 
Federal programs, it remains one of the most successful housing 
programs in the Federal Government's repertoire.
    Furthermore, USDA's argument that very low income 
individuals and families should use the single-family 
guaranteed program defies common sense. So what is the 
rationale behind the reduction by USDA?
    Ms. Trevino. Thank you for the question, Mr. Chairman. We 
certainly understand that this is a critical program for low 
and very low income families in rural America. We believe that 
the budget that has been proposed, the President's budget, is a 
good balance between the population that we serve, and there is 
a balance between how much we have to put out there and the 
investments that we make, the total investments we make for 
rural America.
    We increase rental assistance for what we consider the 
poorest of the poor rural Americans by over $100 million in 
this budget, and at the same time, we were able to offer a 
guaranteed program where we asked for no budget authority and 
are able to deliver $24 billion worth of growth and prosperity 
to rural America through that investment.
    So we believe that it is a balance. While we understand 
that there is a segment of the population that may not be 
eligible for the guaranteed program, we will continue to work 
with our third party providers to increase capacity of these 
rural Americans so that we can try to get them funded through 
the guaranteed program as we move forward.
    We have not zeroed out the direct program. We certainly 
still believe in it. And given budget constraints, we would do 
otherwise. But we believe that what we have offered in this 
proposal is what we can handle at the moment. Understand again 
that this is why it is so critical that our salary and expense 
budget be honored.
    The 502 direct program is one of the most labor intensive 
programs in the field and it takes many, many staff hours. I am 
going to give you a for-instance. Last year we had 99,000 
preapplications in the Single-Family Direct Program. Only about 
7,500 of those were actually approved. That is a lot of work 
being done by ourselves and our third-party providers just to 
get someone in rural America qualified. So it is very labor 
intensive. It is not a choice that we would make given other 
budget considerations.
    Mr. Aderholt. How many direct loans would USDA make under 
this budget request?
    Ms. Trevino. I have the number with me, sir. I would have 
to look it up. I believe we are at about 4,100. It is a 
significant decrease from last year.
    Mr. Aderholt. What was last year?
    Ms. Trevino. Last year we did about 7,500.
    Mr. Aderholt. What is the average annual income of 
borrowers who utilize this direct loan program?
    Ms. Trevino. About $30,000 a year.
    Mr. Aderholt. What about the average income for the 
families that utilize the guaranteed loan program?
    Ms. Trevino. About $40,000 a year. It depends on the size 
of the family.
    Mr. Aderholt. On average?
    Ms. Trevino. Yes.
    Mr. Aderholt. How many very low income borrowers currently 
use this single-family guaranteed loan program?
    Ms. Trevino. I would have to get you that number. I don't 
actually have it broken out.
    [The information follows:]

    Since 2008 to April 2013, RHS has guaranteed 33,400 Single 
Family Housing loans to Very Low-income families. This 
represents 4.9 percent of our guarantees over this period. It 
is noted loans to Very Low-income borrowers average 
significantly less than others, averaging $87,446 compared to 
$127,146 for all loans guaranteed since 2008 to today.

    Mr. Aderholt. How much does a direct loan cost the Federal 
Government over the life of the loan?
    Ms. Trevino. A direct loan is subsidized currently given 
our current interest rates and subsidy costs at about $3,000 
for the life of the loan. That does not take into consideration 
the staff hours and the staff time that it takes to produce 
those loans.
    Mr. Aderholt. How does this compare with USDA's guaranteed 
loan program in other Federal housing programs?
    Ms. Trevino. We currently, in the Rural Housing Service, 
have three programs that require no budget authority and are a 
lot less labor intensive. The Guaranteed Program operates with 
about one-third less employees for a $24 billion program.
    Mr. Aderholt. Mr. Farr.

                     HOUSING PROGRAM COLLABORATION

    Mr. Farr. Ms. Trevino, I am just curious in your response 
to the chairman's question about labor intensive loans; do you 
work with the housing authorities?
    Ms. Trevino. We work with third-party providers that help 
us package loans in the field currently, but the majority of 
the loans come to USDA employees in our field structure. We 
have a field structure of about 400 offices.
    Mr. Farr. But why are you duplicating what is already on 
the ground where everybody has to get their renter assistance 
through HUD, and all those programs for eligibility are already 
being managed through a housing authority? Why don't you use 
their personnel and their clearance so you don't have to have 
all this staffing?
    Ms. Trevino. In rural America not every community that we 
currently serve, especially in severely underserved 
communities, there is no presence of a public housing 
authority. As you know, that is an agreement between local 
government and HUD, and should local government not be able to 
afford that, there would not be a public housing authority in 
that area.
    Mr. Farr. But I am not sure that all your loans are going 
into areas that have no housing authority.
    Ms. Trevino. And I don't have that information with me.
    Mr. Farr. The point is that if Secretary Vilsack's 
discussion about the need to pull together this action team, I 
mean, it is hard enough to get all the Federal agencies, but 
this discussion involves HUD. I am sure that there are 
families. That is going to involve the Department of Education. 
You have to get from the house to the school. That is going to 
involve the Department of Transportation. You want 
communications. That is certainly going to be--and you are 
talking about grid stuff. Even if you can't produce that energy 
in a rural area, you can't get it on the grid. That has to take 
the Department of Energy. You have a lot of other departments 
that have got to be part of this team. And then you don't even 
look at--the point is you are supposed to understand what is 
going on.
    So when you've got to lose staff, a cut-squeeze-and-trim 
attitude here, the Marine Corps says when the going gets tough, 
the tough get going. It seems to me that that is a good ability 
to discover what else is out on the ground, and that team ought 
to be a team of not just Federal agencies, it ought to be a 
team of local and State agencies. There are a lot more teams 
out there.

                HOUSING LOAN PACKAGER CERTIFICATION RULE

    Last year I asked you, because the nonprofits--Mr. Valadao 
asked that question about the need, the nonprofits that you 
could work with. I asked you if you did that last year. You 
indicated no, there was a gap because most of these were only 
housing programs that were established where you had local 
offices. We asked well, why not work with the nonprofits? And 
you said you didn't have the authority, but you were working on 
a new rule and it would soon be adopted. Is that rule in place?
    Mr. O'Brien. If I might, I can answer that very question.
    Mr. Farr. You are now working with nonprofits?
    Mr. O'Brien. The proposed rule on certified loan packagers, 
as we know it, is--has made significant progress in these last 
few months, and, in fact, we do expect that this year, that we 
will be able to propose that rule, and it will provide us, I 
think, the ability----
    Mr. Farr. Last year you said it was being proposed.
    Mr. O'Brien. Yeah.
    Mr. Farr. A year ago.
    Mr. O'Brien. Yes, sir.
    Mr. Farr. And now you are saying it is still being 
proposed?
    Mr. O'Brien. Yes, sir, and I can--I can----
    Mr. Farr. Ms. Trevino, last year, I have it right here what 
she said: Currently we are in the process of creating a 
regulation. I can't tell you the specifics of that regulation. 
I can tell you we are asking for this ability to partner with 
nonprofits who are in those areas where we currently do not 
have a presence and for them to be able to package some of the 
direct loans. And went on to say that this regulation, it is in 
the works right now.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. Moving actually very fast. It is a priority for 
the administration to get that done.
    That is your language.
    Mr. O'Brien. It didn't go as quickly as we had hoped, but 
it has made significant progress.
    Mr. Farr. It is a whole year.
    Mr. O'Brien. Yes, sir. Yes, sir. It has been----
    Mr. Farr. You are losing your credibility here very quickly 
as you--you know, you talk a good talk, but I think you act 
like a bureaucrat.
    So when is it going to be done?
    Mr. O'Brien. The precise date, as you know, as frustrating 
as we all find it, is not completely within----
    Mr. Farr. It is your rule. We don't control that. It is 
your regulation.
    Mr. O'Brien. We are working with the Office Management and 
Budget at this time to accelerate and move that rule forward.
    Mr. Farr. That is what you told us last year. It is in the 
works right now.
    Mr. O'Brien. Right.
    Mr. Farr. Moving actually very fast. It is a priority.
    Mr. O'Brien. Yes, sir.
    Mr. Farr. A year ago.
    Mr. O'Brien. Yes, sir.
    Mr. Farr. Come on. This is ridiculous. You know, Mr. 
Padalino, you know, you have a 3-year backlog. Did you ask for 
money in the budget to make up that 3-year backlog?
    Mr. Padalino. We asked for an increased amount of funding, 
but we did not ask for the full amount, the $3-1/2 billion that 
is in the pipeline right now. What we did was because----
    Mr. Farr. I don't want the excuse. You didn't ask for it.
    I mean, Mr. Chairman, the problem here is that they want to 
go out and help rural America, but when they find out what the 
problems are, you can't help rural America without water, you 
can't help rural America without housing and schools, and they 
are not doing it. They are not helping rural America, they are 
just talking about it.
    Mr. Aderholt. Mr. Nunnelee.

                     HOUSING PROGRAM COLLABORATION

    Mr. Nunnelee. Yes. Thank you, Mr. Chairman.
    I want to continue on the line that we started talking 
about earlier, my early line of questions about trying to 
figure out how to work smarter in this environment, 
specifically as it relates to housing assistance.
    I do know that last summer GAO looked at the issue of 
collaboration and consolidation particularly among Rural 
Housing Service, HUD, FHA and the Department of Veterans 
Affairs. So what is the current status of collaboration between 
HUD and USDA on merging programs in similar markets and 
providing similar products?
    Mr. O'Brien. Thank you, Congressman, and, as you note, that 
GAO report, it recognizes the distinct programs that each of 
the Federal agencies, HUD and VA and USDA in particular, have 
to serve the housing needs of America.
    We are involved in a number of working groups with the 
White House, and particularly the Rental Housing Working Group 
is ensuring that we align our policies as well as to ensure 
that we don't have overlap and duplication.
    As Administrator Trevino alluded to earlier, the footprint 
that USDA serves and the footprint that HUD serves in our field 
structures are quite a bit different, and there is a reason for 
that. There is distinct needs in those two different areas, and 
so we are ensuring that we use Federal resources most 
effectively in each of those, and there is not overlap. We also 
have regular biweekly calls with the Domestic Policy Council 
with those three agencies to make sure that our policies are 
aligned, and, again, so that we are not duplicating efforts.

                    HOUSING REFINANCE PILOT PROGRAM

    Mr. Nunnelee. All right. On a related but different 
project, it is my understanding that you started a Rural 
Housing Finance Initiative, started as a pilot project, and 
then even before that pilot project was concluded, the pilot 
was expanded. But as part of this refinancing initiative, it is 
my understanding that while the participants do have to meet 
income-eligibility requirements and have to be current on their 
mortgage payments, you don't ask for credit reports, you don't 
do home appraisals or inspections. I hear from rural bankers 
all the time saying they are under pressure from regulators in 
their industry on refinancing. How can you refinance loans 
without getting credit reports or appraisals or inspections?
    Mr. O'Brien. I will ask Administrator Trevino to respond.
    Ms. Trevino. Thank you for that question, Congressman 
Nunnelee.
    We actually did a study. We looked at the soundness of our 
current portfolio, and we saw that, in effect, if many of these 
loans were to go to default, it would cost the government much, 
much more than what it would cost us to refinance. So we are 
actually saving many, many more homeowners by going through 
this refinance.
    So, in essence, because there is a government guarantee, 
and understand we are only refinancing our own loans, and 
because we already have a guarantee on that loan, it is already 
ours, so if it fails, it is going to be a lot bigger than what 
we can save it now.
    Mr. Nunnelee. I am going to let my rural bankers take a 
lesson from you. Maybe they can tell Dodd-Frank folks the same 
thing.
    Mr. Chairman, I yield back.
    Mr. Aderholt. Mr. Bishop.

                    BUSINESS PROGRAM CONSOLIDATIONS

    Mr. Bishop. Thank you very much.
    Let me go to the Rural Microentrepreneur Assistance 
Program, which was a major new initiative created by the 2008 
farm bill, which was providing funding through community-based 
organizations to make small loans and technical assistance to 
microentrepreneurs. I have been a big fan of the program, but I 
have always been concerned that it was woefully underfunded.
    But your budget for fiscal year 2014 includes $55 million 
for a new economic development grant program, and it is 
designed to target small and emerging private businesses and 
cooperatives in rural areas with populations of 50,000 or less. 
The program would consolidate a number of the existing grant 
programs, including the Rural Business Enterprise Grants, Rural 
Business Opportunity Grants, Rural Cooperative Development 
Grants, Small Socially Disadvantaged Producer Grants, Rural 
Microenterprise Assistance Grants and Rural Community 
Development Initiative Grants.
    I am very concerned that once you consolidate these small 
loan programs like this, that no matter how well intended, that 
the original targeted participants will get lost in the wash, 
and basically being squeezed out, and those are the very people 
that the programs were designed originally to serve.
    Can I get you to give me your thoughts on that? I know you 
have got to do more with less, but you are putting all these 
programs together, and the ones that were targeted seemingly 
may not be able to survive.
    Mr. O'Brien. Congressman, I appreciate that point.
    The Rural Microentrepreneur Assistance Program certainly 
has a great purpose of serving the smallest of those 
businesses. We have, as you know, proposed to support over $22 
million in program loan level for the RMAP program. The grant 
side of that program, we have proposed to consolidate that with 
five other programs for a number of reasons. One of them is is 
that a number of these grant programs have very similar 
purposes, and they require--and then, you know, an entirely new 
funding opportunity process that requires some significant 
time, particularly for our field staff as well as our national 
office, and that that--and that by bringing these loan or these 
grant programs together, we are able to streamline.
    And as is made clear in the budget language, we have the 
authority to continue to do and to support all of the different 
types of businesses that are currently supported. We would be 
able to craft that program to--with administrative points or 
otherwise, to make sure that some of those particular and 
underserved, in particular businesses and nonprofits, would be 
able to access the program.
    Mr. Bishop. You are going to have fewer people, less 
resources consolidating all those programs, so ultimately fewer 
people are going to be served.
    Mr. O'Brien. Well, actually the budget proposal, when you 
rack up the numbers of all of those grant programs, the budget 
proposal actually would increase the technical assistance 
grants to small and emerging businesses in rural America. So we 
think we actually would be able to serve more people and more 
businesses with less staff because of the streamlined nature of 
the delivery of the program.
    Mr. Bishop. So next year when you come back, you will be 
able to tell us that you have actually served more people, and 
you will be able to show us with some metrics this year versus 
last year and next year.
    Mr. O'Brien. Yes, sir. And thank you for raising the point 
to metrics. Certainly one of the goals of the combined grant 
program is the ability to do some more robust program 
evaluation and metrics for success for those people and 
businesses in rural America.
    Mr. Bishop. Okay. My time is about up, so I will wait for 
the next round for my next question, sir.
    Mr. Aderholt. Mr. Fortenberry.

                             RURAL ECONOMY

    Mr. Fortenberry. Thank you, Mr. Chairman. Good morning.
    Mr. O'Brien, I was looking at your testimony, which I 
didn't have the privilege of hearing earlier since I was a bit 
delayed, but you do quote President Obama as saying, strong 
rural communities are the key to a stronger America. And that 
is a nice statement, but I think we ought to think a little bit 
deeper about that. He didn't say ``are a part of a stronger 
America'' or ``important to a stronger America'' or 
``essential.'' He said ``are the key.''
    Mr. O'Brien. Uh-huh.
    Mr. Fortenberry. I agree. And why? I think we all ought to 
constantly ask ourselves why. Well, of course, it is economic 
wellbeing and the things that we can measure, but I think it 
goes beyond that. I think it goes to the idea of America 
itself, the values that exist in rural communities, the 
attraction, the pastoral nature, the restfulness, the peace, 
the fact that so many of our young people who serve in the 
military come from great swaths of rural America. It is a 
reflection of who we are as a people and, I think, where we 
ought to continue to try to go as a Nation, so I believe it 
most appropriate that you started your commentary with that 
sentence.
    Now, that is the very reason we are all here discussing 
these programs. That is the very reason that all of you made 
some decision at an earlier point in life to go into 
agricultural policy analysis, or perhaps you were attached to a 
farm community, or you saw something attractive in the rural 
way of life, and it is up to us not only to preserve it, but to 
strengthen it. So with that said, thank you for your dedication 
to this.

                            RURAL DEFINITION

    Regarding rural housing programs, there is an issue with 
the Census, as you are aware. I don't know if this came up 
earlier, but we have tried to work on a creative way to fix 
this. Since 1990, basically any community that was eligible for 
rural housing programs has continued to be eligible, but that 
is now expiring, and this would potentially remove a number of 
rural communities who are benefiting from leveraging these 
funds and preserving these ideas--the ideas from participating.
    So what is your plan to deal with that? We have a 
legislative fix, but obviously that is--we have a complicated 
process up here, as you heard, as you figured out. What is your 
plan to address this?
    Mr. O'Brien. Well, I appreciate the question, and, of 
course, I couldn't agree more with your point on the key to 
invest in rural America. And with your support, of course, USDA 
Rural Development has been able to invest over $131 billion in 
the last 4 years in rural America on the housing program and 
the housing issue, one of great interest to those rural 
communities, particularly those that would be affected by the 
possible change in which the decennial census numbers you used.
    We have, of course, by the legislation, the laws that 
provide us the rural definition for that program. As you know 
very well, sir, the final fiscal year 2013 appropriation 
measure extended the current eligibility for the housing 
programs and those in the 1949 Housing Act through the rest of 
this fiscal year.
    We certainly agree, and, in fact, the thousands of 
employees who implement this program are very interested in 
making sure that we have some predictability for the 
stakeholders, for the homeowners, for the banks that deal with 
this. And that is why over the last year plus we have worked 
with a number of offices, I think including yours, on making 
sure however Congress decides to deal with this problem, that 
it makes sense and provides that predictability you need in 
rural America.
    Mr. Fortenberry. Well, we would prefer, as you are 
suggesting, to have a longer-term fix and decrease the 
uncertainty about this. Maybe it is another short-term fix in 
the appropriation process, but again--and then I realize that 
the definition may have to be massaged a little bit. Rural 
communities that are now swallowed up by urban communities 
really don't fit the past definition, but rural communities who 
ironically have actually leveraged these programs and created a 
significant economic multiplier in benefits and now are getting 
on their feet are getting expelled from them potentially----
    Mr. O'Brien. Right.
    Mr. Fortenberry [continuing]. And undermining the very 
purpose in which we have made all this investment.
    And we do have a legislative bill, just for my colleague's 
information, that would fix this, but in case it doesn't go 
through the process, I think we are going to have to be very 
attentive to this dynamic and work on this--
    Mr. O'Brien. Certainly.
    Mr. Fortenberry [continuing]. With diligence.
    Mr. O'Brien. We will work with you within whatever 
authority we have. Thank you.
    Mr. Fortenberry. Thank you.
    Thank you, Mr. Chairman
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair.
    I had a few other topic areas that I think most of my 
colleagues have covered, so I just want to associate myself 
with some of their concerns.
    This last one on the issue of rural definition, as you 
know, a lot of communities in my State are very concerned about 
the final decision on that. There has been a lot of talk about 
the rural housing cuts and some of those concerns, and, again, 
I just basically share everything that everyone has already 
said and have deep concerns about what we are about to do here, 
as well as the wastewater cuts.
    And we have talked about the backlog already, but I have a 
lot of communities that are very dependent on the grant side of 
this. They can't always just make a go of it with a loan.
    So I know you have discussed most of those at length, but I 
just want to emphasize all the concerns in rural States like 
mine. And, you know, there is a lot in the balance here of what 
happens with all these programs, and while I know this is a 
discussion about cuts and more cuts, these are still really 
important areas to all of us. And so when those decision are 
being made, it will have a huge impact on a State like mine.

                               FOOD HUBS

    And so the only other thing I was just going to bring up, I 
want to say in a positive way, I think there is a really great 
report, we were talking about it earlier, but it is called 
``The Role of Food Hubs in Local Food Marketing,'' and I think 
it is fairly new. It is a great guide for people in communities 
that are looking at some of the issues that we talked about 
earlier, about CSAs, and co-ops, and aggregation and 
distribution, and--you know, I am a broken record on this 
topic. But just on this thing, I think it is a great piece of 
work, and I am interested maybe if you want to talk a little 
bit about how you are going to make sure this information is 
out there and available to people, how more communities that 
are facing exactly these same problems can access this 
information and just realize that there is some good work being 
done there, and it could apply in places really all over the 
country. And your report does cover the whole country.
    Mr. O'Brien. Certainly. Thank you for that invitation. The 
recent food hub report that the Rural Business Cooperative 
Service put out that you allude to, you know, does a fantastic 
job of pointing out the opportunities, some of the best 
practices.
    USDA-wide we have identified over 220 food hubs thus far 
through the country. Food hubs are defined as an entity that 
fills that niche in that local and regional food 
infrastructure, and that it might be distribution processing, 
ensuring that consumers can access their demand for local and 
regional food. It certainly builds on the tradition of Rural 
Development, particularly the tradition of the Cooperative 
Business Service, of having rural people work together to 
capture economic opportunity.
    So we are very keen on making sure that we continue to work 
to lift up, share that information. It is something that 
Secretary Vilsack has been talking about consistently recently, 
and in particular on food hubs, because we think after 
spending, you know, a number of years really focusing on what 
can make the biggest difference in moving the needle on local 
and regional food, that--again, that infrastructure--that the 
food hub is a good place to look.
    Not to repeat myself, but, you know, not only within the 
Rural Business Cooperative Service, but the Community 
Facilities Program, that has a very significant program level 
and direct loan this year, we think there is some great 
opportunity to support nonprofits in communities, for-profits 
with the Business and Industry Loan Program to capture those 
opportunities. So we would be happy to work with you and other 
members of the committee to continue to lift up this issue. 
Thank you.
    Ms. Pingree. And just further on that, I recommend this to 
all of my colleagues if there is any of you who don't have your 
own copy at home. I think it is a really nice piece of work.
    And, again, I think there was a time when a lot of these 
things were thought about as sort of a marginalized part of 
farming, food co-ops, CSAs, these aggregation and distribution 
networks. But I know in my State and a lot of New England, you 
know, we were an agricultural center for a long time, and old-
time farmers would say to me, you know, there was a canning 
factory in every community, there was a slaughterhouse in every 
town, there were possibilities for small- to medium-sized 
farmers to really take their goods to market or to process 
them. And now, with increased standards and challenges the 
farmers have to face, but the fact that a lot of family farms 
want to expand what they are doing or young people want to get 
back into farming, this is really a great way for not a lot of 
money for the USDA to be engaged in this process.
    In our State, the food hubs are growing; the distribution 
networks; the community kitchens where people can bring in 
excess produce, process it, and still have it meet the safety 
standards, it is amazing how it is making a difference already. 
And some of those things that start as family farms have 
already become bigger businesses that could build their own 
facility and continue to grow.
    So it is a great role for you to play and involve the 
billions we talk about spending here today. You know, this is 
one of the smallest outputs of money from the USDA that really 
could be enhanced, in my opinion. And anyway, I am just going 
to commend you and say it was great and hope we can continue to 
do more.
    Mr. O'Brien. Thank you.
    Ms. Pingree. Thank you, Mr. Chairman.

                         UNIVERSAL SERVICE FUND

    Mr. Aderholt. Let me shift a little bit to Universal 
Service Fund and telecommunications programs.
    Mr. Padalino, let me direct this to you. Over the past 
couple of years, the Federal Communications Commission has been 
in the process of revamping Universal Service Fund. The 
testimony that was presented to us today here says that 
requests for broadband programs have declined in fiscal year 
2012 and 2013 in part due to these changes. How have the 
changes to the Universal Service Fund affected your borrowers?
    Mr. Padalino. Thank you for that question, Congressman.
    In 2011, the Federal Communications Commission revamped, 
transformed the Universal Service Fund by shifting from an 
emphasis on voice-provided telecommunications services--or 
telecommunications services for voice to telecommunication 
service for broadband. How that has impacted our borrowers is--
I think the best way to phrase it is it has created uncertainty 
for their business model. And where we are seeing the impacts 
and the portfolio is on the loan demand side right now, where 
in fiscal year 2012, out of the funds made available by this 
Congress, we saw a demand in loan applications of 37 percent of 
the funds being applied for, and of the loans that we found 
feasible and were able to approve through fiscal year 2012, 11 
percent of those funds were, you know, made.
    So, that is, you know, one metric that we can gauge some of 
the impacts. And what we hear anecdotally from the borrowers 
and from the rural telecommunications community is that the 
uncertainty created is making it difficult for them to project 
out in a 5-year timeframe what their business would look like.
    The Secretary and I met with the chairman earlier this year 
and laid out some of these concerns, and followed that up with 
a letter outlining some of the areas we thought we could work 
together with the Federal Communications Commission to create 
more certainty and perhaps encourage them to establish--or they 
established the Connect America Fund for rural telecoms; 
however, they have not implemented it yet, and we really 
encouraged them to do so.
    Mr. Bishop. Mr. Chairman, would you--may I?
    Mr. Aderholt. I will yield.
    Mr. Bishop. Would you yield? Thank you.
    It is my understanding that the Universal Service Fund 
would provide some money for these utilities that are providing 
the service in rural areas, which allows them to service the 
loans that they make from--through RUS. And because the changes 
with the FCC will reduce, are proposing to reduce, the 
reimbursements that they get from the Universal Service Fund, 
it would disadvantage them to the point that they cannot now 
accurately predict their ability to service those loans, so, 
therefore, they are not taking advantage of the funds that we 
are making available to you to lend to them. Is that pretty 
much what the situation is?
    Mr. Padalino. That is about right. The Rural Utilities 
Service provides upfront capital costs to make that initial 
investment in the infrastructure, and then the FCC follows that 
up with ongoing cost support provided by the Universal Service 
Fund. So you have the initial investment, and then you have to 
service those facilities over the years, send trucks out, do 
all the kinds of things it takes to run a utility, and that is 
the ongoing cost support provided by the Universal Service 
Fund.
    Many of the rural telecommunications providers rely on the 
High Cost Loop support. You know, there are many different 
categories of the Universal Service Fund, and that is what they 
have been relying on since the 1996 amendments to the 
Telecommunications Act. And with the shift from voice to 
broadband in the transformation order, there has been proposed 
reductions, and those reductions have been put in place, and 
they are ongoing, and they are impacting the revenues, the 
revenues that rural telecommunications providers receive for 
that ongoing cost support.
    Mr. Bishop. But doesn't the telephone service that is being 
deemphasized, isn't that a basic necessity for the broadband, 
because many of the broadband services are carried through the 
phone services?
    Mr. Padalino. Yes. You know, the technology is available. 
You can use copper to run DSL, which is broadband IP-based 
technology. A lot of providers are shifting to fiber, to 
microwaves, to wireless, to a whole variety of technological 
solutions, but it is all moving to an IP-based 
telecommunications service where you can do voice, data and 
video.
    Mr. Bishop. It puts them at a real disadvantage. And I 
understand from a meeting I had yesterday that you guys are 
basically on the same page with the rural utility providers 
trying to get the FCC to modify the position that they are 
taking with regard to this Universal Service Fund.
    Mr. Padalino. We have been working closely with them. You 
know, as I mentioned in the letter, we laid out about six 
different points. One of those was to really implement the 
Connect America Fund. Last summer the Federal Communications 
Commission implemented the Connect America Fund for price cap 
carriers, and on a geography basis, the price cap carrier 
service territory is somewhere about 70 percent of rural 
America, of America at large, and that is, you know, mostly in 
rural areas.
    Many of our borrowers are rate-of-return carriers, and they 
make up about 20 to 30 percent of those carriers. And what we 
are encouraging the FCC to do is to implement, establish the 
Connect America Fund for all carriers, price cap, midsize and 
rate-of-return carriers, so all can end up, you know, putting 
forth a case and receiving some ongoing cost support to make 
sure we are serving those folks out in rural America.
    Mr. Bishop. Would you submit that letter that you sent to 
the FCC to us, to this subcommittee for the record, please?
    Mr. Padalino. Gladly.
    Mr. Bishop. Thank you.
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                          BROADBAND PORTFOLIO

    Mr. Aderholt. That was one thing we were going to ask 
about, the letter, so we would like that.
    These changes that you are talking about, what effect do 
they have on your portfolio?
    Mr. Padalino. We have been monitoring the portfolio 
closely. So far our delinquency rate is maintaining basically 
what it has been over the past couple of years. It is just over 
4 percent in overall telecommunications portfolio, which right 
now is at $4.6 billion. So on the delinquency side, on the 
servicing side, so far we haven't seen an impact.
    Where we see on an individual basis, there is--some of our 
borrowers have applied for a waiver with the Federal 
Communications Commission, and in those waiver requests they 
claim that they may end up defaulting on the rural utilities 
loan. And we are working closely with the borrowers, with the 
Federal Communications Commission to make sure that they 
understand the financial strength of these companies and can 
make decisions accordingly. We have seen some waivers granted, 
some partial waivers, and we work day to day with those, with 
the Federal Communication Commission on those.
    Mr. Aderholt. Mr. Farr.

                HOUSING LOAN PACKAGER CERTIFICATION RULE

    Mr. Farr. Thank you, Mr. Chairman.
    You know, Brazil, I think, is the most successful country 
in the world in moving people out of poverty, and 3 million 
people are moved out of poverty into middle class. I sometimes 
cynically think we ought to just contract with Brazil to run 
our poverty programs, but then that would be outsourcing, and 
we would be criticized for that, so we are back to where we 
started here.
    Ms. Trevino, again quoting your comments last year: These 
regulations are pretty far along, and I can tell you it is 
moving fast. My goal is to get it done before the end of the 
year.
    What is your goal this year?
    Ms. Trevino. We are going to continue to work with the 
Office of Management and Budget. I can tell you that we are 
closer than we were last year, obviously, and----
    Mr. Farr. You were pretty far along last year.
    Ms. Trevino. Well, we were. We were. I can't tell you why 
it was--you know, why it slowed down or why the progress didn't 
happen the way we wanted it to.
    Mr. Farr. Why? Is it top secret?
    Ms. Trevino. I believe it is just because there is a lot of 
conflict in priorities. It is a big department, and I think we 
just have many, many other priorities, and while this is a 
priority for the administration, there are others. And so I 
don't propose to believe that I am the only priority at USDA.
    Mr. Farr. But you are going to save money in doing this.
    Ms. Trevino. Yes, we are. Yes, we are.
    But I will tell you also that we haven't sat on our hands 
the whole time. We have many informal networks already out 
there. We have got third-party providers who are providing the 
service already. The only reason that we need a regulation is 
so that we can formalize the process, and so we can offer 
consistency across the country.
    We are already doing what the regulation is going to allow 
us to do. We are already doing it, but we are doing it in an 
informal process. I can't regulate what a third-party provider 
charges a client, so this is going to allow me to regulate that 
so that we don't have one third-party provider out there 
charging more. And so there are many aspects of the regulations 
that are just going to allow me to formalize the process, but 
there are many providers out there that are already helping.
    Mr. Farr. So Mr. Valadao's question and my question about 
these nonprofits in California that would like to participate 
and be a partner with you, they can do so regardless of the 
regulation.
    Ms. Trevino. Yes, sir.
    Mr. Farr. And we can let them know.
    Ms. Trevino. They just need to talk to the State director, 
and it is a very informal agreement with the State director in 
each State, and the only thing that the regulation is going to 
do is formalize it and provide consistency to every State 
director.

                 UNDERSERVED COMMUNITIES IN CALIFORNIA

    Mr. Farr. Mr. O'Brien, you have targeted these census 
tracks, you told me, that show where the most underserved 
communities are, and are any of them in California?
    Mr. O'Brien. Yes. Yes, I don't have the map with me right 
now, but there are some census tracks--
    Mr. Farr. Do you remember any of the names?
    Mr. O'Brien. I don't but they are certainly in the Valley, 
you know, in San Joaquin Valley. I am not sure if in northern 
California, in the timber country. I would be very happy to 
provide you that map.
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                 UNDERSERVED COMMUNITIES IN CALIFORNIA

    Mr. Farr. Those counties would have a housing authority so 
they could be working with you in partnership because they have 
now--you know, if you want rental assistance or first home 
buyers, you have to go down and register with the housing 
authority.
    Mr. O'Brien. Right.
    Mr. Farr. Because they are the ones that manage the HUD 
loans.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. So they have to prequalify and everything. In 
fact, in our inclusionary zoning requirements, when a private 
developer builds, 10 percent, 20 percent, 30 percent of the 
housing have to be of any unit in that unit, not somewhere 
else, has to be rented if it is a rental unit to low/moderate 
income, same thing they are doing in southeast Washington here.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. So those people all have to qualify as low income 
in order to take advantage of it. I mean, I think you have got 
people doing your job, doing the job you needed done in order 
to qualify for your loans and other programs.
    Mr. O'Brien. We will certainly follow up with our----

                     RURAL DEVELOPMENT CORPORATION

    Mr. Farr. What would also be interesting is how many of 
those counties have Rural Development corporations. Do you work 
with the Rural Development corporations at all?
    Mr. O'Brien. We do. I mean, we work with many different 
types of intermediaries and----
    Mr. Farr. Well, those are the ones that are run by FSA, 
your sister agency in the Department.
    Mr. O'Brien. The Rural Development corporations run by FSA.
    Mr. Farr. Well, they are FSAs, service--the farm service 
agencies, and they are a secondary lender, loan guarantee 
lender. They can loan between $5,000 to $5 million in our area.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. And they have been extremely successful, more 
successful than banks.
    Mr. O'Brien. We work through intermediary relending program 
as well as--there is two other programs that have a relending 
that we work with different intermediaries, and I believe we 
work with Rural Development corporations where we provide them 
the upfront money and then they can create a revolving loan, 
typically small loan to the farm.
    Mr. Farr. Usually they do. I mean, ours in our county does 
the farm loan program, it does the SBA, 504 program, it does 
the SBA micro loan program, does the State Guaranty Loan 
program, it does the county revolving loan program.
    Mr. O'Brien. Yeah.
    Mr. Farr. These are for people who have business ideas who 
have been turned down by conventional lenders.
    Mr. O'Brien. Right.
    Mr. Farr. And then can come in and make their appeal to the 
Rural Development Corporation.
    Mr. O'Brien. Right.
    Mr. Farr. And----
    Mr. O'Brien. And that is--and I am not familiar with that 
particular corporation, but that is a somewhat typical 
intermediary that in particular the Rural Business Cooperative 
Service does work with, one that accesses different technical 
assistance in relending programs, so we certainly work with 
hundreds of entities like that.

                      RURAL PROGRAMS COLLABORATION

    Mr. Farr. Well, I know my time is up, but I would really 
hope that you could get in your implementation in these poverty 
areas that you have identified across the country.
    Mr. O'Brien. Yeah.
    Mr. Farr. That you really get a list of what is going on on 
the ground, what is already there done by nonprofits, done by 
State, done by counties.
    Mr. O'Brien. Yeah.
    Mr. Farr. And use the carrot-stick approach. I mean, you 
are going to--you know, don't come here and just complain, oh, 
we have had our--with sequestration, we have cutbacks, we have 
labor shortages. That isn't going to sell it.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. The American public doesn't believe that--there 
are other ways around those problems, and certainly 
consolidation, collaboration is going to be our answer out of 
this mess.
    Mr. O'Brien. Absolutely.
    Mr. Farr. And my experience in Congress is that everybody 
is stuck in operating their silos, and I am here as a silo 
buster.
    Mr. O'Brien. Thank you. And if I might, just very briefly. 
That certainly--that attitude towards breaking down silos is 
one that Secretary Vilsack has brought not only to the 
Department, but to the White House with the White House Rural 
Council as he serves as chair.
    You know, in practice, in areas of poverty, we have the 
Strike Force Initiative where we have engaged, you know, all of 
the USDA family but primarily the field-based agencies of Rural 
Development, Farm Service Agency, and Natural Resources 
Conservation Service to work--to coordinate their work 
intensively with the local leaders, with the local community. 
And one of the things that we do up front is do basically an 
asset map of that capacity. Some of those places have great 
community--you know, community-based organizations, some of 
them don't, so each of those areas take a different type of 
strategy once you understand the assets that are there. Thank 
you.
    Mr. Aderholt. Mr. Fortenberry.

                  RURAL BUSINESS PROGRAM CONSOLIDATION

    Mr. Fortenberry. Well, as we all know, the strength of 
agriculture in rural communities is essentially tied to 
production agriculture, and that is a source of a great and 
economic wellbeing for America; but interestingly, there are 
new entrepreneurial, returning to traditional means of 
production that are creating a whole host of new opportunities 
for younger farmers and others who are never going to be able 
to have vast amounts of land, but nonetheless, want to grow 
food with their own two hands and create something beneficial 
to the community, reconnecting the farm to the family and the 
urban to the rural, and in the process, strengthening local 
economic ties.
    So, in that regard, Ms. Pingree had mentioned this and I 
briefly looked through it as well, and it is well done. I think 
a lot of people do find this to be exciting and a new 
entrepreneurial movement in agriculture, augmenting the full ag 
family, as I like to call it. It is not in competition with 
anything else. It is all part of the family.
    In that regard, back to Mr. Bishop's inquiry where he 
questioned the consolidation of these various grant and loan 
programs, the Rural Business Enterprise Grant, the Rural 
Microenterprise Systems Grant, the Rural Business Opportunity 
Grant, Cooperative Grant, and on and on.
    Mr. O'Brien. Uh-huh.
    Mr. Fortenberry. Now, all of those programs were, at some 
point, started to address a particular need and leverage funds 
for the expansion of opportunity. Now we are seeing some fruits 
of that.
    Mr. O'Brien. Uh-huh.
    Mr. Fortenberry. Consolidation of them, do you lose the 
original spirit whereby you were targeting a particular area of 
need with a specialized program, I would like to hear you 
address that again. Obviously, look, I understand, you are 
trying to be creative and leverage the resources that you have, 
and if you are duplicating loan officers or grant review 
officials and that work can be consolidated, fine, but the 
original spirit of some of these things, again, is consistent 
with what we are finally seeing in terms of the development of 
new agricultural options as they are manifesting themselves in 
co-ops direct to--from farm-to-family marketing and all types 
of other new ventures that are, again, exciting, to not only 
rural communities but to urban communities.
    Mr. O'Brien. Congressman, thank you for that question. 
The--just a couple of quick responses. One, certainly we agree 
that the opportunity--we are in the business to support 
entrepreneurs and businesses in rural America. There is real 
opportunity in some of the smaller local regional food systems, 
and we have been about the business for a number of years now 
to focus our programs to make sure that folks can realize that 
opportunity.
    On the Consolidated Grant Program, in terms of, the first 
thing I would say is that--to the ranking member's point of 
silos. We have tried to be as flexible as possible to respond 
to, and to support the local needs and the local strategies. We 
think that having a consolidated grant program that has the 
authority to do all of the--and support the projects that the 
various six grant programs can do right now, provides us more 
flexibility to respond to your constituents, to your business 
needs in a more flexible manner, first of all.
    Secondly, I do want to make a quick distinction that the--
that in kind of the food-based businesses, those that are--in 
particular, those that are owned by farmers, we do have a grant 
program, it is the value-added producer program that 
Congresswoman Pingree mentioned before, that is not part of the 
consolidated grant program. So the--what the Rural Business and 
Cooperative Grant Program would be able to do is support those 
small businesses, those small entrepreneurs that don't 
necessarily raise food, but are the critical link to making 
sure that, you know, that farmers, small businesses and 
consumers can take advantage of the opportunities in the local 
regional food system.

                       OLD AND NEW OPPORTUNITIES

    Mr. Fortenberry. I think the last point I would like to 
make is what I have asked other administrators from the USDA, 
including the Secretary, we have all got to think creatively 
and budgets should normally, frankly, be under tension because 
it forces all of us in government to, okay, re-examine what was 
old and met a prior need, but think about how we creatively 
meet emerging new opportunities.
    So, what is old that you are trying to let go of? What is 
new that you are trying to target?
    Mr. O'Brien. I will mention only two, and I would be happy 
to have a longer conversation with you and your staff, but in 
the interest of time. Of course, the consolidated grant program 
is new. It is new in that it streamlines, you know, those 
different authorities into one. It will make it much more 
efficient and effective for us to deliver that program, 
provides us flexibility to respond to local needs.
    What is old is a number of, you know, a number of the 
programs identified there have very small, and for years, have 
had very, very small appropriations lines. So we think it is 
wise to consolidate that into one.
    Another one I will mention is in our housing program that 
we seek the authority for direct endorsement for the guaranteed 
loan program. That is a new--seems like a technical type of 
approach, but what that would allow essentially is it would 
provide an objective underwriting standard where we would be 
able to utilize technology to, if you will, do kind of a first 
cut for those guaranteed loan applications that we receive from 
banks. It would be much more efficient with analysis and some 
of our research.
    We think that it will actually result in a--in a better 
portfolio. It is important to note that even with direct 
endorsement with that more automated system, we still have the 
ability of, if the loan deems, that we look at it on a one-to-
one basis. But all in all, we think we will have some 
significant human resource savings and end up with a stronger 
portfolio and continue to serve rural America. Thank you.
    Mr. Fortenberry. Thank you. Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Bishop.

                        STRIKE FORCE INITIATIVE

    Mr. Bishop. Thank you very much. You referenced a strike 
force which was an initiative introduced in 2010, and it is 
just one of the tools that USDA uses to combat poverty by 
connecting local and State governments and community 
organizations on projects that promote economic development and 
job creation. Several of the counties in my district were 
targeted to participate in the Strike Force Initiative, and it 
has been very well received and viewed as a refreshing creative 
approach by the Department to reach out to communities that in 
the past have sort of been left out and haven't fully benefited 
from the Department's rural programs and the resources.
    In the past few weeks, the Department announced that 10 new 
States would be added to the program. Can you highlight for us 
a few of the results so far, and could you give us some metrics 
of how many jobs were created through the program? Did you 
reach the goal that you set? How much did the program cost? How 
much will it cost with the addition of the 10 new States? And 
tell us whether or not by adding these 10 additional States, 
you will have sufficient resources in the current fiscal year 
to carry out your plans, and do you see--where do you see the 
strike force going for the next 2 or 3 years?
    Mr. O'Brien. That is an excellent question, Congressman. 
And I think it is important to note that what strike force--
what strike force does is it doesn't necessarily, and you know, 
in this time of fiscal constraint, add staff. It ensures that 
the staff that we already have deployed, which are a 
significant number of staff, particularly when you add the 
three field agencies together, that they are acting in a way 
that gets the best results for people in rural America. And we 
believe that it is more of a community economic development 
approach, to make sure that the staff have the tools, and for 
many of them who really want to do this type of work as opposed 
to do--as being solely a loan processor, that they have that 
ability, and we support them in working with local community 
leaders, working with particularly underserved entities, and 
underserved businesses to create that opportunity.
    So, to your first question, how much will it cost? In terms 
of the staffing cost, actually there is not increased staff 
cost. It is just a better way of serving rural America.
    So as we--in terms of the, you know, specific metrics on 
jobs created, I would be happy to follow up with you or your 
staff. I don't have those numbers right now. As you mentioned, 
it has been in a pilot stage for the last year and a half or 
so, and some of those numbers do take some time to rack up.
    We have had some great successes throughout the country 
where farmers--where FSA, Rural Development, NRCS have come 
together to work with a group of farmers so that they can put 
together a conservation need such as hoop houses so that they 
can extend the growing season of their fruits and vegetables. 
And then they can work with Rural Development so we can provide 
them perhaps a value-added producer grant, to make sure that 
they have the business plan so that they know where their 
market is and how they can evolve to meet that market demand as 
well as the Farm Service Agency. And they have had a 
particularly, I think, successful rollout in the last few 
months on micro loans, which there has been an emphasis in the 
Strike Force States to make sure that those small farmers know 
about that new program and it has been----
    Mr. Bishop. The additional 10 States, so is not going to 
require you to have any additional personnel? It is not going 
to increase your expenses at all?
    Mr. O'Brien. Well, I can--I should--I will keep my comments 
to just Rural Development as that is the area which I work 
with, but I know within Rural Development, you know, what we 
have done is essentially, we have reprioritized some of the--
some of the work of those staff in those States to make sure 
that they are utilizing at least some of their time to do that 
capacity building, to do the community and economic 
development, to ensure that you get the best results, the most 
sustainable and viable locally led plans, you know, into the 
future.
    Mr. Bishop. Don't you have to send somebody from Washington 
to these areas to actually stir up those programs?
    Mr. O'Brien. Well, Secretary Vilsack, you know, has 
certainly visited a number of these places, but he is also--you 
know, we----
    Mr. Bishop. Is there some strike force personnel that are 
specifically hired to do strike force?
    Mr. O'Brien. There is--you know, we have a coordinator at 
the national office, but the way that, at least we work with it 
in Rural Development, is that--is that the current workforce, 
it is included as part of their duties. It is part of the way 
of doing business when you are in an area of underserved. And 
so, you know, we haven't, at least in Rural Development, added 
particular staff, but when you----
    Mr. Bishop. So the coordinator is not a part of your staff, 
is not a part of Rural Development. That is somebody from the 
Secretary's office?
    Mr. O'Brien. Yeah. To coordinate it, yes, that is correct. 
It is rotated from place to place in the mission area, but 
yeah, it is basically led, you know, it is a department.
    Mr. Bishop. And you will provide us with the jobs, the 
number of jobs that are created, the success stories, if you 
will.
    Mr. O'Brien. Yes, sir.
    [The information follows:]

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                        STRIKE FORCE INITIATIVE

    Mr. Bishop. We need some way to measure the effectiveness 
of it.
    Mr. O'Brien. Absolutely. The metrics, learning, and we have 
learned. We piloted, you know, in the last 2 years and we have 
actually learned some significant lessons from that first group 
of three States on how to bring this program, make sure that it 
is effective, that the workforce can pick up on it and get the 
best results.
    Mr. Bishop. Thank you.
    Mr. O'Brien. Thank you.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. I will pass, Mr. Chair.

                  RURAL BUSINESS PROGRAM CONSOLIDATION

    Mr. Aderholt. Ms. Salerno, I am going to go ahead and 
address this to you about the rural business and cooperative 
grant program proposal. USDA has proposed a new $55 million 
Rural Business and Cooperative Grant Program, which would 
combine the funding and authorities of seven existing programs. 
While everyone on the Subcommittee appreciates the efficiency 
and effectiveness of USDA of trying to do--combine these 
programs, it is sweeping changes that would be put forth, and 
without a lot of justification.
    The question I would propose to you, has USDA proposed this 
change to be considered as part of the 2013 farm bill.
    Ms. Salerno. I am sorry. I am going to have to ask my 
colleague, Mr. O'Brien to answer that.
    Mr. O'Brien. And we have worked in--and Acting 
Administrator Salerno hasn't had the benefit of working in last 
year's, the farm bill process. We worked with the authorizing 
Committees on both the House and the Senate on providing 
technical assistance and how we can streamline our programs. 
The Senate--the version in the Senate that passed included 
consolidation of the biggest of these grant programs discussed, 
which, of course, is the Rural Business Enteprise Grant 
Program, along with the Rural Business Opportunity Grant 
Program, so we have seen that in some of the legislation, and 
we appreciate and stand ready to work with authorizing 
Committees and the Congress as a whole on how we can streamline 
our programs.
    Mr. Aderholt. Has there been any discussion with the House 
side on the Ag Committee?
    Mr. O'Brien. We did, yeah. Early on we talked about ways 
and are always available to the authorizing committee to answer 
questions and talk through ideas.
    Mr. Aderholt. Is it the intention of Rural Development to 
run this new $55 million program under a notice of funding 
availability instead of going through a rulemaking process?
    Mr. O'Brien. The intention would be for fiscal year 2014, 
if provided the authority, that we would immediately start a 
rulemaking process, but to ensure that we have the program 
delivered in 2014 that we would do it by NOFA in that first 
year.
    Mr. Aderholt. Other than administrative efficiency, what is 
the need for a consolidated program?
    Mr. O'Brien. Well, I think that--and I don't want to repeat 
myself, but in the interaction I had with Congressman 
Fortenberry, the ability to best respond to those local needs, 
we think it is important to be flexible to best support a 
local, you know, best case scenario as a local collaboration 
that has done, you know, asset mapping and research what the 
most viable plan is for their place, and instead of having five 
siloed programs with particular authorities, we would be able 
to support those types of plans in a more effective way.
    Mr. Aderholt. Well, we would--we appreciate the proposals 
to increase effectiveness, police programs and to be more 
efficient in the administrative process, but a change of really 
of this magnitude needs to be considered by the authorizing 
Committee, so if you would keep us informed as that proposal is 
refined.
    Mr. O'Brien. Thank you.
    Mr. Aderholt. Mr. Farr.

                           BUDGET REDUCTIONS

    Mr. Farr. Thank you, Mr. Chairman.
    Secretary Vilsack was very impressive about the ability to 
find administrative savings in the Department, and essentially 
a model for all the Federal agencies. But if you look at your 
budget, since 2010, the reductions in the budget authority for 
the Rural Housing Service, the Rural Business Service, and the 
Rural water and waste loans and grants total at least $750 
million. During that same period of time, USDA's discretionary 
budget has dropped by about $4 billion.
    In short, Rural Development is more in the disproportionate 
share of the budget cuts. From fiscal year 2014--I mean, the 
fiscal year 2014 budget includes substantial savings in the 
budget from changes in policy that result in negative subsidy 
rates for certain loan programs. My question is, is there some 
reason that these savings were not put back into Rural 
Development programs that have been hit so hard by these other 
cuts? The question is why aren't we putting our money where our 
mouth is?
    Mr. O'Brien. Well, the--thank you for that question. The 
fiscal year 2014 budget, we think, is, given the fiscal 
situation that we find ourselves in, is the right mix. And at 
the risk of repeating some of my testimony, we do look at 
supporting what we think is the most vulnerable. And those who 
live in those multi-family units that receive rental 
assistance, we increase significantly by over $100 million, 
that support for those folks. We do look to those because of 
the historically low interest rates as well as the excellent 
performance of a number of our programs, we have a zero or 
negative subsidy rate. We think that increasing the program 
level in those programs at this time is appropriate and the 
best way to do it.
    There are some very difficult choices that needed to be 
made, and that I know that this committee faces in terms of 
finding some ultimate savings from that budget line, and you 
know, this is the result.
    Mr. Farr. The question is, are you with this strategy the 
chair just asked about----
    Mr. O'Brien. Uh-huh.
    Mr. Farr [continuing]. In the consolidation.
    Mr. O'Brien. Uh-huh.
    Mr. Farr. Do we really have enough resources to do this war 
on poverty in rural America?
    Mr. O'Brien. That is an excellent question, Congressman. I 
know that Rural Development has--you know, is one very 
significant piece of the Federal response to concentrated 
poverty in rural America. We have tried----
    Mr. Farr. To practice one, aren't you coordinating all of 
the other Federal agencies through the task force.
    Mr. O'Brien. No, we are one, and by statute, we are the 
leader.
    Mr. Farr. You are the leader.
    Mr. O'Brien. Congress has provided us some leadership role.
    Mr. Farr. And you are going to need all these resources to 
respond to infrastructure needs to bring businesses out to 
rural areas, to creating jobs, to hooking up these new power-
producing entities to the grid, do all these things, you are 
going to need every agency there.
    Mr. O'Brien. That is absolutely right.
    Mr. Farr. Has the task force examined whether they have 
enough budget resources to complete mission, which I think is 
an appropriate one?
    Mr. O'Brien. Well, you know, some of the resources in 
particular are trying to--to ensure that we have a staffing 
level that is sufficient to deliver those programs, and in 
particular, in areas of concentrated poverty. We have a 
significant level of staffing that we have proposed and that we 
request that is key. On some of the other programs, I think, 
you know, that----

                      RURAL PROGRAMS COLLABORATION

    Mr. Farr. But in that staffing, can't you look at maybe 
including the work that is already being done on the ground. I 
mean, the USDA contracts out through inspections with State 
license folks. You do these cooperative agreements all the time 
with State and local government in sort of specialty areas.
    Mr. O'Brien. Right.
    Mr. Farr. It seems to me that you can also do it as your 
manpower is being cut. Why can't you look around to see others 
who aren't being cut because it is not necessarily every local 
government and Federal--I mean, California has certainly been 
through all this that we are starting here. We are starting 
this roadmap to, you know, for fiscal austerity and they did it 
in California for a number of years, and we have had State 
offices close once a month on Fridays and people don't go get 
their DMV license, so they know. They incorporate it in, and we 
can learn a lot of lessons.
    Mr. O'Brien. Yes.
    Mr. Farr. We can also start working more with folks.
    Mr. O'Brien. I agree. We agree. They--I think the--
historically, Rural Development, you know, now we have just 
over 400 offices. Two years ago we closed 43. If you look at 
the trajectory of those offices, we actually, 10, 15 years ago, 
we had well over 1,000 offices. The story of our mission area 
and our agency has been one of--at one time, we were providing 
direct capacity with a very significant footprint. We continue 
to do that. 400 offices is very significant, more significant 
than any other Federal entity in the rural space for community 
and economic development, but I couldn't agree with you more 
that we need to continue to look for opportunities to work with 
intermediaries where there are intermediaries with good 
capacity.
    I think one of the challenges will be that in some of the 
poorest places, the intermediaries, you know, either don't 
exist or don't have the capacity to move the needle. For that, 
our challenge is to make sure to, you know, to give them that 
capacity and provide them----
    Mr. Farr. That capacity building is essential.
    Mr. O'Brien. Yes, it is.
    Mr. Farr. I mean, you got to work yourself out of a job.
    Mr. O'Brien. Absolutely. Yeah.
    Mr. Farr. And the only way you are going to do that is by 
building that capacity in those communities.
    Mr. O'Brien. That is absolutely right, and----
    Mr. Farr. And they will all be at different levels, but you 
will be able to, with your smart team, to figure out which 
level they are at and what they are going to need.
    Mr. O'Brien. Right.
    Mr. Farr. And we have enough people in the Federal family 
and certainly State and local families to if you all, you know, 
zero in on it.
    Mr. O'Brien. Right.
    Mr. Farr. Look at how much we zeroed in on the Boston 
incident and how quickly we were able to get some solutions and 
learn capacities. If nothing else, repeated capacities that are 
very, very professional and very good. I just think we are just 
kind of slow at trying to use those same systems in eliminating 
the root causes of poverty.
    Mr. O'Brien. We have accelerated in the last 2 years and we 
plan to work more and more with intermediaries, the 
Consolidated Grant Program, work in the housing, as well as 
working with the rural electric cooperatives.
    Mr. Farr. I will just finish with this statement because 
time is up. But it just seems to me with the way the 
departments have been cut, that your priority is to attack, for 
lack of a better word, the war on poverty in rural America. 
Congratulations. But then the people that you head up, your 
office, to head up that agency, to head up that program, takes 
a cut in the budget. It is just you are trying to do more with 
less. And I applaud you if you can get it done, but I would be 
interested in following up. So we are going to be watching you 
closely.
    Mr. Aderholt. Mr. Fortenberry.

                  RURAL BUSINESS PROGRAM CONSOLIDATION

    Mr. Fortenberry. I stepped out of the room a moment ago and 
one of my county officials was here. She said, what are you 
doing? I said, I am in a meeting with the top people at the 
USDA. She said, what did you ask them? I said, well, about the 
rural housing census issue problem and the consolidation of the 
grant programs. We talked a little bit more about that.
    Now, she is coming from one of the areas that is highly 
concentrated in production of agriculture, one of the most 
intense areas in the country. But when we talked about, again, 
the variety of grant programs that have been targeted for this 
expansion, some of which have been targeted for the expansion 
of the local foods movements and new forms of production, she 
said, oh, that is just very exciting, what is happening in that 
whole field. So she says, be very careful of formula-driven 
grant processes because, again, going back to the spirit of the 
original question, all of these initiatives, they were 
somebody's idea because they saw a need and it was trying to 
target narrowly in order to expand to the core mission of 
strong economic development and good outcomes for all people. 
So that was her advice.
    So let's just talk one more moment about how you envision 
this consolidation to potentially work. What happens sometimes 
in formula-driven grant processes is a lot of people are left 
out, and it ends up getting concentrated in the hands of fewer 
people who know the system or have the strength of 
relationships here and elsewhere and have the mechanism by 
which to get that done. A lot of people don't.
    Mr. O'Brien. Right. So the implementation of the Rural 
Business Cooperative Grant Program would likely, the largest 
component of those six grant programs right now is the Rural 
Business Entrepreneur Grant Program. That is a program, I think 
the only one of those six, I can be corrected, the 
administrator can correct me, that actually has a State 
allocation, because it is actually big enough to do a State 
allocation. The rest of them, it is a national competition. 
Generally not all States are able to participate because there 
is just not enough awards to get to all the States. Or we do 
find some of our grant programs, there is a particular State 
that kind of really figures out the program. There might be an 
intermediary or land grant system that positions itself to help 
firms in that State, and we find that that State is very, very 
competitive, or in other words, gets a lot.
    So this grant program, I think, we would use the State 
allocation, which generally the way that works is we look at a 
formula that looks at three variables; the rural population, 
the poverty rate, as well as unemployment. And the State 
receives their allocation. There is a point in the time in the 
fiscal year, usually in July, where if they have not been able 
to allocate that money, then we sweep it back, or, excuse me, 
if they have not been able to award that money, we sweep it 
back to make sure that money is used that year so it can go 
out.
    The way we would make sure that small disadvantaged firms 
and nonprofits would be able to participate is likely through 
utilization of priority points. For instance, an administrator 
has priority points in a number of these grant programs, and we 
would be able to build that in the funding opportunity in the 
NOFA so that everybody knew so that it was transparent, so that 
we are working to make sure those types of firms would be able 
to receive some of the awards.
    Mr. Fortenberry. Thank you.
    Mr. Aderholt. Ms. Pingree.
    Ms. Pingree. Nothing further.
    Mr. Aderholt. At this time, we will stand adjourned. We 
appreciate each of you being here and we look forward to 
following up with some of these issues that were brought 
forward today. Thank you very much.

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                                         Wednesday, April 24, 2013.

                       DEPARTMENT OF AGRICULTURE

                               WITNESSES

ANN MILLS, DEPUTY UNDER SECRETARY, NATURAL RESOURCES AND ENVIRONMENT, 
    DEPARTMENT OF AGRICULTURE
JASON WELLER, ACTING CHIEF, NATURAL RESOURCES CONSERVATION SERVICE, 
    DEPARTMENT OF AGRICULTURE
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Aderholt. The hearing will come to order. I understand 
Mr. Farr will be here just shortly, but we will go ahead and 
get started with the testimony.
    I would like to welcome Ms. Ann Mills, Deputy Under 
Secretary for National Resources and Environment, Jason Weller, 
Acting Chief of the Natural Resources Conservation Service, and 
Mr. Mike Young, the USDA's Budget Director, to the Ag Approps 
Subcommittee this afternoon.

                           Opening Statement

    We are convening this afternoon to review the NRCS' fiscal 
year 2014 budget request. NRCS requests a total of $808 million 
in discretionary funding for its salaries, expenses, and 
activities. In addition, more than $3.1 billion will be 
available to farmers, ranchers, and private landowners through 
the farm bill's mandatory conservation programs to help them 
preserve, protect, and enhance their land.
    The cooperative work of NRCS and individual farms and ranch 
families to conserve and maintain productive lands is usually 
unrecognized. The science-based, locally led, and voluntary 
approach to conservation on these lands is an incredible legacy 
that arose out of the terrible Dust Bowl years. Even if we do 
not realize it, all Americans have benefitted from it, and the 
legacy is certainly worth defending.
    But part of the legacy is the integrity of the NRCS' 
operations and programs. The subcommittee has been concerned 
for several years with the agency's management of its programs 
and financial systems. We hope to hear today that the agency is 
on a better track. In order to maintain support for the agency, 
its programs and locally led conservation, and to pass on the 
legacy to the next generation, it is necessary that we have the 
highest level of confidence in NRCS' systems, their science, 
and their staff.
    Mr. Aderholt. And with that, let me recognize Ms. Mills for 
her opening statement. And anything that you want to put on the 
record will be included.
    Well, hold up 1 second. Mr. Farr is here. Let me see if he 
has any comments he would like to make.
    Just about to recognize you for any comments you would like 
to make.
    Mr. Farr. It is great to have you all here and look forward 
to the round of questions. I do not have any formal comments. 
Thank you.
    Mr. Aderholt. Deputy Under Secretary Mills, please proceed.

                           Opening Statement

    Ms. Mills. Thank you, Mr. Chairman. And thank you to you, 
members of the Committee. I am pleased to appear before you 
today to present the U.S. Department of Agriculture's fiscal 
year 2014 budget for the Natural Resources Conservation 
Service, and I would like to thank the Subcommittee for its 
ongoing support for voluntary working lands conservation.
    USDA, through NRCS, remains committed to helping America's 
farmers and ranchers achieve their conservation goals as they 
respond to the challenges of the 21st century. As you noted, 
Mr. Chairman, the President's 2014 budget requests a total of 
$4 billion for NRCS, roughly $3 billion for mandatory funding, 
and $808 million for discretionary funding. And I would like to 
use my time to outline today just a couple of examples of how 
NRCS is coupling its traditional strengths of site-specific, 
on-the-ground technical and financial assistance with a new 
generation of conservation approaches that are going to help 
America's farmers remain the most productive in the world.
    Under the 2008 farm bill, NRCS and its customers have 
benefitted from historic levels of conservation funding that 
have enabled the agency to maintain not only its nationwide 
conservation support, but also target some of the funds to 
address some of country's most critical natural resource 
concerns. Our Conservation Effects Assessment Project, or CEAP, 
has shown that targeting the right practices on the right acres 
can significantly improve the cost effectiveness of producers' 
efforts to reduce nutrient and sediment runoff. NRCS has 
implemented this tool and others in establishing a number of 
landscape initiatives, including those in the Gulf of Mexico, 
the Mississippi River Basin, the California Bay Delta, the 
Florida Everglades, and the Great Lakes. And across these 
landscapes, we are working with our partners and with producers 
to leverage funds to measurably improve water quality and 
wildlife habitat for at-risk species.
    In two other forward-thinking priorities for Secretary 
Vilsack, we are looking at agricultural certainty programs and 
environmental markets. Both create nonregulatory incentives for 
producers to scale up their voluntary conservation investments. 
And importantly, they are attracting private dollars to 
agricultural conservation, which is important at a time when we 
see both Federal and State budgets declining.
    Given NRCS' technical expertise, its science-based 
conservation practices and trusted relationships with 
landowners that have been developed literally over generations, 
NRCS is well positioned to play a unique role to help States 
and their partners develop environmental markets and 
agricultural certainty programs.
    In a kind of a back-to-the-future move, NRCS has launched 
the soil health campaign. As you mentioned, sir, NRCS was born 
out of the Dust Bowl 77 years ago and healthy soils is part of 
its DNA. But what we have learned and we are reemphasizing is 
by investing in what is arguably a farmer's most valuable 
asset, in investing in healthy soils, we can increase their 
productivity, we can reduce input costs, and importantly, we 
can make them more resilient to extreme weather events.
    And when those weather events happen, NRCS is there. NRCS 
was there during last year's drought in 22 states putting 
conservation practices on the ground like cover crops, helping 
producers install more efficient irrigation systems, and 
livestock watering facilities. We were there after the 
Deepwater Horizon, we were there after Hurricane Sandy, and we 
are there as we speak moving dollars into those States that are 
experiencing flooding in the Midwest, so that if they need 
those funds, they are available.
    In the President's 2014 budget we propose some difficult 
cuts, but we also invest in some strategic moves that include 
investments in significant process improvements, in 
restructuring the budget and financial management, the 
procurement and property and human resources functions, all 
three with an eye to improving service and lowering costs. 
These steps are helping us weather budget cuts while 
maintaining a robust level of service. NRCS employees are doing 
an extraordinary job of delivering record levels of service to 
their customers with fewer resources.
    Secretary Vilsack recently testified that under President 
Obama's leadership, USDA has taken significant steps to 
strengthen rural America and at the same time lay the 
groundwork for continued growth and prosperity. With changing 
climate patterns and high commodity prices, now, more than 
ever, America's farmers and ranchers need NRCS to ensure the 
health of our natural resource base.
    I would like to thank the committee for this opportunity 
and for supporting NRCS in these efforts, and I look forward to 
any questions you may have.
    [The information follows:]

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                        FY2014 PROPOSED SAVINGS

    Mr. Aderholt. Thank you, Ms. Mills.
    The President's budget request proposes nearly $38 billion 
in savings--it will be over 10 years--from changes to mandatory 
farm programs. That includes the elimination of direct farm 
payments, savings from the crop insurance program, and a 
reduction in the acreage cap for the Conservation Reserve 
Program, and the reduction in the cap for the Conservation 
Stewardship Program. Could you walk us through these proposals 
a little bit and tell us more about them?
    Ms. Mills. Sure. Actually, I would like to ask Chief Weller 
to get into the details of those, if I might, sir.
    Mr. Aderholt. Okay. Speak into the microphone. It is sort 
of directional based.
    Mr. Weller. Good afternoon, Chairman Aderholt, Ranking 
Member Farr, members of the Committee. My name is Jason Weller. 
I am the Acting Chief of the Natural Resources Conservation 
Service.
    With respect to your question, so the proposals to the farm 
bill programs under the purview and administration of this 
agency, NRCS, that would include the Conservation Stewardship 
Program, as well as the easement programs, which includes the 
Wetlands Reserve Program, the Farm and Ranch Lands Protection 
Program, the Grassland Reserve Program.
    First, starting with the Conservation Stewardship Program, 
the President's budget proposes to reduce the overall annual 
enrollment into the program. So under current law through 
fiscal year 2014, that program is allowed to enroll upwards of 
12.8 million acres, additional new acres every year into that 
program into 5-year stewardship contracts. And the President's 
budget proposes reducing that down to about 10.3 million acres 
a year. So that additional reduction in acreage enrollment then 
will provide savings over the 5- and 10-year budget picture, so 
reducing the baseline forecast for budget authority and 
outlays.
    On the easement programs, right now we have the three core 
easement programs that we administer, the Wetlands Reserve 
Program, the Grasslands Reserve Program, the Farm and Ranch 
Lands Protection Program. The President's budget proposes an 
alignment with both the Senate and last year's version of its 
farm bill, but also in the House committee's version of the 
farm bill, proposed consolidating those three easement programs 
essentially into one conservation easement program. So the 
President concurs and agrees with that, thinks that is a good 
approach to go, and provides an annual funding amount of $500 
million in total funding for the consolidated program.
    Regarding the CRP, that is a program that is administered 
by the Farm Service Agency. I cannot speak directly to the 
proposals regarding CRP. I guess I would defer to Mike Young or 
the Department to the broader--but overall, under current law, 
the program is authorized to enroll up to a total ceiling of 32 
million acres. And so the President's Budget is proposing to 
lower that acreage cap limit, again, to generate overall budget 
baseline savings into the future.
    Mr. Aderholt. What about the Environmental Quality 
Incentive Program and the Wetlands Reserve Program, what does 
the USDA have in mind as far as programmatic changes to the 
farm bill's conservation programs that NRCS administers?
    Mr. Weller. So under the 2014 budget, setting aside WRP for 
a second and just focussing on the Environmental Quality 
Incentives Program, which is our main financial assistance 
program, it is where we enter into contracts with the producers 
to essentially share the cost of implementing conservation 
actions on our operations. The President's Budget proposes a 
total savings in fiscal year 2014 of $400 million. So the 
program is authorized next fiscal year for a total funding 
level of $1.75 billion, and the President's budget proposes a 
savings of $400 million, lowering that total authorized level 
down to $1.35 billion. But there are no policy changes in terms 
of how that program would operate. It is a 1-year budgetary 
savings.
    Regarding the Wetlands Reserve Program, the authorization 
to enroll acres in that program actually expires this fiscal 
year, in fiscal year 2013. So the President is proposing to 
extend the authorization enrollment period in 2014 for the 
Wetlands Reserve Program, but it is that consolidated easement 
programs approach, so it is essentially one main easement 
program, and will have a wetlands conservation easement 
component to it and then a working lands easement component to 
it.
    Mr. Aderholt. Mr. Farr.

                           WATER CONSERVATION

    Mr. Farr. I have a couple of questions, but just a 
suggestion, more than anything else. The coastal area that I 
represent, both the Salinas Valley and Pajaro Valley, have big 
saltwater intrusion problems. They are getting all their water 
from the aquifers because we are not connected to the 
California water project and we live off our ground water. So 
when it stops raining, if we have do not stored it either in 
the ground or in some very limited coastal reservoirs, we do 
not have any water come August, September, October.
    We want to keep the Pajaro Valley in agriculture, and so 
our growers have been very involved and we had some big Fortune 
500 companies. Driscoll's berries, which are almost all the 
berries in the country, are grown there or grown by that 
company, and they want to be a good corporate leader and have 
created this thing called the water dialogue--the Pajaro Valley 
water dialogue. Kathleen Merrigan visited the project last 
year. The district conservationist has been great. You have 
Carlos Suarez there tomorrow visiting this project. But what I 
would love to see, and I think we have a model because the 
dialogue is really involving the community, it is also a 
community of a lot of, you know, low income farmworkers and 
farmworker families, but it has got all the matrix for just the 
perfect combination of best management practices.
    So I would love to have you talk to Carlos after he has 
been there and talked to the group to see what more NRCS can do 
to help this. I think it could be a model for all over the 
country for water conservation and best management practices. 
They are involving the community stakeholders, defining 
community issues, developing social and economic community 
profiles, using census-building techniques, managing conflicts 
and understanding the nature of communities and considering all 
the diversity of the community of what kinds of tools can be 
brought to bear. I think their goals are to develop an 
irrigation management technology that can be expanded to 
additional farms, performance incentives for groundwater 
nutrient management, aquifer recharge with constructed ponds in 
higher recharge areas, environmental infrastructure projects 
benefitting water supply and water quality, monitoring programs 
to document change in conditions over time, permit coordination 
that assists in both project design and getting projects 
constructed, and education and outreach to industry and 
community about matrix of success. So I think it has got all 
the ingredients that you need, and I would hope that you might 
find ways in which NRCS can better help the community reach its 
goals.
    Other than that, I just wanted to ask a question if I 
still--are we--is the clock working? Okay. You are keeping time 
there?
    Mr. Aderholt. I will let you know.

                         SEQUESTRATION IMPACTS

    Mr. Farr. I think in the bill that NRCS was the poster 
child for shrinking government, and I am really curious to 
understand how that shrinking government is going to affect the 
programs on the ground, both through sequestration and 
shrinking budgets, and particularly in the mandatory programs.
    Are there any programs where payments went out prior to 
sequestration taking effect and then you will have to draw 
back? How are you going to handle that? And if payments have 
not gone out, how will you administer sequestration? And when 
will the program participants be notified about sequestration 
impacts?
    Mr. Weller. So, Mr. Farr, I would like to dig a little bit 
here, and excuse me if I get a little bit wonkish, into the 
sequestration numbers, but sometimes I cannot help it. As a 
former staff person of this Committee, I definitely appreciate 
your interest in understanding kind of the budget numbers 
behind sequestration.
    But first let me talk a little bit bigger picture, first 
addressing your first point on the Pajaro Valley and the 
Salinas Valley. I grew up just a little bit further north, 
actually in San Mateo County, so I am familiar with the region 
and actually the water quality and water resource challenges 
producers face in that area. I will absolutely follow up with 
Carlos Suarez when I get back to the office after he has had a 
chance to visit with the community.
    Mr. Farr. Where in San Mateo?
    Mr. Weller. Actually I grew up in San Mateo, just on the 
bay side. I spent a lot of time in Half Moon Bay and Santa Cruz 
and a little bit further south of there.
    But also, as you know, we have taken a very collaborative 
approach with the community in the Monterey Bay region overall 
in helping producers better manage their water resources and 
also the whole food safety and conservation interface, the co-
management challenges that community faces. We have been 
working. I am sure you have been a great spokesperson and a 
leader on that. So we are very aware of the importance of a 
community-led and really a collaborative approach to 
conservation, and I fully trust that Carlos and his team are 
going to continue in that.
    Ed Burton, when he was State Conservationist, was a real 
advocate for that, and I think Carlos is going to be a 
fantastic State Con. So I think he is going serve you well. But 
I will definitely follow up with him after he has had his 
meeting.
    Mr. Farr. All right.
    Mr. Weller. Overall, big picture on how NRCS has addressed 
its budget constraints, under the leadership of former Chief 
White when he was the chief of NRCS, I really credit him, and 
his leadership team saw the wind shift several years ago and 
realized that we are going to have to adjust to an era of more 
stringent budgets. And so there were some steps we started 
taking well in advance. It has not just been the last several 
months. It has actually been the last several years. We have 
been really focused on really some three core things, big 
picture.
    Number one, ensuring that our employees are customer 
oriented. So instead of having technical folks in field 
offices, in area offices doing clerical work and administrative 
staff, we wanted to get those agronomists and conservationists 
back out in the field actually facing their customers and 
engaging and actually doing conservation work. So it is really 
streamlining our internal administrative work to get our 
professionals back in the field.
    Number two, it is overall reducing our overhead costs, so 
really streamlining how we are spending money on equipment and 
IT investments. Vehicle fleet I know has been a historical 
question for you, and I sure look forward to talking a little 
bit further about that later on. So, overall, we have been 
taking a lot of proactive steps to try and address our overall 
budget constraints.
    Mr. Aderholt. Mr. Nunnelee.

                           CERTAINTY PROGRAMS

    Mr. Nunnelee. Thank you, Mr. Chairman.
    NRCS has been a very important part of working in my State. 
I want to thank you for what you have done over the years. I 
have learned quickly in my term here, but even before that in 
my time in the statehouse that you are important, not just for 
us in our State but for our neighbors in surrounding States, 
and not just for this generation but for successive 
generations.
    I particularly appreciate your efforts to provide certainty 
to producers. Just like you, I have regularly heard from 
producers that the potential for shifting regulatory 
requirements makes it difficult for them to plan their business 
operations. In your testimony you highlight, quote, ``Farmers, 
ranchers, and forest managers have regulatory predictability 
and confidence that their conservation investments that they 
make on their lands today will not result in regulatory 
penalties and that they can help sustain their operations over 
the long term.''
    So I would just like you to elaborate for this Subcommittee 
on some of your efforts in that area. What practices have you 
implemented to help provide that certainty?
    Ms. Mills. Certainly, Congressman, and I would like to 
speak to the agricultural water quality certainty and then we 
can have Mr. Weller speak to the wildlife certainty program. 
But we see this as a very promising new development that States 
are interested in putting together these certainty programs. We 
do recognize it as a State-led initiative, and it is critically 
important to have agricultural voices at the table as these 
programs are being developed. But we have seen certainty 
programs in Michigan for some time now, we have seen programs 
recently developed in Virginia, in Maryland just last month. 
And we would be very interested in working with the State 
leadership in your State, sir, to explore developing a 
certainty program there.
    We think it is a win-win. It is a win for the farmers, it 
is a win for the resource, and it is a win for creating a new 
set of incentives for producers to invest in conservation at a 
time when, frankly, you know, we are seeing State and Federal 
budgets diminished. So we would be very interested in working 
with your office and with the leadership in your State, sir.
    Mr. Weller. Sir, regarding the species side of certainty, 
we really are very excited about this new approach, and we feel 
it is almost a new paradigm for species conservation. So there 
are two examples in the west, but actually we have tried to 
build this model out nationally, which also include Longleaf 
Pine Forest Habitat in your State.
    And so the concept is simple. It's that where there is a 
species, whether it is listed today or it is at risk so it is a 
candidate for listing on the Endangered Species Act, the idea 
here is that we work collaboratively with either a forest 
landowner or farmer or rancher. We come on their operation--
invited, it is a voluntary approach--we do a conservation plan. 
We actually then have an array of approved conservation 
practices: Here is the suite of practices that will address not 
only your agronomic production needs, so you can grow food and 
fiber, but also then enhance the habitat needs for the critical 
habitat for the species.
    And what is really innovative here and very exciting is 
that for the first time you have the Federal Government, so the 
voluntary conservation agency is then working hand-in-hand with 
the regulatory entity. And what the Fish and Wildlife Service 
has said to those producers: As long as you are managing the 
operation according to that conservation plan that NRCS has 
helped you prepare, for the next 30 years you have certainty 
that you are not going to be regulated. You essentially get an 
incidental take permit for that species. So you can keep 
ranching. You can keep harvesting timber. As long as you are 
managing the operation according to that conservation plan, you 
can sleep well at night and not worry about ESA.
    And that right there, you have unlocked a collaborative 
approach to species conservation. Now you give someone an 
incentive to participate and actually step up, and it is almost 
an insurance investment. So up front today you can make some 
investments in your operation, and over the long term you know 
it is not just this year and next year, but for several 
generations you are going to be okay. And that right there 
changes the whole paradigm in the approach for how we address 
species conservation. So we are very excited.
    Mr. Nunnelee. Thank you.
    Mr. Farr. Shows you have to be a former staff member.

                      SEQUESTRATION IMPLEMENTATION

    Mr. Nunnelee. Yeah.
    Let me shift gears a little bit. It is my understanding 
that NRCS has been able to manage sequestration without 
resorting to furloughs. Short of maybe hiring you as an 
consultant for the rest of the Federal Government, just explain 
to me how you have prioritized, how you have been able to 
accomplish implementation of sequestration without furloughs, 
and what do you look for when making those decisions?
    Mr. Weller. And I apologize, Mr. Farr, for not getting 
directly to your question, so I will try and address both 
questions here.
    In terms of sequestration, actually there is only one real 
program that was impacted where payments have actually gone 
out, and that is actually a letter that I believe the 
Department has submitted to this Committee for your 
consideration on how to address sequestration, and that is the 
Conservation Security Program. But broadly speaking, across our 
other programs, yes, sequestration has hit all of our programs 
and accounts.
    And so, by taking some proactive steps up front, so first 
and foremost at the beginning of this fiscal year, well ahead 
of this calendar year, we actually implemented a soft hiring 
freeze. So nationally we have 400 to 500 vacancies that we have 
not funded that we are holding off on, and that has generated 
savings of upwards of $33 million in staffing costs, personnel 
costs that we are now not having to figure out how to cover.
    So when you have an 11,000-person organization, 500 FTEs, 
those positions will ultimately have an impact on service 
delivery, and that is why it is really critical for the 
remaining staff we have, you get them customer facing instead 
of just doing administrative clerical tasks, you streamline 
your business process and get people back to doing customer 
service as opposed to internal bureaucratic work.
    But we have also installed some other technology several 
years ago. So, for example, video teleconferencing technology--
it was actually in my written comments--where back in 2010 we 
invested in this to help reduce our travel costs. And so an 
upfront modest cost to install these VTC facilities around the 
country, we have now, over the last 3 fiscal years, we avoided 
upwards of $22 million in travel costs. Our travel spending has 
been reduced by $7 million just from last fiscal year, and we 
are looking to reduce another $7 million this fiscal year.
    Our vehicle fleet. We have reduced our vehicle fleet 
already by 12 percent, so we have avoided our operating costs 
in our vehicle fleet by upwards of $2.5 million from where we 
were 2 years ago.
    So you start adding these things up, and it is a proactive 
approach to better manage your business, that we actually have 
some room to be more efficient. So that is why at the end of 
the day we feel we will not have to furlough.
    Mr. Nunnelee. I cannot tell you how refreshing it is to 
hear an agency come in here and say: We started planning for 
sequestration at the beginning of the fiscal year. As opposed 
to the long line of people that have testified before 
subcommittees on which I serve that said: We did not start 
planning until 2 days before because we did not think 
sequestration was going to happen. So thank you for being good 
stewards of taxpayer dollars.
    Mr. Aderholt. Thank you, Mr. Nunnelee, for that question. 
And I think the whole Subcommittee agrees with your comments 
there.
    Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman. I would 
just say, if you have 400 positions vacant, that says to me 
that there are a whole bunch of things that are not getting 
done. And I would actually like to know what is not getting 
done before we all pat ourselves at the back for automatic 
indiscriminate cuts that affect various parts of the country 
and various people and what your mission is.
    But before I get to my question, first of all, I want to 
welcome you, Ms. Mills, and glad to see you here, and you, Mr. 
Young, glad to have you back again. But if I can just be 
proprietary for the moment, Mr. Chairman. Seeing Jason Weller 
in this position and hearing him being called Chief warms my 
heart. Chief Weller, I was fortunate, really fortunate to work 
with him when I chaired this Subcommittee, and I think already 
he has demonstrated the wealth of knowledge that he has about 
not just the, you know, macro parts of this mission, but also 
the microparts of it. And as he said to Mr. Farr, he was going 
to get a little bit wonkish about this, he knows every detail 
of this bill.
    And I also want to say we had the opportunity to work 
together on the farm bill in 2008, and magnificent, it charts, 
and I just have this one here, which we fought this battle 
comparing average annual payments of food stamp recipients and 
the commodity support recipients. Fantastic chart. I think I 
may have to take a look at it again this time around, and I may 
give you a call, Chief Weller, on this.
    My last point is how is your--I think it was your daughter 
who was born during our time together. Doing well?
    Mr. Weller. Ellie is doing very well. She is now 5.
    Ms. DeLauro. Oh, my God, all right. Thank you. Thanks very 
much. And let me get to the questions, because it does have to 
do with sequestration, because I made my point about 400 vacant 
positions.

                         SEQUESTRATION IMPACTS

    But you talked about being prepared, you talked about the 
staffing. What is of interest to me, because I think, unknown 
to most of my colleagues--and if you can, I would like you to 
be very specific. You have got programs and regions of the 
country that are going to be affected by sequestration. I think 
it is important for this Committee to know, to know what 
programs and what regions of the country are going to be 
affected. And I would be happy to have you both answer that 
now, and as well if there is further information, I would like 
to see a list. And you can get that to my office. Happy to sit 
down with you. I want to know what is going to happen.
    [The information from USDA follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. DeLauro. This is not a free pass. You all know that and 
I know that. And where is it going to take its effect? So, 
please.
    Mr. Weller. So, overall, between the sequestration----
    Ms. DeLauro. If I can just say this to you. Secretary 
Vilsack, when he was here, he expected that there would be 
15,000 producers who would get conservation assistance as a 
result of sequestration.
    Mr. Farr. Fewer, fewer.
    Ms. DeLauro. Fewer, fewer, I am sorry. Fewer producers 
would get the conservation. Thank you, Sam.
    Mr. Weller. Absolutely, Ms. DeLauro. So overall 
sequestration and also the rescissions that were included in 
this year's appropriations act, you know, if you compare to 
where we were for a full year CR, reduced this agency's budget 
by almost $250 million, $248 million. So irrespective of, you 
know, the steps we tried to be proactive and to anticipate that 
and to ensure continuity of operations, it does not matter who 
you are, if you get cut $0.25 billion there will be an impact 
on service and on the mission.
    So as the Secretary has said, approximately 15,000 
participants will not be able to participate this year. So 
looking at, for example, just the main Environmental Quality 
Incentives Program, our main financial assistance program, we 
already, last year, ended the year with a backlog. That means 
people who had applied because there just was not enough money 
nationally of $1.4 billion.
    So when you cut the Environmental Quality Incentives 
Program by an additional 70-plus million dollars, you know, 
that is just exacerbating the competitiveness of that program, 
but also the reduction in conservation assistance we can 
provide, irrespective, you know, from Maine to Guam and from 
Alaska to Puerto Rico. It is just less assistance who can go 
out in the landscape.
    Ms. DeLauro. You have anything to add, Ms. Mills?
    Ms. Mills. Yes. I would also say, you know, as these cuts 
are made it is also affecting the staffing, and it has an 
impact on our ability to bring in new biologists, new engineers 
and the kind of experts that we need to continue to provide 
these robust services that generations of farmers have relied 
on. That is part of the heart and soul of what NRCS provides.
    I also just wanted to note that in terms of the savings, 
NRCS has done a fabulous job of finding savings. The Secretary 
noted that as part of his Blueprint for Stronger Service, 
overall the Department has saved over $700 million, and I can 
assure you we are going to continue as a Department to look for 
additional savings so that we can buffet some of these cuts 
with additional streamlining that makes sense for the taxpayer 
and makes sense for not only the Department, but for NRCS so 
that going forward we continue to be resilient.
    Ms. DeLauro. I would just add that the EQIP program is one 
that I think is so well regarded around the country, and so 
many of the regions of the country and my community, et cetera, 
really take advantage of. And so much of the work that is done 
by NRCS is really bedrock for our farmers and ranchers, et 
cetera, and it is historical in so many instances, but 
necessary, including the project that Congressman Farr was 
talking about of how to try to deal with these issues in terms 
of the biologists, the technical people that you are talking 
about, that that gets shortchanged.
    I would just repeat what I said because I am sure my time 
is almost up, that I would like a list, very much so want a 
list of the programs and the regions and of how much each of 
them are going to be cut back.
    Thank you very much. Thank you, Mr. Chairman.
    Mr. Aderholt. With that, as you can tell by the bells, and 
I know Chief Weller is familiar with those bells quite from his 
experience here, we do have a series of votes on. We have three 
votes. So we will do a recess for the votes. And when we come 
back, Mr. Rooney will be next up. Thank you.

                         FY 2014 BUDGET REQUEST

    Mr. Aderholt. Okay, we are back. So thank you for your 
patience with that. As I mentioned, those that are familiar 
with the way of the Hill, that is not unusual, especially when 
we are in votes. So that was certainly the case.
    As I mentioned in my opening remarks, the science-based, 
locally-led and voluntary approach to conservation on private 
farm-, ranch- and forestland is an incredible legacy to have 
arisen out of the terrible Dust Bowl years. All Americans have 
benefited from it. This legacy is one that is worth defending 
against the tendency of government to regulate and apply one-
size-fits-all national solutions.
    Would you discuss with us, Under Secretary, the budget 
requests and how they are envisioned to maintain this legacy?
    Ms. Mills. Yes, Mr. Chairman. Well, as I mentioned in my 
oral remarks, we are making strategic investments to ensure 
that we can continue to maintain the level of service to 
producers, and that we can continue to build on the tools that 
we have developed like the Conservation Effects Assessment 
Project to help us determine where our investments are best 
made.
    Needless to say, the cuts that we have experienced over the 
last several years have had an impact on our capacity to 
deliver the level of services and to meet the demand. As Chief 
Weller noted, we have a backlog. We are unable to meet the 
complete demand that producers would like to see from NRCS. And 
I think at the end of the day, we are making the best decisions 
we can to target our resources the most efficient way we can, 
to use tools like CEAP, to use additional tools that are 
helping us quantify and measure the effectiveness of these 
practices so that we can stretch our dollars further.
    But it continues to be a challenge to be able to reach all 
producers around the country, and I cannot say that it is not 
difficult to be able to address the resource challenges, 
whether it is protecting wildlife habitat and threatened 
species or improving water quality. But we are making 
significant gains, and we are putting an increasing emphasis, 
sir, on measuring the effectiveness of our results. Landowners, 
producers want to see what the results are so they can manage 
their operations more efficiently, and we want to be able to 
help them do that. It makes them better able to stay ahead of 
regulation as well.
    I would invite Chief Weller to make any other additional 
comments, if that is appropriate.
    Mr. Weller. So stepping back a little bit, and as you have 
articulated really this agency's history from since it's 
dawning 75-plus years ago, its greatest strength is that 
locally led approach where you have the professionals, the men 
and women, 11,000 of us, who work out of our field offices 
across the countryside working in virtually every county in the 
country, all across the 50 States and Puerto Rico. And it is 
that locally led process that the budget actually is 
maintaining and supporting.
    So we are trying at the top level to streamline and ensure. 
We are pushing out all of our financial resources we can, but 
also our staff resources, those conservation professionals, to 
maintain that high level of service and that locally led 
approach, working out of those field offices, to help ensure 
that we are getting this conservation assistance, both the 
planning that the conservation budget supports, but then also 
the farm bill delivery. This conservation program is funded by 
the farm bill. So the budget supports that integral historic 
approach to how we approach private lands conservation.

                               CHALLENGES

    Mr. Aderholt. What do you see as the biggest threat to the 
legacy?
    Mr. Weller. Well, it is maintaining the flexibility. And so 
as we are trying to maintain that outward approach and that 
collaborative approach in a very complex environment where you 
have regulatory challenges that producers are having to face, 
but also dynamic challenges, changes in agriculture, it is 
helping producers, giving them the best available, most up-to-
date scientific and technical advice with their very dynamic 
and rapidly changing agronomic industry. So whether you are in 
the organic industry, livestock production, dairy industry, row 
crop, it is just keeping up to date on the agronomics is very 
challenging.
    But also then with the multitude of programs that we are 
delivering, it is a very complex overall suite of programs. In 
part that is what this Congress has proposed streamlining, just 
the number of programs we are administering. So reducing, I 
guess, the complexity in the service we are providing are two 
of the primary challenges we are facing.

                   COLLABORATION WITH OTHER AGENCIES

    Mr. Aderholt. In your work you have contact with numerous 
Federal agencies on land and conservation issues. Talk a little 
bit about how you defend NRCS and voluntary conservation.
    Mr. Weller. With the other Federal agencies? We work very 
closely, obviously, with partners, such as the Fish and 
Wildlife Service, Bureau of Land Management, U.S. Forest 
Service, Environmental Protection Agency, a lot of it from the 
field all the way up to Deputy Under Secretary Ann Mills' 
level. Actually a lot of it is education and really helping 
them understand the value of the collaborative approach. So a 
lot of these other entities have a very strong regulatory 
approach and more sort of a national perspective on how to 
approach, whether it is water quality or air quality.
    So it is a lot of time and energy invested in just trying 
to educate the other Federal agencies on both the value and the 
efficacy of a voluntary, collaborative approach to achieving a 
shared goal, that being more productive agriculture, but then 
also cleaner water, and cleaner air and more abundant wildlife.
    Mr. Aderholt. My time has expired.
    Mr. Farr.
    Ms. Pingree.
    Ms. Pingree. Thank you, Mr. Chair.
    Thank you both very much for being here today. It has been 
very interesting to hear your testimony and how you are 
handling some of the challenges.

                      SEASONAL HIGH TUNNEL PROGRAM

    I want to start by talking about something very specific. I 
am very interested in seasonal high tunnels. When you launched 
the Seasonal High Tunnel program in 2009, it was immediately 
popular in my home State of Maine. I think in the first year we 
had 19 contracts from almost every county in Maine that were 
signed up to build high tunnels. It has been a great thing for 
us. Being a cool-weather State, obviously it extends the 
growing season. It makes it possible for people to both have a 
longer season to grow in and enhance the amount of produce they 
are able to produce.
    I do not have NRCS high tunnels, but on my own farm we have 
high tunnels, and we already have had things growing in there 
for a long time and are able to keep things going all winter. 
So I know firsthand how important they are.
    But I just want to ask a little bit of specific background 
about this. As I said, it offers great economic opportunities 
for small farmers, and we would like to see more about it. So I 
am interested in hearing some more about some of the success 
that you have had in the few years, what else could we be doing 
to support the program more. In the budget request you mention 
that the demand is outpacing the funding. Is there a backlog? 
How long are farmers waiting for this? By how much is the 
demand outpacing the funding? And I have got one side question, 
if those are not enough for you.
    The one thing I do occasionally hear from farmers, because 
nobody is ever happy with a program that they do not have a few 
concerns about the program, usually it is just that there is 
not enough of it, but I also understand that there is a 
distinction that says farmers are prohibited from using any 
heating or ventilation elements in the high tunnels. So I am 
just curious about where that regulation came from, why, what 
that specific prohibition is. But, anyway, I generally am, as 
you can see, very interested in the program.
    Mr. Weller. So we initially launched the high tunnels, 
Seasonal High Tunnels, as a pilot approach, and it was at the 
time--it is now a permanent conservation practice standard, but 
initially it was an experimental standard. We just really test 
what are the actual conservation benefits from high tunnels.
    So what we found is that they actually--beyond extending 
the growing season and helping small, locally grown, organic 
producers extend their growing season, but also be able to get 
produce to market, it also has water conservation benefits. So 
you can install micro-irrigation systems in there, so you are 
actually reducing the irrigation needs for those crops. Because 
you are using a lot of soil radiation, you are also then 
reducing energy, so it has energy conservation benefits. You 
have better pest management, so you are reducing your pesticide 
and herbicide uses. It has soil health benefits and nutrient 
management benefits. So it really cuts across an array of 
resource concerns.
    So nationally over the last 3 years, I believe we have 
installed well over 7,000 high tunnels nationally. It is now 
virtually all 50 States have high tunnels. So it is more than 
just now an experimental practice standard; it really has 
exploded in all respects. And I think upwards of $40 million 
over the last several years have been invested into high 
tunnels across the countryside.
    And there are producers and examples of this. For example, 
in Alabama, one of the producers who has been very successful 
with this, his name is Al Hooker--or Al Hooks. And Mr. Hooks, 
we have been working with him for a long time, and this is a 
small, locally grown produce. We helped him install some high 
tunnels on his operation, and he has been in collaboration--it 
is a small co-op--with three other farmers, and together, with 
improved irrigation systems in the high tunnels, they are now 
able to produce fresh, locally grown produce greens to local 
restaurants and to local grocers, but also now he is selling 
directly to Walmart. So he is now able to, because he has an 
expanded growing season and also now the production is just so 
excellent, that now Wal-Mart is buying directly from this 
produce.
    So here is an example. It is not just locally grown; you 
have large multinational corporations in some instances 
actually now starting to work with producers. So we think it 
has been a really big success.
    In terms of the backlog, it is not just the high tunnels, 
it is actually nationally, and we have a backlog. This is in 
part, due to the dialogue we had a little earlier before the 
votes, on just the oversubscription on EQIP, the Environmental 
Quality Incentives Program, which is the program that funds 
this practice.
    And so when we are looking at a national level, at the end 
of the last year, we had a backlog of $1.4 billion. You know, 
we are having demands for high tunnels. We have demands for 
organic assistance. We have demands from dairymen to help with 
waste management. We have requests from livestock producers to 
help them do prescribed grazing practices. Energy conservation, 
you name it, there is not a practice where there is not more 
demand than we actually have capacity to deliver that help.
    What may help in the future is currently what we are doing 
with high tunnels, we actually say up front we budget for it. 
We say, here we are going to invest X amount this fiscal year 
for high tunnels. I think next year what we are going to do is 
actually no longer do that. It is more of just open up the 
governor, so to speak, on practices and allow for folks that if 
demand--a lot of them basically compete, and if the demand at 
that local level, and again, in the case of Maine, Maine 
decides through their public process, the State technical 
committee, that this is going to be a high priority for Maine, 
then NRCS, the State Conservationist, can work with his 
partners and set aside an appropriate budget in his State for 
high tunnels. Again, instead of it being a top-down national 
mandate or direction, it is going to be more of a locally led 
approach.
    Ms. Pingree. I think I am out of time. If I have any more 
questions, I will save them.
    Mr. Aderholt. Mr. Farr.
    Mr. Farr. For the record, I praised Mr. Weller for being a 
former staffer, and I forgot to praise Ms. Mills for being a 
former staffer, too. She was a staffer in California when I was 
a State legislator. She was a staffer to the lieutenant 
governor, and I was chair of the Economic Development and New 
Technologies Committee. And the lieutenant governor was doing a 
lot of really interesting economic development projects.
    We also have a common background of having lived in 
Colombia.
    So thank you for your former staff work, too, and present-
day work.

                             VEHICLE FLEET

    Mr. Weller, I understand that NRCS is involved in a pilot 
project to track the vehicles that the Department owns, and 
that you are going to complete that pilot program and evaluate 
it at the end of this month. My question is what have you 
learned from the data so far, is the information that you are 
gleaning from this pilot program useful, and can it prove to be 
cost-effective for you and for other Federal agencies as well?
    Mr. Weller. So, yes, we have had a year-long pilot, and 
this is on our vehicle fleet. And so the initial pilot over the 
past year, starting from this April going back to April of 
2012, we installed around 1,700 of these GPS devices on our 
vehicle fleet in 7 different States. So California was one of 
the pilot States, but this includes six other States. We tried 
to get a wide diversity of different climates, size of the 
fleet, size of the State, so all across the countryside.
    We actually still have not completely finished the pilot 
yet, it is through the end of this month, and so we are still 
working and doing the analysis on the data. To deploy this, at 
the end of the day, what we have done, though, to deploy the 
vehicle tracking system across our whole fleet of around now 
9,000 cars and trucks, it would cost upwards of $9 million. So 
we are trying to weigh this out, the pros and the cons, in 
terms of what does this help us do in terms of better manage 
our fleet versus what the upfront--just the investment will 
take. And then there is an ongoing operating license 
requirement, which will be multimillion dollars a year.
    So we are just trying to weigh out the pros and the cons. 
So we have not firmly landed on where we are going to go yet on 
the overall implementation, but what we have learned is that, 
frankly, we can do a better job of managing the fleet. And this 
is why we are moving to a different approach on our 
administrative operations side, starting to ask, instead of 
managing our business as 50 different independent business 
units--so California manages its cars and trucks, and its 
accounts, and its HR operations, and its contracting operations 
just as a separate entity--we are starting to think, well, can 
we do this a little more strategically and have better 
management of our staff resources, in this case of our vehicle 
fleet?
    And so what we learned through the pilot is that there is 
periods of the year, the seasonality of the work, that we can 
maybe perhaps look and work with GSA, and when we lease our 
vehicles from them, instead of leasing a whole vehicle for a 
full 12 months, maybe--GSA is actually putting out a new 
leasing instrument where you can only--you lease a vehicle for 
a short-term lease. So maybe we need only lease cars and trucks 
during the spring and summer seasons when we are actually out 
in the field. We do not need to have cars and trucks sitting 
idle in the wintertime. That would save us a lot of money.
    So then you start thinking about vehicles as FTEs. Instead 
of having three cars and trucks for a full year, maybe you only 
need three cars and trucks for the summer for a few months, and 
that ends up being, in terms of a vehicle, only one vehicle. So 
it is about, again, stretching the dollar further.
    Mr. Farr. So the lessons learned here, I mean, could have 
incredible application for the entire Federal fleet, not just 
USDA's fleet.
    Mr. Weller. I can only speak to our fleet, and to us, yes. 
What we are learning from that is we need to think about how do 
we utilize that equipment and that vehicle fleet better so we 
can get--actually when we need the cars and trucks, they are 
available, but when we do not need them, perhaps look for other 
ways.
    Mr. Farr. And you can make a decision that would not 
necessarily require that you have to go all the way to 9,000 
total vehicles, because you own the equipment now and those 
vehicles. Could you continue the pilot?
    Mr. Weller. That would be an option just on the existing 
fleet, on the existing pilots, yes. So those devices are 
installed.
    Mr. Farr. So there is no cost to that. It is just the----
    Mr. Weller. It is the ongoing, it is the license then. From 
the private company that we work with, it is the payment of the 
data. We need to pay them to access the data they collect.
    Mr. Farr. Well, it seems to me you doing a lot of 
innovative things in the Department, and I think we are going 
to have lessons learned there that the Secretary brought to us 
that could have application for other departments in the 
Federal Government. And I hope that this is one that you will 
continue, at least the pilot, to see if we could use it.
    Mr. Weller. Yes, we are absolutely committed to improving, 
again, ongoing management from a national perspective.
    Mr. Farr. So when will you know what you are going to do 
with it?
    Mr. Weller. We are going to decide early May how to proceed 
with the pilot, whether to go with full implementation or not.
    Mr. Farr. But you have choices less than full 
implementation, too.
    Mr. Weller. Right. One, as you suggested, would be to 
continue with the current deployment just in the experimental 
vehicles.
    Mr. Farr. Well, I just think it is an interesting applied 
technology. I would be interested. Keep me posted.
    Mr. Weller. Absolutely. Will do.
    Mr. Farr. Thank you, Mr. Chairman.

                            FINANCIAL AUDIT

    Mr. Aderholt. In November of 2012, the inspector general 
reported on NRCS's financial statements, noting that there 
continues to be a number of problems. NRCS's outside auditor 
identified seven deficiencies.
    This Subcommittee has been concerned about NRCS's financial 
management for several years. This is the fifth year that NRCS 
has received a disclaimer of opinion.
    Chief Weller, could you talk to us about the status of the 
NRCS's work on its financial and accounting systems?
    Mr. Weller. This absolutely has been a singular focus of my 
predecessor Chief White. It certainly is with Secretary 
Vilsack. I have had several direct conversations with him, and 
he has been abundantly clear with me, but also with my 
leadership staff, on the importance of this. They are taking it 
absolutely seriously, as do I.
    This has been an ongoing question when I was both here 
within NRCS and outside of NRCS for many years in ensuring we 
make very solid progress and, at the end of the day, in the 
very near future, we actually start to actually get qualified 
or even unqualified opinions on our budget and overall 
financial management.
    Mr. Weller. So as you indicated, there are seven 
weaknesses. Five are material weaknesses and two of them are 
what they call significant deficiencies. All of that is a lot 
of accounting speak for we could do better, and we are taking 
this absolutely dead serious.
    So there are three main approaches--big picture--we are 
taking on improving our financial management. And number one is 
focusing on the people. So first and foremost, I will be 
straight, I have talked to you about a hiring freeze or soft 
hiring freeze. We do not have enough financial management 
experts. We do not have enough accountants on staff to actually 
manage the complexity of our operations and our programs and 
our accounts as we should.
    So over the last 6 months we have actually brought on 
upwards of 13 or 14 additional accountants to our national 
accounting team to improve the accounting management from a 
national perspective. This is an instance, given the size of 
our budget and overall complexity of our operations, in the 
current distributed approach on how we manage our business. 
That needs to change. And so we need to just strengthen and 
bulwark the staffing.
    But also then it is ensuring very strong both training and 
accountability on the management.
    And so as I mentioned with Mr. Farr, right now the way we 
are managed is we essentially have 52 different business units, 
so each State has the ability to write into our general ledger, 
and we have national headquarters and the Caribbean. So we have 
52 different business units all with the ability to enter into 
our general ledger, which if you talk to our CFO is not good 
because he cannot at the end of the day control what goes in or 
off his general ledger.
    So the second main approach is that we are going to be 
standardizing our business. We are moving to a new business 
model. So first of all we moved to a new financial management 
system under the leadership of the Department and Acting Chief 
Financial Officer Jon Holladay for USDA. We moved to the 
Federal Financial Management Modernization Initiative, FMMI is 
the acronym. This is a state-of-the-art new financial 
management system that improves better accountability and 
internal controls so that we will have better oversight from a 
national perspective of where the dollars are and how they are 
being used, but also then improve on overall accountability and 
reporting on our financial management.
    The longer term, and this is not something we can do 
immediately, but we are moving towards a new business model, 
too, on our financial management. So at the end of the day we 
are going to align our budget and financial management staff, 
instead of having 52 units, we are going to have one financial 
management unit. So this is not about taking away power, 
control absolutely from the States, because this is at the end 
of the day ensuring that when we allocate dollars to a State, 
that the State Conservationist can focus on the conservation 
and the program and the mission, but leave the accounting work 
and the contract work to the professionals, and that everything 
being from a standardized national approach as opposed to every 
State kind of doing it the best way they know how, but not 
always necessarily the way it should be done.
    And the third main approach is then to enhance our internal 
controls and internal compliance. So instead of relying on OIG 
or external auditors, through KPMG is right now our external 
auditor that is doing the financial management audit, we need 
to have our own first and foremost Federal professionals who do 
internal controls and compliance reviews and are working on OMB 
Circular A-123, which is the standard for ensuring internal 
compliance.
    So we have actually stood up our own internal compliance 
staff underneath our CFO and it is focusing on A-123 
compliance. And we have actually gone a step further and 
actually now we have contracted with outside accounting firms 
who have the expertise to first of all review our current 
internal control environment, but then also help train our 
staff and to basically raise our game so that going forward we 
can take this responsibility on for ourselves.
    Mr. Aderholt. When do you anticipate a clean audit?
    Mr. Weller. If you look historically, and my understanding 
with, like, the Forest Service, yeah, it took them 7 to 10 
years from when they first had their first standalone audit to 
when they actually had a qualified opinion. We are now year 5 
into that audit. I cannot promise you it is going to be this 
year. What my CFO tells me is that within the next 1 to 2 
fiscal years we are actually within striking distance of 
getting a qualified opinion.
    So with this year's audit we actually made very good 
forward progress, the biggest being on our financial 
obligations. That was actually reduced from a material weakness 
and it was downgraded. Basically we had demonstrated 
significant controls and improvement on our ending balances 
that the auditors felt comfortable in actually downgrading 
that, saying we are on the right track. That is huge, because 
if we can maintain that, hopefully either this fiscal year or 
next fiscal year we could end the year with a balance that we 
can tie to which then sets us up for a qualified opinion the 
next fiscal year. So we are close.
    Mr. Aderholt. Mr. Farr.
    Ms. Pingree.

            ENVIRONMENTAL QUALITY INCENTIVES PROGRAM (EQIP)

    Ms. Pingree. I think that most of what I wanted to hear 
about today has been covered, but let me just go back to my 
favorite topic. So, A, I just want to say that again everything 
under the EQIP program, and you mentioned that, so to the 
extent we can enhance that, make it more available to people, I 
actually thought that your suggestion that there will be less 
restrictions on exactly what categories things go in could be 
very helpful in States where trends change.
    I wanted to put in a plug for the Organic Initiative 
Program. A lot of that has been already allocated to Maine 
where we have a very strong organic farming community that has 
been active and engaged and continues to grow. So anything else 
you want to say about the success of that program and what else 
we can do to enhance it I am interested to hear.
    And I just wanted to clarify before, you said the backlog 
on EQIP was $1.4 billion, is that correct?
    Mr. Weller. Yes.

                      SEASONAL HIGH TUNNEL PROGRAM

    Ms. Pingree. And the only other little technically nerdy 
question was, do you know why hoop tunnels cannot have 
ventilation or heating?
    Mr. Weller. Okay. In reverse order. So on that, these are 
supposed to be temporarily structures and not permanent 
structures. And our view as an agency is once you start running 
electricity to it or you install ventilation equipment, it is 
now we are installing greenhouses. You are actually installing 
physical infrastructure that is permanent. And that is just, it 
is beyond then just a conservation practice, it is now shading 
into actually a production practice, into greenhouses.
    Ms. Pingree. Got it.
    Mr. Weller. That is not really the intent of EQIP.
    Ms. Pingree. Okay. So anything else?

                           ORGANIC INITIATIVE

    Mr. Weller. So on organics, we are again trying to provide 
services to as diverse array of agriculture as possible. And, 
frankly, it is a little bit self-serving in the sense we are 
actually trying to expand our constituency. We want to have the 
maximum number of people benefiting from our service, but also 
requesting our service and demanding for assistance.
    And so we have made great inroads in the last several years 
with the organic industry, particularly as it has taken off, 
and we are focused both on folks who are already in organic 
production, how can we help them be even more efficient with 
their nutrient management, but also address their soil erosion 
concerns and water quality/water supply concerns. So we are 
helping them even be better stewards of the resources. And then 
folks who are transitioning to organics, how can we then help 
them in that transition into an organic system.
    So over the last 3 years we have actually invested just 
through the organic initiative, which is a statutory 
requirement of EQIP, $60 million into organic agriculture 
nationally. And actually some States, you look at the top 10 
States in this, actually Alabama and Maine are two of the top 
10 States for organic investments. And you have States where it 
is a little counterintuitive, like even Oklahoma now we are 
getting a lot of demand for organic assistance in Oklahoma, and 
it is organic poultry production.
    So it is beyond just the mom-and-pop organic producers and 
it is now expanding both in size and scale, but also in terms 
of region. And so we are trying to innovate. And so we are 
partnering, we have innovation grants where we try and push 
ourselves, but also encourage innovation. So, for example, we 
have contracted with an external group to come in and review 
all 160-plus of our conservation standards and see across 
everything we do--how can we tailor it to make sure it works 
for organic agriculture.
    And so that has been a 3-year agreement. We are now 
approaching the end of it and they are coming back with some 
excellent recommendations so that when an organic producer 
comes in the door we actually make sure that our practices, 
basically our tool chest will work for organic production. And 
they have had great recommendations we have been able to 
incorporate.
    We actually then have hired and worked with an NGO called 
Oregon Tilth, who is an organic production group, NGO in 
Oregon, and they are providing us an organic expert who is 
going out and actually doing training so that our field forces, 
our field folks in our field offices do not have to figure this 
out on their own. So actually she is conducting Statewide 
training around the country so that at the State level and at 
the local level, again when an organic producer walks in the 
door, we have people who are comfortable and trained and 
actually can speak organic.
    Ms. Pingree. Great. Well, thank you for your work.
    Thank you, Mr. Chair.
    Mr. Aderholt. Mr. Farr.

                         SEQUESTRATION IMPACTS

    Mr. Farr. Just one last question. Following up on my 
earlier questions on the farm bill conservation programs, are 
you looking at issuing demand letters or offsetting the fiscal 
year 2013 reductions against the potential fiscal year 2014 
payments? Would you be allowed to offset the sequestration cuts 
against future payments? In case of the programs or authorities 
where the payments have not yet gone out in fiscal year 2013, 
are you looking at making sequestration cuts/reductions on a 
program-by-program basis or will you look at making the cuts to 
each individual contract or easement holder payment? And if 
there are sequestration impacts, how will you be notifying 
participants of the actions that may need to be taken under the 
fiscal year 2013 sequestration order?
    Mr. Weller. So I apologize, Mr. Farr, for not getting to 
your sequestration questions earlier. So first and foremost 
demand letters. The one program that on sequestration got its--
I guess the best analogy I can come up with, sort of--got its 
tail caught in the machinery here was the Conservation Security 
Program. And the reason that is, is because those are 5- to 10-
year contracts. This is the old CSP from the 2002 farm bill. So 
these are long-existing contracts.
    Under law, as soon as practicable after the new fiscal 
year, so October 1, we have to make payments. So we made 
payments in early October to those long-term contract holders. 
We did not hold a new sign-up. These are folks who have been in 
for long term. We have paid out upwards of 95 percent of those 
contracts, and there are still a few left that the checks have 
not been cut yet and disbursed.
    So then when sequestration was triggered we had the 
Hobson's choice: Do we go back out, and there are now 12,400 
producers across the country we have to demand money back? Or 
for those folks that the payments have not gone out, do we take 
their money and leave everyone else whole? That is inequitable 
and it would have created a lot of administrative pain, a lot 
of confusion, and just, frankly a lot of rancor.
    And so what we actually have provided to the Subcommittee, 
I understand the Department submitted a request for your 
consideration yesterday, is a proposal to use the Secretary's 
interchange authority where it would move $5.4 million from the 
Farm and Ranch Lands Protection Program, the easement program, 
to cover the gaps. There is still money we would sequester from 
the security program, but it is the money that we just cannot 
cover or else we are going to have to go out and basically 
demand money back.
    So it is $5 million from the Farm and Ranch Lands 
Protection Program to cover the balance out of the Security 
Program that we cannot currently pay for. We feel that is a 
more equitable approach. It will not impact Farm and Ranch 
Lands Protection owners or current contract holders. This is 
budget authority. These are new dollars from new contracts.
    So in essence there is this choice. Well, it was a very 
difficult choice for us to make, but we think on balance it is 
basically a few fewer contracts, easements we will enter into, 
but it is a lot less pain and confusion and rancor, both for 
our customers, but also internally on just for our field staffs 
at the worst time of the year as we are trying to roll out into 
sign-ups and do field work.
    Across all the other programs, for example on the 
Stewardship Program, we intentionally did not hold a national 
sign-up for the Conservation Stewardship Program, in part 
anticipating sequestration. So now that sequestration has 
occurred we are going to proceed with a national sign-up. And 
no one's payments are going to be reduced, it just means we are 
going to have a few fewer contracts that we are going to be 
able to enroll.
    EQIP, Wildlife Habitat Incentives, Agricultural Management 
Assistance, you go down the list of our programs, we are not 
having to reduce anyone's payments. Current contract holders 
will not be impacted. It just means we will have less money to 
enroll new people in the program.
    Mr. Farr. Or they may not get re-enrolled.
    Mr. Weller. Or they may not be re-enrolled, right.
    Mr. Farr. I have no further questions.

                                PIGWEED

    Mr. Aderholt. Anecdotally, there is more dirt being turned 
in the Cotton Belt than in the past 25 years. This is because 
of herbicide-resistant pigweed. It was found in Alabama in 2006 
and has spread to 26 of our 67 counties in the State of 
Alabama.
    Three years ago NRCS began a pilot program with the 
assistance of land-grant universities to test a new 
conservation tillage system that would allow some tillage, 
combined with a heavy cover crop to control the pigweed. I 
believe NRCS has been working on a new conservation practice 
standard since that time. Of course, it would be a shame to 
lose 25 years of conservation tillage because of the weed.
    What is the status of this new practice and when it will it 
be released?
    Mr. Weller. My understanding is actually the standard has 
been released. It is an interim standard akin to my 
conversation with Ms. Pingree earlier about the interim 
standard on the high tunnels.
    An interim standard for us is essentially a pilot on a new 
approach. And we go out for 3 years and do field trials and 
tests, and then we bring it back into the garage, so to speak, 
put it on blocks, lift the hood, see how it worked, fine tune 
it and then roll it out as a permanent final standard. So that 
is what we are doing right now.
    And it is really an integrated pest management, an IPM 
approach to pigweed, so to herbicide-resistant weeds, 
specifically to the pigweed in the southeast part of the 
country, Georgia and Alabama and Mississippi. And so it is both 
the IPM side, which is looking at crop rotation and the 
diversity of crops, cover crops, selective use of herbicides in 
cases where it can be helpful and beneficial, conservation 
tillage. We do not want to lose 25 years of investments in good 
tillage practices, and that would therefore exacerbate soil 
erosion and soil loss. We do not want to lose that.
    So we are looking basically at an array of tools and 
practices to try and address the pigweed issue and still allow 
for good production of cotton and other crops, but not lose 
ground on soil conservation.
    Mr. Aderholt. So the pilot program you talked about was a 
success?
    Mr. Weller. Yes. And so we have moved out now with this new 
interim standard, and that is now available to a field, and 
folks are starting to use that. But, yes, to my knowledge and 
my understanding it has been successful.
    Mr. Aderholt. Okay. That is all I have. You do not have 
anything else?
    Okay. Well, thank you all for being here and for joining us 
this afternoon, and we look forward to following with you as we 
proceed with these requests. And thank you for your service at 
the USDA. Thank you.

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                           W I T N E S S E S

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Avalos, Edward...................................................     1
Mills, Ann.......................................................   487
Mitchell, Larry..................................................     1
O'Brien, Doug....................................................   279
Padalino, John...................................................   279
Salerno, Lillian.................................................   279
Shea, Kevin......................................................     1
Shipman, D.R.....................................................     1
Trevino, Tammye..................................................   279
Weller, Jason....................................................   487
Young, Michael..............................................1, 279, 487
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