[Senate Hearing 114-633]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 114-633

   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016

=======================================================================

                                HEARINGS

                                BEFORE A

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION
                             
				   ON

                           H.R. 3049/S. 1800

 AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD 
 AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL 
         YEAR ENDING SEPTEMBER 30, 2016, AND FOR OTHER PURPOSES

                               __________

                       Department of Agriculture
 Department of Health and Human Services: Food and Drug Administration

                               __________

         Printed for the use of the Committee on Appropriations
         
         
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   Available via the World Wide Web: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=senate&committee=appropriations

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                      COMMITTEE ON APPROPRIATIONS

                  THAD COCHRAN, Mississippi, Chairman

MITCH McCONNELL, Kentucky            BARBARA A. MIKULSKI, Maryland, 
RICHARD C. SHELBY, Alabama               Vice Chairwoman
LAMAR ALEXANDER, Tennessee           PATRICK J. LEAHY, Vermont
SUSAN M. COLLINS, Maine              PATTY MURRAY, Washington
LISA MURKOWSKI, Alaska               DIANNE FEINSTEIN, California
LINDSEY GRAHAM, South Carolina       RICHARD J. DURBIN, Illinois
MARK KIRK, Illinois                  JACK REED, Rhode Island
ROY BLUNT, Missouri                  JON TESTER, Montana
JERRY MORAN, Kansas                  TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota            JEANNE SHAHEEN, New Hampshire
JOHN BOOZMAN, Arkansas               JEFF MERKLEY, Oregon
SHELLEY MOORE CAPITO, West Virginia  CHRISTOPHER A. COONS, Delaware
BILL CASSIDY, Louisiana              BRIAN SCHATZ, Hawaii
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
STEVE DAINES, Montana                CHRISTOPHER MURPHY, Connecticut

                      Bruce Evans, Staff Director
              Charles E. Kieffer, Minority Staff Director

                                 ------                                

     Subcommittee on Agriculture, Rural Development, Food and Drug 
                  Administration, and Related Agencies

                     JERRY MORAN, Kansas, Chairman
ROY BLUNT, Missouri                  JEFF MERKLEY, Oregon
THAD COCHRAN, Mississippi            DIANNE FEINSTEIN, California
MITCH McCONNELL, Kentucky            JON TESTER, Montana
SUSAN M. COLLINS, Maine              TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota            PATRICK J. LEAHY, Vermont
STEVE DAINES, Montana                TAMMY BALDWIN, Wisconsin
                                     BARBARA A. MIKULSKI, Maryland
                                       (ex officio)

                           Professional Staff

                            Carlisle Clarke
                            Patrick Carroll
                             Rachel Santos

                   Jessica Arden Schulken (Minority)
                        Dianne Nellor (Minority)

                         Administrative Support

                         Teri Curtin (Minority)
                            
                            
                            C O N T E N T S

                              ----------                              

                        Thursday, March 12, 2015

                                                                   Page

Department of Health and Human Services: Food and Drug 
  Administration.................................................     1

                        Tuesday, March 17, 2015

Department of Agriculture........................................    51

                     Wednesday, September 16, 2015

FDA Food Supply Safety Efforts...................................   115

                      Wednesday, October 21, 2015

A Review of Rural Development in 21st Century America............   159

 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016

                              ----------                              


                        THURSDAY, MARCH 12, 2015

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10 a.m. in room SD-138, Dirksen 
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
    Present: Senators Moran, Blunt, Hoeven, Daines, Merkley, 
Tester, and Leahy.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                      Food and Drug Administration

STATEMENT OF HON. DR. MARGARET A. HAMBURG, 
            COMMISSIONER, FOOD AND DRUG ADMINISTRATION
ACCOMPANIED BY:
        JAY TYLER, CHIEF FINANCIAL OFFICER, FOOD AND DRUG 
            ADMINISTRATION
        NORRIS COCHRAN, DEPUTY ASSISTANT SECRETARY FOR BUDGET, 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES


                opening statement of senator jerry moran


    Senator Moran. Good morning, everyone. We are delighted to 
have you with us. My first faux pas as new subcommittee 
chairman was to fail to turn on the mike. Senator Blunt is here 
to correct any of those mistakes, and I look forward to working 
with Senator Merkley to see that our subcommittee does its 
oversight work and its appropriations process oversight in a 
very significant and meaningful way.
    We are delighted to be here this morning. Today's hearing 
is going to focus on one of the important aspects of our 
subcommittee, the Food and Drug Administration (FDA), its 
fiscal year 2016 budget request. We thank the Commissioner, as 
I indicated, for being here, along with Mr. Tyler and Mr. 
Cochran.
    We look forward to questioning you, Dr. Hamburg, with this 
being your last appearance before the subcommittee, and let me 
take a moment to thank you for your public service and wish you 
well. We look forward to your testimony today and we look 
forward to your success and enjoyment in the future.
    The agency you head has authority over approximately 20 
cents of every $1 spent in America. Americans expect that the 
food they eat and the drugs they take will be safe and 
effective, and the FDA has vast reach.
    The agency has authority over more than 300,000 foreign 
establishments and 185,000 domestic establishments, ranging 
from food processing plants to facilities that manufacture 
life-saving medications.
    In addition to the facilities themselves, FDA is tasked 
with the regulatory responsibility of individual products. Just 
last week, FDA approved the first biosimilar product in the 
United States, enabling access to important therapies for 
patients in chemotherapy and other cancer treatments.
    In delivering these regulatory responsibilities, your 
private sector partners expect transparency and certainty from 
the FDA, and when I speak to small businesses, agriculture 
producers in Kansas and across the country, their great concern 
is the limits of Government and how it limits their ability to 
create jobs and stifles innovation through unnecessary and 
burdensome regulations.
    In part, we are here to try to eliminate where possible 
that unnecessary burden.
    Over the past 4 years, the FDA has been given significant 
new responsibilities, including the Food Safety Modernization 
Act (FSMA), menu labeling legislation, and drug compounding 
legislation. When implementing these laws, FDA must avoid the 
trappings of one size solution fits all problems. Small 
business and consumers suffer under the practices that limit 
the ability to respond to new requirements and little time to 
implement those changes.
    The agency's final rule on menu labeling in my view is 
overly broad and inflexible and lacks a great deal of 
practicality, and I was disappointed to see the inclusion of 
grocery stores, convenience stores, and other entities that do 
not sell restaurant style food as their primary business 
included in that regulation.
    Under the Food Safety Modernization Act, FDA is tasked with 
implementing the most sweeping changes to food safety laws in 
over 70 years. I was pleased to see that the agency took many 
of the concerns within the agriculture community into account 
by re-proposing significant portions of the rules because they 
were unworkable for farmers.
    With the court mandated deadline for finalization 
approaching, I encourage FDA to consider deliberate and 
thoughtful implementation of this law.
    I look forward to discussing with you these and other 
topics this morning. We have a lot to cover. I will now turn to 
Senator Merkley.
    [The statement follows:]
               Prepared Statement of Senator Jerry Moran
    This hearing will come to order. Good morning. Today's hearing will 
focus on the Food and Drug Administration's (FDA) fiscal year 2016 
budget request, and thank you Commissioner Hamburg, Mr. Tootle, and Mr. 
Cochran for being here today to discuss FDA's priorities for the 
upcoming year. Dr. Hamburg, with this being your last appearance before 
the subcommittee as FDA Commissioner, I want to thank you for your 
public service and your efforts to promote the health and safety of 
American consumers.
    The agency you head has authority over approximately 20 cents of 
every $1 spent in America. Americans expect that the food they eat and 
the drugs they take will be safe and effective. FDA's reach is vast; 
the agency has authority over more than 300,000 foreign establishments 
and 185,000 domestic establishments, ranging from food processing 
plants to facilities that manufacture lifesaving medications. In 
addition to facilities themselves, FDA is tasked with the regulatory 
responsibility of individual products. Just last week, FDA approved the 
first biosimilar product in the United States, enabling access to 
important therapies for patients in chemotherapy and other cancer 
treatments.
    In delivering these regulatory responsibilities, your private 
sector partners expect transparency and certainty from FDA. When I 
speak to small businesses and agricultural producers in Kansas, their 
overwhelming concern is a government that limits their ability to 
create jobs and stifles innovation through unnecessary and burdensome 
regulations. We must always be mindful of these concerns.
    Over the past 4 years, FDA has been given significant new 
responsibilities through the Food Safety Modernization Act, menu 
labeling legislation, and drug compounding legislation.
    When implementing these laws, FDA must avoid the trappings of 
``one-size-fits-all'' solutions. Small businesses suffer under this 
practice all too frequently because they have limited capital to 
respond to significant new requirements and little time to implement 
these changes.
    The agency's final rule on menu labeling is overly broad and 
inflexible and lacks a great deal of business practicality. I was 
disappointed to see the inclusion of grocery stores, convenience 
stores, and other entities that do not sell restaurant style food as 
their primary business.
    Under the Food Safety Modernization Act, FDA is tasked with 
implementing the most sweeping changes to food safety laws in over 70 
years. I was pleased that the Agency took many of the concerns within 
the agricultural community into account by re-proposing significant 
portions of the rules because they were unworkable for farmers. With 
the court-mandated deadlines for finalization approaching, I encourage 
FDA to consider deliberate and thoughtful implementation of the law.
    I look forward to discussing this and other topics with our 
witnesses today. We have a lot to cover this morning, so I will turn it 
over to Senator Merkley for his opening remarks.

                   STATEMENT OF SENATOR JEFF MERKLEY

    Senator Merkley. Thank you very much, Mr. Chairman. I am 
delighted to be here in the role of ranking member, and I am 
certainly looking forward to working with you as we examine the 
budgets for the Department of Agriculture and the FDA.
    Commissioner Hamburg, welcome to what is your last 
appearance before this subcommittee.
    Senator Moran. She is smiling.
    Senator Merkley. You look a little too happy. You have had 
the longest tenure of any FDA Commissioner in recent history, 
so thank you for your service over the last 6 years. You have 
steered the FDA through a period of enormous growth in both 
funding levels and responsibilities.
    In 2009, FDA's budget was just over $2 billion in 
appropriated funds. In 2015, $2.6 billion. If you throw in user 
fees on top of that, the numbers are even higher.
    Since you took the helm, Congress has passed several major 
pieces of legislation including the Family Smoking Prevention 
and Tobacco Control Act, the Food Safety Modernization Act, 
Drug Quality and Security Act, and the FDA Safety and 
Innovation Act, each of which has placed significant new 
responsibilities on the agency, and each of which you are 
currently implementing.
    At the end of the fiscal year, multiple new food safety 
rules will be finalized. I am hopeful that we will see the long 
awaited tobacco deeming regulations from FDA in the next couple 
of months. There is a lot going on, and your leadership will be 
missed.
    I am going to try to wrap this up fairly quickly so we can 
get to questions. I do want to point out this is a very robust 
budget request. The budget for FDA includes an increase of $147 
million in appropriated funding, with much but not all directed 
to food safety activities.
    I know that this subcommittee has been critical of FDA 
budgets in recent years that have simply proposed new user fees 
to fund food safety activities, and the likelihood of approval 
of those fees was minimal.
    This budget does have some additional proposed user fees, 
but also a significant budget authority increase of $109 
million for FSMA implementation, and an increase of $15 million 
for the administration's larger combating antibiotic resistance 
initiative or CARB initiative regarding antimicrobial 
resistance.
    While the FDA's piece of this is small, the role that FDA 
plays in ensuring there are new antibacterial drugs is vital. 
It is a significant issue, and I am pleased to see that you are 
addressing it in the budget, and look forward to your 
testimony. Thank you, Senator.
    Senator Moran. Senator Merkley, thank you. I, too, look 
forward to working with you, and Dr. Hamburg, we are now ready 
for your testimony.
    Dr. Hamburg. Thank you very much, and good morning, 
Chairman Moran--I have the same problem. Six years and I still 
have not learned----
    Senator Moran. Thank you for making me comfortable.

           SUMMARY STATEMENT OF HON. DR. MARGARET A. HAMBURG

    Dr. Hamburg. Thank you, Chairman Moran, Ranking Member 
Merkley, and members of the subcommittee. I am pleased to be 
here today to discuss the President's fiscal year 2016 budget 
request for FDA. It is an important budget request, as Senator 
Merkley noted.
    This will be my final appearance before the subcommittee 
before stepping down as Commissioner, and I want to begin by 
thanking this subcommittee for your past investments in FDA.
    This support has helped us address many of the demands of 
our broad and ever more complex mission. I have appreciated the 
constructive dialogue that we have been able to have over the 
years.
    During my tenure at FDA, Congress has recognized the vital 
and unique role that we play in promoting and protecting public 
health. Landmark new legislation has expanded FDA's authority 
as was just noted.
    We now regulate tobacco products, implement legislation to 
dramatically transform our food safety system, and to expand 
our medical product mandates, and a host of other new programs 
as well, not to mention new requirements to ensure the safety 
and integrity of complex global supply chains for both medical 
products and for food.
    Our accomplishments really demonstrate our ability to 
respond to evolving public health needs and responsibilities 
across the very broad spectrum of products that we regulate.
    However, resources in fact have not kept pace with our new 
authorities and mandates, as well as the demands of dramatic 
advances in the science and technology that underpins the 
products that we regulate, and the rapidly changing global 
marketplace, which has enormous ramifications on the work that 
we do and the people we work to protect.
    Moreover, most of our growth in funding has been in user 
fees provided by regulated industries, resources that can be 
spent only on a limited range of FDA programs.
    We certainly recognize the duty that you have to wisely 
distribute taxpayer dollars among many competing priorities, 
but FDA has had a great return on investment.
    Last year, in terms of budget authority, FDA cost every 
American only about $8 to ensure the safety of their food, 
their access to safe, effective, and even life-saving medical 
products, a safe blood supply, and so much more.
    FDA is committed to finding efficiencies wherever they 
exist. In fact, in the budget before you, we are proposing $16 
million in reductions to our base resources, nonetheless, 
tackling such critical challenges as food safety modernization, 
antibiotic resistance, and precision medicine requires 
additional investments at this time.

                             BUDGET REQUEST

    To help meet our public health mission for fiscal year 
2016, FDA is requesting $4.9 billion, $2.7 billion in budget 
authority, and $2.2 billion in user fees. The increase above 
fiscal year 2015 is $425 million, $148 million of which is 
budget authority. Again, recognizing the larger pressures on 
the Federal budget, we focused the budget request on essential 
functions and urgent needs of our agency.
    I would like first to address FDA's efforts to improve and 
protect America's food supply. The fiscal year 2016 budget 
request includes a total of $1.5 billion for food safety and 
nutrition, including $109.5 million budget authority increase. 
This increase will be largely dedicated to implementation of 
the Food Safety Modernization Act or FSMA.
    Since FSMA was passed in 2011, FDA has made extraordinary 
progress, including the issuance of seven major proposed 
regulations which will be finalized later this year.
    Significant funding gaps still loom. The actual on the 
ground implementation of these regulations will require us to 
modernize inspections and retrain staff to apply the new rules 
effectively and consistently, provide guidance and technical 
assistance to industry to support their compliance efforts, and 
invest in the capacity of our State partners to leverage their 
local knowledge and capacity.
    We also must address concerns about the safety of the large 
and growing volume of food imported from other countries. FSMA 
empowers the agency to hold foreign food producers to the same 
standards we expect of food producers in the United States. We 
must do so to ensure a level playing field for American firms, 
and most importantly, to protect our citizens.
    I cannot overstate the importance of our request to fund 
continued successful implementation of FSMA. A shortfall in 
funding will undermine Congress' intent to transform our 
Nation's food safety program, and will harm all stakeholders.
    If we invest now, I am confident that we can fulfill FSMA's 
vision of a modern prevention oriented food safety system that 
works collaboratively across our global food system to reduce 
foodborne illness, bolstering public confidence in the food 
supply, and maintaining U.S. leadership on food safety.
    In the vital area of medical product safety and innovation, 
the fiscal year 2016 budget request provides a program level of 
$2.7 billion, including a budget authority increase of $33.2 
million above fiscal year 2015.
    Part of the proposed budget increase will support FDA 
implementation of key initiatives of FDASIA, the Food and Drug 
Administration Safety and Innovation Act, and to continue 
important work on the national strategy for combating 
antibiotic resistant bacteria, where we have made important 
strides on both the human and the animal front, although this 
remains a pressing public health challenge.
    An additional $10 million is to support FDA's essential 
role in personalized or precision medicine, and enable us to 
continue to speed the development of promising new diagnostics 
and treatments for patients with serious illnesses.
    Our exciting work in medical product innovation and safety 
is a testament both to the new opportunities that have been 
presented by scientific knowledge and technology, as well as 
our innovative approaches to expedite development and review of 
medical products to address unmet medical needs while adhering 
to established standards for safety and efficacy.
    In fact, in 2014, FDA approved the most new drugs and 
biologics in almost 20 years, and brought life-saving drugs to 
market more quickly than ever. We have also made real progress 
in reducing times for medical devices to reach the market.
    Enhanced funding will help us to maintain our Nation's 
preeminence in biomedical product innovation and safety, and 
will benefit us all.
    Let me close by underscoring that FDA's public health 
mission is indispensable to the health and well being of every 
American. We carry out our mission effectively and with 
relatively few taxpayer dollars, despite tremendous expansions 
in our responsibilities as a result of new legislation, 
scientific and technological advances, and a globalized 
marketplace.
    Our budget request plans for efficient spending on programs 
that are essential to providing Americans with safe foods and 
safe and effective medical products that they expect and count 
on.
    I know that with your ongoing support, FDA will continue to 
move forward in fulfilling its critical responsibilities to the 
American public.
    Thank you.
    [The statement follows:]
           Prepared Statement of Hon. Dr. Margaret A. Hamburg
                              introduction
    Good morning Chairman Moran, Ranking Member Merkley, and members of 
the subcommittee, I am Dr. Margaret Hamburg, Commissioner of the Food 
and Drug Administration (FDA). Thank you for the opportunity to appear 
before you today to discuss the President's fiscal year 2016 budget 
request for FDA. I would like to thank the subcommittee for its past 
investments in FDA, which have helped us meet the demands of our broad 
and increasingly complex mission. For fiscal year 2016, FDA is 
requesting $4.9 billion to support our essential functions and priority 
needs.
    On a personal note, I'd like to thank the Committee for its 
continuing commitment to these issues during my 6 years as 
Commissioner. As you know, I will be stepping down at the end of this 
month, so this will be my final appearance before this subcommittee. I 
will miss the constructive dialogue we have enjoyed over the years to 
address matters of mutual concern. My decision to leave FDA was not an 
easy one, as there is always more to be done, and I remain dedicated to 
the vital work and mission of the agency. But, I am confident that I 
leave the agency stronger and more effective than when I began, and 
better positioned to meet the challenges of the 21st century. And, I 
know that with your commitment, FDA will continue to move forward in 
fulfilling its critical responsibilities to the American public.
        fda plays a vital role in america's public health system
    FDA is a science-based regulatory agency charged with an enormous 
and significant public health mission: to promote and protect the 
health of the American people. Our goal in carrying out our mission is 
to ensure the safety, effectiveness, and quality of medical products, 
as well as the safety and security of the vast majority of our Nation's 
food supply. The agency also regulates the manufacturing, marketing, 
and distribution of tobacco products and seeks to reduce the use of 
tobacco products by minors. FDA plays a unique and vital role in 
facilitating the availability of safe and effective products, while 
also protecting citizens from products that may cause harm.
    FDA's important work promotes innovation in the industries it 
regulates, creates jobs, and positions domestic industries to compete 
in the global marketplace. History shows that when there is public 
trust in FDA's oversight, the industries we regulate flourish. 
Conversely, when food and medical products cause serious harm, the 
result is often severe economic damage across the industry involved.
    Congress has recognized the dynamic role that FDA plays and the 
increasingly complex and global environment in which we operate. As a 
result, FDA has been tasked with a multitude of new responsibilities 
and authorities in the public health arena, including the Drug Quality 
and Security Act (DQSA); the FDA Safety and Innovation Act (FDASIA); 
the FDA Food Safety Modernization Act (FSMA); and the Family Smoking 
Prevention and Tobacco Control Act. While FDA has stepped up to meet 
these essential public health challenges under current funding levels, 
successful implementation of these new authorities requires significant 
additional resources.
                fda has a proven track record of success
    FDA's accomplishments over the past year have been as substantial 
as any in the agency's recent history. Across the areas of food safety 
and nutrition, medical product safety and innovation, tobacco control, 
and other areas of our work, our accomplishments demonstrate our 
ability to respond to evolving needs and opportunities--including the 
embrace of new approval pathways, innovative technologies, and cutting-
edge science.
    Moreover, especially given the importance of our work, FDA is a 
bargain. The products regulated by FDA account for more than 20 percent 
of every consumer dollar spent on products in the United States but 
individual Americans only pay about 2 cents per day to ensure that 
those products are safe and effective. This is a small price for life-
saving medicines approved as fast or faster than anywhere in the world, 
confidence in medical products that are relied on daily, and a food 
supply that is among the safest in the world.
      fda's innovations improve and protect america's food supply
    Food Safety Modernization.--FDA published seven major proposed 
rules and, based on stakeholder input, four supplemental proposals to 
implement FSMA. The agency also completed 8,607 high-risk food 
establishment inspections in fiscal year 2014, exceeding the target of 
6,507 inspections by 32 percent. FDA also released a FSMA Operational 
Strategy Document that focuses on how we can implement FSMA by 
prioritizing prevention, voluntary compliance, risk-based oversight, 
and expanded collaboration across the food safety community.
    Genome-Based Food Pathogen Detection.--FDA established GenomeTrakr, 
the first national pilot network of whole genome sequencers (WGS) for 
pathogen identification to trace where outbreaks start--even at the 
level of a single farm or food facility--based on whole bacterial 
genomes. FDA is already utilizing this innovative technology, such as 
in the identification and closure of a cheese facility connected to a 
Listeria monocytogenes outbreak, to take quicker, yet more targeted, 
action and likely prevent a larger number of illnesses.
    Nutrition Labeling.--On December 1, 2014, FDA published two final 
rules requiring that calorie information be listed on menus and menu 
boards in chain restaurants and similar retail food establishments, and 
on signs for vending machines. Americans eat and drink about one-third 
of their calories away from home, and this is an important public 
health step to help consumers make informed choices for themselves and 
their families. FDA also proposed important updates to the nutrition 
facts label, such as more prominent calorie declarations, to bring it 
up to date with current diet and health concerns.
            promoting innovative medical product development
    Medical Product Application Review.--FDA's rapid drug reviews and 
use of expedited programs has helped provide meaningful new products to 
U.S. patients. In 2014, FDA approved 51 new molecular entities and 
biological products, more than in any single year in almost 20 years. 
Among the 2014 approvals are treatments for cancer, hepatitis C and 
type-2 diabetes, as well as the most new drugs for ``orphan'' diseases 
since Congress approved the Orphan Drug Act more than three decades 
ago. Seventeen of the new approvals are ``first in class'' therapies, 
which represent new approaches in the treatment of disease, and almost 
two-thirds were approved first in the United States. In addition, 
important biological products approved in 2014 include a number of 
groundbreaking vaccines for meningitis B, the flu, and certain types of 
human papillomavirus.
    From 2011 to 2014, the median number of days for FDA to approve 
investigational device exemption (IDE) submissions decreased from 442 
to only 101, cutting the time it takes to bring a new medical device to 
market by nearly a full year. In addition, improvements to the de novo 
program have resulted in a 70-percent reduction in the average total 
time to decision for these submissions.
    These developments are a testament not just to expanding 
understanding of human biology and the molecular mechanisms that drive 
the disease process, but also to FDA's innovative approaches to help 
expedite development and review of medical products that target unmet 
medical needs, while adhering to the established standards for safety 
and efficacy.
    Abuse-Deterrent Opioid Medications.--FDA continues to make progress 
in its efforts to help reduce prescription drug abuse, while remaining 
committed to ensuring that patients with pain have appropriate access 
to medicines they need. In 2014, FDA approved three new opioids with 
abuse deterrent features to give physicians effective new treatment 
options with less risk of abuse. To help encourage the development of 
more abuse-deterrent formulations of opioids, the agency hosted a 
public meeting to discuss scientific and technical issues related to 
development and assessment of abuse-deterrent opioid products and is 
working diligently to finalize its guidance on this topic this spring. 
We also approved a new dosage form of naloxone with an autoinjector to 
allow for the emergency treatment of opioid overdoses in community 
settings.
    Drug Quality and Security Act.--During fiscal year 2014, FDA 
conducted over 90 inspections of compounding facilities, issued warning 
letters, and worked with DOJ to bring criminal and civil enforcement 
actions. The agency also continued to develop a framework to implement 
the new law. FDA has issued numerous policy documents to implement 
Federal Food, Drug, and Cosmetic Act section 503A, as amended by the 
DQSA, as well as section 503B, as added by DQSA, concerning outsourcing 
facilities. In addition, on February 23-24, 2015, FDA held the first 
meeting of the Pharmacy Compounding Advisory Committee to provide 
advice on scientific, technical, and medical issues concerning drug 
compounding.
     fda works to reduce the impact of tobacco on the public health
    Family Smoking Prevention and Tobacco Control Act.--FDA published 
the proposed ``deeming rule'' to extend FDA's tobacco authority to 
additional tobacco products, including e-cigarettes, and is reviewing 
over 135,000 comments the agency received in preparation of the final 
rule. Public health-based regulation of these products can help reduce 
the death and disease toll from tobacco use. FDA also closely monitors 
retailers' compliance with restrictions on tobacco product marketing 
and sales to youth--and takes strong corrective action when violations 
occur. In addition, the agency launched a major public education 
campaign targeting youth about the dangers of tobacco products, with 
the goal of reducing or preventing use in future generations.
          fda tackles emerging, unique, and complex challenges
    Combating Antimicrobial Resistance.--FDA has made important strides 
in confronting the growing resistance of some bacteria to antimicrobial 
drugs. In 2014, FDA approved four novel systemic antibiotics to expand 
the pipeline of new medical products available for identification, 
prevention, treatment, and/or cure of bacterial infections. In 
contrast, only five new antibiotics had been approved in the previous 
10-year period. In addition to working on the human medical product 
side, FDA has made great progress on its initiative to fight 
antimicrobial resistance by restricting the use of medically important 
antimicrobials in food animal production to legitimate animal health 
purposes. All 26 drug companies with affected products have committed 
in writing to remove animal production uses from their FDA-approved 
labels and bring the remaining medical uses under veterinary 
supervision by the end of 2016. FDA is working closely with USDA, 
producers and drug companies to support implementation of these 
important changes and gather data to verify their effectiveness in 
reducing antimicrobial resistance.
    Ebola Outbreak Response.--In response to the Ebola epidemic in West 
Africa, FDA has acted aggressively to help expedite the development and 
availability of investigational medical products for Ebola, including 
by: providing regulatory advice and guidance to commercial developers 
and U.S. agencies; helping to facilitate access to investigational 
medical products for patients with Ebola when requested by clinicians; 
and authorizing the use of eight investigational diagnostic tests for 
Ebola under FDA's Emergency Use Authorization authority. We have 
collaborated extensively with the World Health Organization, NGOs and 
several international regulatory counterparts to support international 
response efforts. FDA has also monitored for fraudulent products that 
claim to prevent, treat, or diagnose Ebola and took action, as 
warranted, to protect public health.
           fda's fiscal year 2016 president's budget request
    The fiscal year 2016 President's budget request for FDA is $4.9 
billion for the total program level, which is $425 million above the 
fiscal year 2015 enacted level. Of the total funding, $2.7 billion is 
budget authority and $2.2 billion is user fees. The fiscal year 2016 
increase consists of $148 million in budget authority and $277 million 
in user fees. The growth in user fee funding stems from several new 
programs, along with increased collection authority for many of FDA's 
existing programs. Mindful of the larger pressures on the Federal 
budget, we have focused our request on the most urgent needs for fiscal 
year 2016.
                              food safety
    The fiscal year 2016 budget provides a total program level of $1.5 
billion for food safety, which is $301 million above the fiscal year 
2015 enacted level. This total includes a $109.5 million increase in 
budget authority and a $191.8 million increase in user fees. The 
proposed budget authority increase will be almost exclusively dedicated 
to implementation of FSMA.
    FDA's successful implementation of FSMA is essential to reducing 
foodborne illness, bolstering public confidence in the food supply, and 
maintaining U.S. leadership on food safety internationally. With FDA 
under court order to issue many key FSMA regulations in 2015, fiscal 
year 2016 is an absolutely crucial year for the investments needed to 
ensure timely, effective, and non-disruptive implementation. FDA's 
collaborative implementation strategy requires a modernized approach to 
inspection and enforcement, focusing on food safety outcomes and 
encouraging voluntary compliance. To be successful, this strategy 
requires retraining and retooling of FDA and State inspectors. In 
keeping with FSMA's theme of collaboration and partnerships, the 
largest single portion of the budget authority will go to the States to 
better integrate, coordinate, and leverage Federal and State food 
safety efforts.
    FDA's FSMA philosophy of ``educate before and while we regulate'' 
also requires investing in guidance, education, and technical 
assistance for industry to support their compliance efforts, especially 
among smaller scale farmers and manufacturers. FDA will deliver this 
assistance through collaborative alliances and training partnerships.
    Finally, FDA must make crucial investments in fiscal year 2016 to 
implement the new import safety system mandated by Congress. This 
includes FSMA's Foreign Supplier Verification Program requirements, 
which are the foundation for FSMA's new import safety system and key to 
helping assure a level playing field of food safety standards and 
oversight for U.S. consumers and industry.
    The investments FDA can make with the fiscal year 2016 budget 
authority request will enable the agency to maintain momentum toward 
timely and successful implementation of FSMA. Without these 
investments, implementation will be disrupted and delayed.
                 medical product safety and innovation
    The fiscal year 2016 budget provides a program level of $2.7 
billion, which is $84.8 million above the fiscal year 2015 enacted 
level, to continue core medical product safety activities across FDA 
programs.
    With part of this increase, FDA will support implementation of 
three initiatives of FDASIA: the Unique Facility Identifier; Unique 
Device Identifier; and Electronic Biological Product Application 
Submission programs. FDA will also continue contributing to the 
National Strategy for Combating Antibiotic-Resistant Bacteria (CARB) to 
help ensure the judicious use of medically important antimicrobials in 
food-producing animals; to evaluate new antibacterial drugs for patient 
treatments; to streamline clinical trials; and to develop better 
vaccines for antibiotic resistant organisms. An increase of 
approximately $1 million will support continued implementation of new 
compounding oversight authorities and the evaluation of sunscreen 
ingredients. Finally, $10 million of the increase will help FDA adapt 
its regulatory process to developments in ``precision medicine.'' 
Funding this initiative will permit FDA to keep pace with scientific 
advancements and help speed the development of promising new 
diagnostics and treatments that will enable precision medicine to be 
successful.
                          rent and facilities
    Within the budget request, FDA requests a program level increase of 
$38.9 million for infrastructure. FDA has a growing workforce of 16,000 
full-time equivalents (FTEs), resulting in rising operational rent 
costs. Without the requested funding, FDA cannot simultaneously support 
this expanded workforce, critical facility needs, and its increasing 
programmatic responsibilities. The request also includes funding for a 
feasibility study to address FDA's expanded workforce and facility 
needs on the White Oak campus.
                         current law user fees
    A $78.5 million increase is requested for current law user fees, 
which will help FDA fulfill its mission of protecting the public health 
by assuring the safety and efficacy of human and veterinary drugs, 
biological products, and medical devices, assuring the safety of our 
Nation's food supply, and advancing the public health by helping to 
speed innovations that will offer safer, more effective and higher 
quality medical products.
                               conclusion
    FDA's public-health mission is indispensable to the health and 
well-being of every American. We carry out our broad public health 
responsibilities effectively and with relatively few taxpayer dollars, 
despite dramatic expansions in our responsibilities as a result of new 
legislation, scientific and technological advances, and a globalized 
marketplace. Our budget request plans for efficient spending on 
programs that are essential to providing Americans with the safe foods 
and safe and effective medical products they expect. We look forward to 
answering your questions today and to working with you in the coming 
year.

    Senator Moran. Commissioner, thank you very much. In the 
hopes that the human trafficking legislation can proceed, we 
are going to allow Senator Leahy the opportunity first to ask 
questions so he can get to the Floor.

                          DRUG SAFETY LABELING

    Senator Leahy. Mr. Chairman, I appreciate especially as the 
newest member of this subcommittee the courtesy of the 
chairman.
    A couple of questions. Commissioner, as I told you 
privately before, I hate to see you leave. I understand it 
reaches a point, but thank you for what you have done.
    In 2013, FDA issued a proposed rule that ensures generic 
drug companies can update their safety labels when they learn 
new safety information. Brand-name manufacturers have that 
ability now, and it is tremendously important. I have a 
constituent, Diana Levine, who was able to seek justice when 
she got a mislabeled brand-name drug and lost her hand as a 
result of it.
    The FDA's proposed rule for generics has been sitting there 
for over a year, and the FDA recently reopened its rulemaking 
which would allow an industry backed alternative that actually 
turns the existing labeling rules on its head. Their proposal 
is that no brand-name drug company nor generic drug company 
could update its label immediately upon learning of adverse 
side effects, and there would be no liability if something 
happened.
    That does not seem the way it should be. I would hope FDA 
would commit to complete the rulemaking in a way that if there 
are problems with a drug, that consumers would know about it 
immediately, not have it delayed.
    Dr. Hamburg. Thank you for those observations. Certainly, 
our goal as we are working through this process is to ensure 
that patients and their healthcare providers can get access to 
the most recent safety information, wherever it emerges from, 
whether it is from experience with an innovator drug or generic 
drug, and that the systems really enable rapid and responsive 
communication of information.
    We have received a lot of comments on the proposed 
guidelines, lots of different stakeholder perspectives. We have 
tried to listen very carefully and have held a number of 
meetings and are holding another public meeting on March 27.
    We do plan, of course, to proceed with finalizing, but we 
want to make sure the process is inclusive, but the goal is to 
provide the best possible information for patients.
    Senator Leahy. Best possible and the most timely.
    Dr. Hamburg. And the most timely. Realistically, one of the 
concerns that you may be aware of is if only the innovator can 
make the change, the sponsor of the original product, then what 
happens in a world where there is increasing reliance on 
generics and some of the original innovator drugs are no longer 
in the marketplace.
    Senator Leahy. Also the warnings can be done immediately, 
perhaps not the changes immediately, but the warnings could. I 
will follow up with further questions on that.

                       MAPLE INGREDIENT LABELING

    Let me go to what may sound like a parochial thing. In 
Vermont, winter will end; I have been assured after having 
lived there for 75 years, it does end. Then we go into maple 
season. It is very, very hard work on the 30-so gallons of sap 
for every 1 gallon of maple syrup, but we are able to do this 
and we can sell it because people rely on it being pure maple 
syrup.
    Here is what is happening. More and more things are being 
sold. For example, this is pure Vermont maple syrup. I would 
hasten to add that it is very, very good. We go through a lot 
at home. Then people have things like this that are sold, maple 
and brown sugar. You go into the ingredient list, and there is 
no maple whatsoever. There is caramel color and things like 
that.
    Are you able in your funding to go after people who are 
actually mislabeling these things, because the people who have 
done the work for this pure Vermont maple syrup are being badly 
hurt.
    Dr. Hamburg. Well, certainly the kinds of responsibilities 
that FDA pursues involves ensuring the accuracy of labeling in 
key areas.
    This issue about the maple syrup is not unknown to us, and 
in fact, we did recently pursue a criminal case where someone 
took cane syrup with a little bit of maple syrup flavoring, I 
guess, and labeled it as a product of Vermont when in fact it 
was not, and as maple syrup. In fact, those individuals pled 
guilty. That was back in 2012, I think.
    We hope that actions like that send a message, but it is 
the case that we have such a broad range of responsibilities, 
we do have to prioritize. Certainly, the issues around being 
able to pursue all of the misleading and false claims has been 
one that has been challenging for us in areas that range from 
food products to drugs to dietary supplements to cosmetics, and 
it is one where working with industry and working with 
consumers so we get reports where there are actions that we can 
aggressively take are very helpful to us.
    Senator Leahy. I realize you have to be selective. I can 
tell you right now, unless there is really strong action 
against some of these people, you are going to destroy 
something that is not only part of the culture of our State, 
but it is a very important industry in our State, and one in 
which there are some very, very hard working people who through 
no part of their own are wiped out.
    Dr. Hamburg. It is very important. The more we can get 
information about where problems occur, we monitor the 
marketplaces well. We do inspections to enhance our enforcement 
activities.
    We were pleased we were able to take that action swiftly 
and aggressively to protect true and authentic maple syrup from 
Vermont.
    Senator Leahy. Thank you, Mr. Chairman.
    Senator Moran. You are certainly welcome. It is nice to see 
the Senator from Vermont parochially protecting----
    Senator Leahy. First time a parochial interest has ever 
come up in my 40 years on this Committee.
    Senator Moran. All the rest of us are certainly reluctant 
to criticize that circumstance.

           STATUTORY ROLE OF THE FOOD AND DRUG ADMINISTRATION

    Commissioner, let me ask first, one of the areas that I 
have focused some attention on in my time on the Appropriations 
Committee, and Senator Blunt is now the chairman of the Labor, 
Health, and Education Appropriations Subcommittee, but what is 
the formal statutory as well as informal relationship between 
the Centers for Disease Control (CDC), the National Institutes 
of Health (NIH), the Department of Health and Human Services 
(HHS), how does FDA statutorily and otherwise relate to the 
healthcare issues, the health issues, associated with those 
other agencies?
    Dr. Hamburg. We are one of the agencies of the Public 
Health Service, and we are part of the Department of Health and 
Human Services. I report to the Secretary of Health and Human 
Services. Many of the authorities that I have as FDA 
Commissioner derive through authorities given to the Secretary.
    Certainly, we work very closely with our partners in the 
Public Health Service. There are many issues of overlapping 
concern, whether it is food safety and the infectious disease 
work that NIH does, the outbreak investigation work that CDC 
does, and the product oversight that we do. We work together as 
a team or in response to an emerging public health crisis like 
Ebola, where we all have important roles to play in order to 
support an effective and meaningful public health response.

                           DIETARY GUIDELINES

    Senator Moran. Let me ask about one or two of those arenas. 
In regard to dietary guidelines, what role will FDA have in 
advising the Department of Health and Human Services?
    Dr. Hamburg. For the dietary guidelines, at least as I 
understand it, it is a process that ultimately involves 
decisionmaking that is coordinated between the Secretary of 
Health and Human Services and the Secretary of the Department 
of Agriculture, USDA.
    FDA does play a role in reviewing reports and information 
that goes into the final determinations, and we of course bring 
our science based approaches to our recommendations in terms of 
nutrition science and health.
    Senator Moran. What is the status of that process now at 
the Department of Health and Human Services and your role?
    Dr. Hamburg. I believe there is a report that is currently 
under review that was developed by a group of outside 
scientific experts, and we like other components of HHS have 
been asked to review that report and make comments for the 
Secretary.

                     EBOLA EMERGENCY APPROPRIATIONS

    Senator Moran. You mentioned Ebola, one that the Centers 
for Disease Control as well as NIH was actively engaged in. 
Congress appropriated additional money to the FDA to expedite 
and develop the availability of medical products related to 
Ebola.
    Can you bring us up to date on the status? What approval 
process success have we had in the effort to combat Ebola?
    Dr. Hamburg. The FDA has been very actively involved in 
responding to Ebola. We are not quite as visible. We are not 
the front page news on the response to the Ebola crisis, but we 
have played a very meaningful role in terms of both trying to 
make unapproved medical products available as needed for 
diagnosis or treatment of individuals at risk for disease or 
with disease.
    Importantly, also working with our scientific colleagues to 
really put in place the systems for scientific evaluation and 
research so that we can actually learn what works and what does 
not in terms of new treatments and vaccines that may have a 
very important role in this continuing outbreak, but will be 
absolutely crucial to have when there is a future epidemic.
    Sadly, by the nature of this disease, there almost 
certainly will be future problems with Ebola in Africa, and 
perhaps in other places.
    We also have a role in monitoring for fraudulent products 
and fraudulent claims. Sadly, in the Ebola situation as we have 
seen in other public health crises, there are people that 
readily jumped to the opportunity to try to sell products that 
offer hope but no proven value, so we also are taking action 
against some fraudulent products in the marketplace.
    Senator Moran. Commissioner, can you point to changes in 
process, in other words, expediting the process to get medical 
approval accomplished? What has happened since Congress gave 
the supplemental appropriations to FDA that is different today 
than it would have otherwise been?
    Dr. Hamburg. Congress has been beneficial in our ability to 
respond in a number of ways, certainly the supplemental funds 
that were given for Ebola will make a significant difference. 
As yet, those funds have not been expended. We have responded 
pulling from other resources, but those dollars are going to be 
very meaningful in our overall program.
    Authorities that Congress has given us at earlier points 
have also made a difference. The emergency use authorization 
(EUA), for example, that was part of the Pandemic and All 
Hazards Preparedness Act (PAHPA) legislation, has enabled us in 
this context and in other settings to be able to make as yet 
unapproved diagnostics available so that better assessments of 
patients and their needs can be made.
    In response to Ebola, we have done a significant number of 
EUAs, making those products available, and certainly some of 
the flexibility in terms of regulatory pathways that Congress 
has given us has enabled us to move more swiftly.
    Senator Moran. Thank you. Let me now turn to the ranking 
member, Senator Merkley.

                       TOBACCO DEEMING REGULATION

    Senator Merkley. Thank you very much, Mr. Chair. Thank you 
for your testimony, Dr. Hamburg. It will not surprise you that 
I want to start by addressing the rules controlling the 
regulation of tobacco products.
    It was 2009 when the United States, Congress, and the 
President passed legislation giving FDA the power to regulate 
these products. We are now in 2015, 6 years later. We do have a 
draft deeming rule out, and comments have been turned in. At 
last count, I understand the goal is to have a final deeming 
rule out by June.
    Can you give us assurances that we are going to have this 
rule by June, 6 years since the legislation was passed?
    Dr. Hamburg. I can tell you that it is my strong commitment 
and that of the team at the FDA--we are shooting very hard for 
that June timeframe. We feel this is an absolutely essential 
regulation that is foundational for many other aspects of our 
ability to meaningfully regulate tobacco products that are in 
the marketplace and may be in the marketplace in the future.
    I share your deep interest in this and can assure you of 
the commitment of our agency. We did, as I think you know, get 
an enormous number of comments on the deeming rule when we did 
the proposed reg. I think it was more than 135,000. Some of 
them were duplicative, I will say. Serious comments.
    We are systematically going through. We knew we would get a 
lot of comments. We geared up for that, and we do not feel that 
will be an impediment to meeting our tentative, and publicly 
indicated the goal in terms of what was put forward in the 
unified agenda of June 2015.
    Senator Merkley. Can you give us some sense as to whether 
the final rules will prevent the tobacco industry from selling 
candy-flavored products?
    Dr. Hamburg. You know, I cannot comment on what is in a 
rule that is still in formulation.
    Senator Merkley. Do you think it would be a good idea for 
the final rule to include----
    Dr. Hamburg. Let me say this is an area of intense focus 
and concern. One of the things that I would like to highlight 
in terms of FDA activities that I think are really a 
contribution has to do with the research that we are actually 
supporting through our tobacco program to better understand 
some of these issues about the influence of different aspects 
of tobacco products on behavior and use, initiation and 
succession, and also looking at subpopulations who may be using 
tobacco products differently.
    We are investing in some very targeted research activities 
in different key areas, and also a first of its kind major 
longitudinal study that we are doing in collaboration with NIH 
that will give us very important insights, and the data for 
regulatory decisionmaking that will be so crucial, so that when 
we make regulations in key areas, they will be based on good 
strong science that will meet the public health needs and also 
be able to survive potential litigation, which we know in this 
arena can often come.

                              E-CIGARETTES

    Senator Merkley. Thank you for all that work. During this 
timeframe, these years that have been passing, many, many new 
products targeted at children have come forward. New 
technologies have come forward with the E-cigarettes.
    We are finding that children are finding easy access to E-
cigarettes. Just to give you an example, I know we anticipate 
the deeming regulations will require minimum age and i.d. 
restrictions to limit access to children, but a study funded by 
the National Cancer Institute published at the beginning of 
this month showed that getting E-cigarettes online by children 
is quite easy, specifically found that only 5 of 98 attempts by 
teens to buy E-cigarettes online were blocked by online vendor 
attempts to verify customer age.
    CDC has also reported the rate of teens who reported using 
E-cigarettes has doubled just between 2011 and 2012. My 
understanding is that is continuing to grow very rapidly 
between 2012 and now.
    What this means is while this vacuum exists, and I must say 
when products are labeled after things like flavored gummy 
bears and double dutch chocolate, so on and so forth, the 
targeting for children is quite obvious, and certainly it is 
well understood that addiction to nicotine occurs in your 
teenage years, that addiction rarely occurs after the age of 
21.
    It is obvious why this is being done. This has tremendous, 
huge health implications for our youth. This is why we are 
expecting FDA to act as if every person in the agency has a 
child who might be affected by the ulterious effects of 
nicotine addiction.
    It has been a little bit of a sense by many of us here in 
Congress, and you know the phrase, ``While Nero fiddled, Rome 
burned.'' While the FDA is fiddling around with trying to get 
everything perfect, a tremendous number of our children become 
addicted to products deliberately targeted at them.
    It is in your power to act. If there is any way to convey a 
sense of urgency that just seems to be missing over the last 
now 6 years on your way out, as you wrap up, it would be so 
important to the health of this Nation.
    Dr. Hamburg. I can tell you we do have a sense of urgency. 
We do understand this is a historic opportunity to transform 
the oversight of these products and to really bring science 
based public health regulation to bear.
    We feel the same sense of urgency you do to get the deeming 
rule completed because that is the foundation for some of the 
other important actions that you are talking about. We do feel 
that while deeming is one key aspect of what we are doing, we 
also are making enormous strides forward in other key ways, 
including limiting access of cigarettes and the other products 
specified in the Family Smoking Prevention and Tobacco Control 
Act to children, targeting also an educational campaign at 
youth.
    As you know, much of life-long smoking begins in young 
people. I think sadly you can get addicted to nicotine at any 
age, but it is certainly the pattern with smoking that if you 
start smoking young, you are more likely to continue into 
adulthood with all of the attendant and preventable health 
consequences.
    I can assure you that terrific important work is going to 
continue to come out of our Center for Tobacco Products. It is 
a commitment that extends across the whole agency in terms of 
its priority. We certainly hear your concerns and want to work 
with you going forward.
    Senator Merkley. Thank you very much, Doctor.
    Senator Moran. The Senator from Missouri, Senator Blunt.

                             MENU LABELING

    Senator Blunt. Thank you, Chairman. I look forward to 
working with you and your leadership on this subcommittee. I 
have been on this subcommittee as you have, since we came to 
the Senate. I find it a very encouraging subcommittee to be 
part of. Certainly, Senator Pryor did a great job of leading 
the subcommittee the last 2 years, and I would hope that you 
and Senator Merkley have the same positive relationship that 
Senator Pryor and I had as we sat in the two seats that you are 
in now.
    Commissioner Hamburg, while we have not agreed on 
everything you have done, I think the country has benefited 
from the great capacity, energy, and judgment you have brought 
to this job. I am glad you have been willing to stay as long as 
you have. I am sure there are lots of other opportunities out 
there, and you will soon find out just how good they are, and I 
hope they are good.
    One of the things I have often said in your leadership 
here, one of the great things you have been able to do is be so 
knowledgeable in so many areas, that when there was something 
you did not know, you did not hesitate to say I really do not 
know and I will find out, which only verified the many things 
that you did know.
    Thanks for the work you have done. Good luck in what you 
will do next.
    Senator Moran has already brought up menu labeling, a topic 
that you and I have spent a lot of time and energy talking 
about over the last several years. I know it is an assignment 
that took a lot more time than anybody would have ever 
imagined.
    I am not going to give you time to respond to it today 
because we could quickly lose the 3 minutes and 29 seconds I 
have left.
    I do have a series of questions for the record that I am 
hearing and Senator Moran is hearing, others. What is 
restaurant type food, what is food on display, what is a 
standard menu item. There are a number of questions and I have 
about 15 of them here in front of me that we will ask you and 
your staff to deal with, not only for the benefit of the 
committee, but for all the people that currently believe 
without those questions being answered quickly, they cannot 
comply by the end of this year with what the Department is 
asking them to comply with.

                      MOBILE MEDICAL APPLICATIONS

    Senator Blunt. In terms of the new technology out there, I 
think one of the challenges for the Acting Commissioner and 
then the full-time Commissioner will be how to deal with 
everything that is happening and Smartphone technology as a 
shorthand way to discuss the many things that are going to be 
out there that will be quickly improved and improvable, and 
more and more affordable, unless we needlessly stand in the way 
of that.
    I think you are leaving a discussion in place that is a 
helpful one about at what point does FDA need to be involved 
and at what point does FDA not need to be involved.
    I would hope that discussion goes on where we really try to 
figure out what kinds of things have life threatening impact 
and what kinds of things are just simply helpful for you and 
others to know about your daily health that can be monitored 
quickly in ways that it has not been before. That is certainly 
something as a member of this subcommittee I continue to be 
looking at.

                             GENERIC DRUGS

    A couple of quick questions. One, on generic drugs, while I 
think under your leadership, the approval of new drugs has 
gotten quicker. The approval of generic drugs has gotten 
slower. I think we are up to the point now where we have gone 
from 30 months in 2011 to 42 months in 2014.
    I want to talk a little about what we can do to make that 
move from the more expensive drug to the generic drug happen 
more quickly than it is happening now, or at least as quickly 
as it used to happen.
    Dr. Hamburg. I am not aware of those numbers you are 
citing. I will have to go back. As you say, if I do not know, I 
will say so. In fact, we have been making a major push in the 
generic drug area. It is true we have had unacceptable backlogs 
in approval times.
    As part of FDASIA and the user fee negotiations, for the 
first time in that process, we actually worked with the generic 
drug industry to develop a user fee program so we could get 
more adequate resources to do the job both in reviewing drug 
applications and in addressing the backlog.
    We have expanded the program. We have made great progress 
in addressing the backlog. One of the challenges with generic 
drugs, which as you note are so important in terms of people 
having access to important medical care, and they now represent 
a very, very large proportion of spending on prescription 
drugs, but many of the generic drugs that are used in this 
country are actually manufactured overseas.
    There is also additional complexity in our approval process 
of the need to do inspections of the facilities before 
approval, and the additional time and costs of the 
international component.
    The fact that we have now this user fee program in place, 
which has measurable goals and performance measures that are 
transparent and monitored by industry and other stakeholders, I 
think you are going to see enormous progress. I think we have 
made enormous progress.
    We have addressed 72 percent of the existing backlog that 
was in place at the time that the Prescription Drug User Fee 
Act (PDUFA) and FDASIA went into effect.
    I think you will be pleased by the progress that has been 
made and will continue to be made.
    Senator Blunt. Just one follow up on that, Mr. Chairman. I 
am told there are 4,000 applications pending.
    Dr. Hamburg. That was the backlog at the time that FDASIA 
was----
    Senator Blunt. What do you think the pending number today 
is?
    Dr. Hamburg. As I said, I understand we have cleared/
addressed 72 percent of that backlog.
    Senator Blunt. I assume other people are applying. What has 
been added to that number?
    Dr. Hamburg. Our commitment in the PDUFA process, the 
generic drug user fee process, was that by 2017, we would have 
eliminated all backlog, existing and from incoming.
    Senator Blunt. You believe you will?
    Dr. Hamburg. I do believe that we will.
    [The information follows:]

    Answer. Based on the volume of generic applications received in 
previous years, the Generic Drug User Fee Act (GDUFA) [program] assumed 
that the Food and Drug Administration (FDA) would receive approximately 
750 original abbreviated new drug applications (ANDAs) per fiscal year. 
In fact, we received significantly more in the first 2 years of GDUFA: 
almost a third more applications in fiscal year 2013; and double the 
expected number in fiscal year 2014.
    Approximately 3,300 original ANDAs are currently pending with the 
agency while 700 are pending with industry.
    We are determined to make significant progress in reducing these 
numbers over the next few years and achieving GDUFA performance goals.

    Senator Blunt. Thank you, Chairman, for letting me follow 
up.
    Senator Moran. To the Senator from Montana, I do not think 
I ever served on a committee in the Senate that we have not 
been together on, and here you are again. I just want you to 
know that this subcommittee is going to be very actively 
engaged, and you are going to have plenty of opportunities to 
spend your time fulfilling the senatorial responsibilities as 
compared to anything outside of the United States Senate.

                              FOOD SAFETY

    Senator Tester. I appreciate that because as you and I both 
know, you coming from Kansas and myself coming from Montana, 
and especially the way I look, food is pretty damn important, 
okay.
    We thank you for your leadership, Mr. Chairman, and Ranking 
Member Merkley.
    Just out of curiosity, do you know where you are going to 
land when you leave?
    Dr. Hamburg. No, I made my decision to step down 
independent of future opportunities. I am going to rest, relax, 
regroup, and then decide. I suspect that I will still be 
involved in many of the kinds of issues that I have dealt with 
at FDA.
    Senator Tester. We wish you the best. I have a question 
here that deals with food safety research. The Center for Food 
Safety and Applied Nutrition is within your purview; correct?
    Dr. Hamburg. Correct.
    Senator Tester. I have a list. I think this came from you 
guys. It shows about $4.5 million in risk analysts and 
evaluation. I would assume you are talking about the budget 
partially for the Center for Food Safety?
    Dr. Hamburg. Which number are you referring to?
    Senator Tester. I was just wondering how much money, just 
to cut to the chase, how much money is dedicated towards the 
Center for Food Safety and Applied Nutrition out of this 
budget?
    Dr. Hamburg. I am going to look to one of my helpers here.
    Senator Tester. That is perfectly all right.
    Dr. Hamburg. You want the Center for Food Safety and 
Nutrition?
    Senator Tester. Yes, I want to know how much money they 
have to work with.
    Dr. Hamburg. $1.2 billion.
    Senator Tester. $1.2 billion?
    Dr. Hamburg. You are interested in research specifically?
    Senator Tester. Yes. My understanding is in research, you 
are doing your research to find out what will kill you and what 
will keep you healthy.
    Dr. Hamburg. Yes. We cut up the budget in so many different 
ways.
    Senator Tester. Can you get back to me on that?
    Dr. Hamburg. Yes.
    [The information follows:]

    Answer. $1.2 billion is the total fiscal year 2015 food safety 
funding amount. In fiscal year 2016 the total food safety request is 
$1.5 billion. Of the total fiscal year 2016 request, $355 million in 
budget authority and user fees is for the Center for Food Safety and 
Applied Nutrition (CFSAN). This is an increase of $74.5 million over 
fiscal year 2015 enacted. CFSAN provides services to consumers, 
domestic and foreign industry and other outside groups regarding field 
programs; scientific analysis and support; and policy, planning and 
handling of critical issues related to food and cosmetics.
    The $4.5 million for risk analytics and evaluation in the fiscal 
year 2016 President's budget request would support the development of 
new tools for ranking risks, prioritizing program activities across the 
FDA Foods and Veterinary Medicine Program based on opportunities to 
reduce risk, and linking risk-based priorities more clearly with budget 
formulation and execution. These tools, for example, will better inform 
FDA about which foods, including animal foods, are most vulnerable to 
which bacterial contaminants, and where it should invest its research 
efforts to most effectively identify how to reduce contamination of 
food.

    Senator Tester. That is a very critical component to the 
FDA's job. I do not know that you can tell somebody that they 
can or cannot put an ingredient into food or into cosmetics or 
into medicine unless you know what it is going to do.
    I am curious to know how much that line item is.
    Dr. Hamburg. Can I also add that I am really delighted that 
we have a new Director for the Center for Food Safety and 
Nutrition who brings a strong science and research background, 
Dr. Susan Mayne, who is here somewhere. There she is.
    One of my goals before I step down was to make sure that we 
had the right leadership. That research activity is so 
essential to what we do.

                            FOOD INSPECTIONS

    Senator Tester. Very important. I want to touch on one 
thing, if you want to talk parochial, we will talk really 
parochial. That is how do you train your inspectors that are in 
the field? Do you hire them and then just send them out or do 
they go through training on how to interpret the rules that 
they have to apply to the individuals on the ground?
    Dr. Hamburg. No, they are hired, looking for certain 
fundamental credentials, and then they are trained, and 
training, of course, is an ongoing process, and certainly in a 
world where there is greater specialization, that training is 
increasingly important.
    Senator Tester. The point I am going to get to is you have 
a set of rules. Most people in business can read. Then if an 
inspector comes out and interprets those rules different than 
what they are, it really ping pongs that--call them 
``producer'' or whatever you might want to call them.
    The question is what is done to hold the inspectors 
accountable? I am all about inspectors doing their job, but I 
want to make sure they do their job correctly, as the rule 
applies.
    Dr. Hamburg. Absolutely. The work of the inspectors is then 
overseen by a management structure, and there are many decision 
makers before enforcement actions are actually taken. There is 
considerable oversight of the inspection activities, but one 
thing----
    Senator Tester. Just a second, and sorry for cutting you 
off, we only have about 5 minutes. If an inspector comes out 
and the producer feels that those rules are being interpreted 
in a way different than what they are printed, what is their 
recourse?
    Say a manufacturer is manufacturing widgets, and the 
inspector comes out and says no, you cannot do this because the 
rules say you cannot do it, and you read the rules, and the 
rules do not say you cannot do it. What is that widget 
producer's recourse?
    Dr. Hamburg. To engage with us in a discussion. After the 
inspection is done, there is a report, and that report is gone 
over with the product sponsor and can be questioned.
    Senator Tester. But the question is how do you notify, how 
does that producer of those widgets know who to get a hold of? 
They are dealing with the inspector. There is a conflict of the 
way the rule was implemented. Is there somebody--are they told 
of somebody within the agency that if there is a conflict here, 
you get a hold of so and so and they can help remedy it? Do you 
see what I am saying?
    Dr. Hamburg. Yes. There is a system and people do know how 
to get in touch with us, believe me.
    Senator Tester. The people who are regulated know how to 
get in touch with you?
    Dr. Hamburg. I think one of our goals over the course of 
the last few years has been to try to increase transparency and 
communication to make it easier and to clarify our rules and 
expectations.
    One of the reasons we are asking for money in this budget 
for FSMA is to be able to train our inspectors to new systems 
and provide the proper oversight, and----
    Senator Tester. Right. Excuse me for going over time a 
little bit, Mr. Chairman. One of the reasons I want to give you 
money is to make sure that those inspectors are trained and 
make sure there is the kind of outreach that is going on.
    What I do not want to do is give you money if that outreach 
does not happen and if that inspector training does not happen.
    My question to you is when it comes to outreach to folks 
who are on the ground, you need to regulate them, the people 
you are regulating, how do you do that outreach? You have some 
additional dollars for outreach in this budget. How do you do 
that outreach and where is it focused?
    Dr. Hamburg. The outreach, particularly as we have been 
working on FSMA, has been really very extensive. We do it by 
working with both the larger organizations that represent the 
different food producers and farmers, and also doing regional 
meetings and on farm visits, et cetera.
    I think while there is a huge need to continue those 
efforts and extend them, I think we have laid a groundwork as 
we have worked on the FSMA rules for what is a real 
partnership.
    We want to extend the work with State and local partners, 
and that is part of what is in this budget request, to actually 
give money to counterparts at the State and local level to help 
do some of that on the ground work.
    Senator Tester. Appreciate it. Thank you, Mr. Chairman. I 
would just say I want you to be able to do your job, but I also 
want you to be able to do it in a way that meets the needs of 
the consumer and meets the needs of the business community out 
there, too. Thank you very much, and I do appreciate your work 
very, very much.
    Dr. Hamburg. Thank you.
    Senator Tester. Thank you, Mr. Chairman.
    Senator Moran. Senator Daines. Welcome.

                           DIETARY GUIDELINES

    Senator Daines. Thank you, Mr. Chairman. You are surrounded 
by Montanans here this morning. You have John Tester, myself, 
from both corners of Montana.
    I spent 12 years working for Procter & Gamble, and I used 
to work a lot with the FDA. I really appreciate all the work 
that you do, and I think I have an understanding of the heavy 
lift that is entailed in your job every day.
    Thank you for coming to this subcommittee hearing today. As 
you know, Montana is a large producer in ag, it is our number 
one industry, $5 billion a year. Maintaining a high-quality 
food supply is of paramount importance for our producers.
    In Montana, agriculture plays an important role in the 
diets of Montanans, for Americans across the country, and even 
around the world.
    The question I had really relates to some of the dietary 
guidelines, and specifically in the fiscal year 2015 omnibus, 
there was a congressional directive that expressed concern that 
the advisory committee was ``Showing an interest in 
incorporating environmental factors into their criteria,'' and 
directed the Secretary to include ``Only nutrition and dietary 
information, not extraneous factors'' in the final guidelines.
    As you know, the scientific report of the 2015 Dietary 
Guidelines Advisory Committee was just released last month. It 
included, and I quote, ``Environmental approaches are needed to 
compliment individual based efforts to improve diet and reduce 
obesity and other diet related diseases.''
    The question I have is do you think the advisory committee 
report is compliant with the congressional directive?
    Dr. Hamburg. Well, as I think you probably know, our role 
in this is not a direct one, but it is advisory to the 
Secretary of Health and Human Services in terms of reviewing 
materials, including the report you mentioned, that then become 
the basis for decisionmaking by the Secretary of HHS and the 
Secretary of the Department of Agriculture.
    Our role is really to provide feedback in terms of the 
science of nutrition and health. The broader issues that you 
were referring to, I think, were reflected in a report that was 
done by an outside group of scientists, but in terms of what we 
will be commenting on to the Secretary of Health and Human 
Services will be on nutrition science and health.
    My understanding is at the end of the day, the decisions 
that are made will really focus on the dietary guidelines that 
are science based.
    Senator Daines. Doctor, do you believe the environmental 
issues are within the purview of developing those dietary 
guidelines?
    Dr. Hamburg. Well, from the FDA's perspective, as I said, 
that is not something that we are looking at. My understanding 
is that the Secretary of Agriculture and the Secretary of 
Health and Human Services understand their role in terms of 
establishing the dietary guidelines.

                     FOOD SAFETY MODERNIZATION ACT

    Senator Daines. Okay. FSMA was brought up here a minute 
ago, I would like to talk about that for a moment. You 
highlighted the fact that the successful implementation of FSMA 
is essential to improving food safety.
    I have been hearing concerns from Montana ranchers and 
farmers across our State about the President's budget that is 
proposing to consolidate these food safety programs currently 
split between the USDA and HHS into a new agency entirely 
within HHS.
    They are concerned that an inevitable result of such a 
significant consolidation could negatively impact FSMA, and 
result in inspection delays and some logistical challenges.
    Why are you removing the USDA from the food inspection 
process?
    Dr. Hamburg. You know, I think what was in the President's 
proposed budget was really laying out the concept of trying to 
find more integrated ways of addressing a very important 
problem of food safety. It is fragmented, not just across USDA 
and FDA, but also many other agencies of Government.
    As you probably know, for a long time there have been 
discussions about should there be a consolidated approach that 
would really bring together different components and different 
agencies.
    For us, the need to implement FSMA takes a very high 
priority, and as we implement FSMA, we are trying to do it in 
coordination with USDA and other important players at the State 
and Federal level, and we think it is a process that is working 
very well, even though we are in different agencies or 
departments with different legal regulatory frameworks for our 
work.
    The on the ground ability to coordinate has been, I think, 
very successful, and we expect to build on that.
    Senator Daines. One of the concerns I am hearing from the 
ag community is the loss of expertise by removing the USDA from 
the food safety process. Do you have concerns? The USDA has 
some expertise unique to agriculture.
    Dr. Hamburg. Well, I think these two programs have 
historically worked quite well together, but they do have very 
different approaches and different legal regulatory frameworks 
and different targeted commodities in terms of the work that we 
do, and certainly different areas of expertise.
    As I noted, there are other components of Government that 
also bear on food safety. I think that it makes sense to look 
at how we can better coordinate, whether that requires creating 
a new single agency or whether there are more effective ways 
for coordination is, of course, a debate.
    Senator Daines. Yes, I think our ag folks are concerned 
about the subject matter expertise the USDA has brought to the 
ag portion of that, I guess that would be the voice coming from 
the ag community.
    Thank you. I am out of time, Mr. Chairman.

                             MENU LABELING

    Senator Moran. Thank you, Senator. We are going to have 
another round of questions, Commissioner. Thank you very much.
    I want to address menu labeling a bit more. My 
understanding is that the FDA has announced something they are 
calling guidance as of this morning in regard to this issue 
that Senator Blunt raised about the inability of many who may 
be or are regulated by FDA in menu labeling, their ability to 
actually know what to do between now and December.
    In cursory review of what FDA has said this morning in what 
they call guidance, it appears to us that it is simply 
restating things that have already been put before the public 
and before this subcommittee previously, and that no real 
benefit, no additional certainty or knowledge of what behavior 
needs to occur, what actions need to be taken, could be 
garnered by reading what you are calling guidance.
    Again, I would reiterate this issue about the scope of what 
you are asking many to do in menu labeling, and the significant 
costs it will take to comply with those requirements, and yet 
the uncertainty about if the business expends that money, 
whether they will really have met the regulations.
    Let me ask a couple of questions about individual or sector 
of the food industry concerns. One that comes to mind, and 
Kansas is a place, so I can be provincial this morning, Kansas 
is a place that originates Pizza Huts, pizza delivery.
    It is our understanding that the regulations do not allow 
the regulations to be satisfied by posting caloric values on 
the Internet despite the fact that is where most people 
apparently today order a pizza.
    In fact, the requirement is that the information be 
provided on the box that the pizza is delivered in, and that 
there are--I do not know what the number is--hundreds of 
different ingredients that you could order for your pizza, and 
the ability to label the caloric values on that pizza box for 
that specific pizza is an impracticality.
    Are those issues that you are aware of, addressing and 
understand the need for common sense, if anybody is going to be 
able to comply with the direction you are going, particularly 
in this setting in which it is not a restaurant?
    Dr. Hamburg. Well, the restaurant like establishments is 
clearly the hardest part of this equation. It was hard as we 
worked through what should be in the proposed rules, and as we 
went to finalizing, and now as we move towards implementation, 
and in particular, some of the foods on display as opposed to 
the more traditional preset menu kinds of situations.
    I think first we have to clarify just misinformation. The 
requirement you just mentioned for calories on the pizza box is 
not something that I have ever heard of, and I agree, it does 
not make sense. We have tried to be quite flexible, recognizing 
these new ways that foods get sold in our country, and the 
complexities.
    We have tried to address that, and a lot of time was spent 
on pizzas and the fact that you can have different toppings and 
arranging for ranges of calories and also recognizing that, at 
certain places, people order it over the Internet and not where 
there is a posted menu.
    Grocery stores is another area that I know Senator Blunt 
has been concerned about as well. We are working closely with 
that industry, with the broad FMI that represents many of the 
supermarkets, but also individual companies, to try to 
understand what the questions are.
    We have not put out guidance but we plan to propose some 
guidance or put out a framework to address some of these areas 
that are more confusing, particularly the food on display.
    Our goal in doing this is to not disrupt practices or add 
unnecessary burden. We want to be able to have a smooth and 
efficient implementation of this and work with the components 
of industry as needed to make that possible.
    To clarify as explicitly as we can where the problems are 
and what needs to be done is our goal, and we are underway 
trying to achieve that, but there is more work to be done.
    Senator Moran. My understanding about something called 
guidance being issued by the FDA today on this topic, is that 
inaccurate?
    Dr. Hamburg. I am not sure what that would be referring to. 
It was a plain language summary of the rule for small 
businesses, so an effort to try to clarify what is in the rule 
and what is not.
    Senator Moran. More guidance to come, more actual guidance.
    Dr. Hamburg. Yes.
    Senator Moran. The rule does not require the labeling of a 
box of pizza for the number of calories based upon the 
ingredients included in the pizza?
    Dr. Hamburg. Not to the best of my knowledge and belief, 
no.
    Senator Moran. Well, obviously there is uncertainty about 
the direction that a business must go to comply with the 
regulations, and what you described to me as your goal is a 
good thing.
    What it brings to my mind is that getting us from this 
point to the certainty by December seems pretty far stretched 
to me, and a delay in the final implementation or the final 
effect of the rule is something you should consider.
    Dr. Hamburg. There clearly is more work to be done. The 
discussion we have just had, I think, underscores that there is 
still considerable confusion about what is actually in the rule 
and need to spell that out more explicitly, addressing the 
individual concerns of companies and the industry more broadly, 
and really narrowing in on some of these areas that are just 
harder to address and more confusing as we go from the issuance 
of the final rule to the actual implementation.
    Senator Moran. Do you believe that FDA has the discretion 
whether to include food delivery services, the pizza delivery 
and the grocery stores, the salad bar at the grocery store--
that was a FDA decision to include, not a legislative 
requirement?
    Dr. Hamburg. I believe the salad bar issue was actually 
explicitly in the law, but we were asked to look at restaurants 
and restaurant like establishments, because the fact is that 
the world we live in no longer revolves around traditional 
restaurants, but there are many, many settings where you can 
get prepared food intended for individual consumption at that 
site or immediately thereafter, and the law did ask us to look 
at that broader range.
    Senator Moran. Let me now turn to Senator Merkley.

                       IRRIGATION WATER STANDARDS

    Senator Merkley. Thank you very much. There is a camp song 
that has a stanza of ``I lika pizza, I lika pie, I don't like 
onion in my eye.'' I will use that as a transition to talk 
about onions.
    We have a lot of onions growing in Oregon, and in the 
effort to provide guidelines for the Food Safety Modernization 
Act, part of that is related to the water that is used in 
irrigation. My onion growers have been very concerned about 
this. The initial standard was that the water had to meet 
recreational water standards.
    Would it be fair to summarize that is roughly equivalent to 
whether a lake is safe to swim in? Is that a fair 
representation of that?
    Dr. Hamburg. Yes.
    Senator Merkley. It is largely expected that irrigation 
water for onions would never meet that standard. The water is 
precious. It is used to irrigate. It is recollected. It is 
reused. It goes from irrigation ditch to the field, back to the 
irrigation ditch.
    The feedback, there has now been an exemption granted or at 
least I think this is in the next version of the rule, that if 
irrigation water has not been put on a crop for 7 days before 
it is harvested, then they are exempted from having to meet 
that standard. Is that a fair way to represent it?
    Dr. Hamburg. Well, I think what I can say is that we heard 
very clearly that some of what was put forward in the original 
proposed rule would impose a lot of restrictions that would not 
meaningfully improve public health and safety, and would 
produce burdens.
    We listened to that. We rethought. We looked at what did 
the data tell us. We did a supplemental to that proposed 
rulemaking in order to put forward a new model and approach, 
and we are confident that as these proposed rules move to 
final, that the concerns that you and the onion growers have 
had will be addressed.
    I would say there have been other areas where we have 
learned about concerns, have looked at it in terms of what does 
the data tell us, where is the evidence, what is the impact on 
health, and we have tried to learn from what we have heard, to 
accommodate, to try to achieve the least burdensome approach to 
meaningful rulemaking that will address the goals of FSMA, 
which is to improve food safety and actually support a vibrant 
successful food industry.
    Senator Merkley. Great. I think that is the least 
burdensome approach, and certainly appropriate. If you look at 
this often, I hold a town hall in every county every year and I 
get a lot of feedback. The onion growers have come out to talk 
about this issue. They have been very concerned.
    Here is where they start the conversation, there is not a 
single known case of E. coli contamination linked to an onion 
bulb product in America. I believe that is correct. Is it, to 
the best of your knowledge as well?
    Dr. Hamburg. To the best of my knowledge.
    Senator Merkley. The reason is because of the way these 
onion bulbs are harvested, whatever E. coli might be there 
dies. The product has a continual drying period before it gets 
to the grocery store shelf. Outer layers of the onion are 
peeled.
    For all these reasons, that is why it has not occurred. 
There has been an impact from green onions from Mexico that are 
harvested in a completely different way.
    I think they appreciate very much that they have been 
heard, and I appreciate very much they have been heard, because 
having something that creates a substantial burden without 
having any public safety is the sort of thing that just drives 
people nuts.
    When people complain about regulations, I say well, give me 
specific examples, and this is a very specific example. I 
believe it is anticipated that they are still going to be asked 
to test their irrigation water every week and report.
    I will continue the conversation with the FDA, but if you 
know in advance the irrigation water is never going to meet 
that test, and if you know in advance you are going to be 
exempted from having to meet that test, maybe that is also an 
unnecessary burden on the industry, and maybe there is another 
way to approach it that does not require the expense and 
complexity of testing and reporting, especially when at the end 
of the process, they are going to be exempted.
    Can I just encourage the FDA to continue to take a look at 
that?
    Dr. Hamburg. Yes. I think that we have tried to make this a 
process where we can learn from the real world experience, look 
at the data and the evidence, and look at the impact on public 
health. That is, I think, the goals we all share, to ensure 
that we have a safe, high quality food supply, and that we do 
not overly burden farmers and producers in the process.
    Senator Merkley. Just to close with this specific question 
because my time has run out, can you encourage me as you are 
leaving the FDA to continue to look at whether the testing 
requirement under this set of circumstances is still overly 
burdensome?
    Dr. Hamburg. Yes. In the case of the onion growers, there 
is the issue of being able to demonstrate bacterial die off. 
When it sits, as you said, baking in the sun. Those are 
important factors in terms of what would be required.
    It is challenging because number one, there are lots and 
lots of different food commodities and they all have very 
specialized issues and concerns as we have learned in the 
process of doing this. I can tell you I have learned a whole 
lot more about food, farming production, and consumer 
preferences as well.
    This will be a dynamic process also as we learn more and 
unexpected things happen as well. We do not see when we 
complete this rulemaking and implementation of FSMA that we are 
done with food safety forever because we have to continue to 
bring new, better science and technology to the process, but 
our process is that new and better science and technology will 
actually improve and modernize and streamline some of what 
needs to be done and provide better monitoring and oversight of 
our Nation's food supply.
    Senator Merkley. Thank you.
    Senator Moran. The Senator from North Dakota.

                        EXPANDED ACCESS REQUEST

    Senator Hoeven. Thank you, Mr. Chairman. I would like to 
thank all of you for being here today.
    Dr. Hamburg, I would like to address my question to you. As 
you are aware, we have a family in North Dakota that is 
struggling with pantothenate kinase-associated 
neurodegeneration (PKAN). They have youngsters in the family 
that are struggling with PKAN. They made a compassionate use 
application to FDA for use of the drug, RE024. You and I have 
spoken about this before. The family continues to try to gain 
compassionate use access to this drug.
    I am wondering what you can tell me in terms of helping 
make that happen.
    Dr. Hamburg. You know, I have not received an update on the 
status of that. I know you and I have talked, and certainly I 
can go back and look at the specifics of that instance.
    As you know, in terms of requests for expanded access, when 
requests come to us, we generally, I think 99 percent of the 
time, actually support the applications of the healthcare 
provider working with families.
    There were some specific issues in this case, the fact that 
we generally are very supportive, and in this case, there were 
some concerns. I cannot really speak to the status or the 
specifics.
    Senator Hoeven. As of our last meeting, at least one of the 
issues was FDA wanting the manufacturer to do some additional 
work, make an additional investment in some of the research on 
the drug, and we were asking if you would work with the company 
to do that, and also we were appealing to the company directly 
to do it as well, so they could reach an agreement with you in 
order to allow the compassionate use for the family.
    I would ask that you check on that.
    Dr. Hamburg. I do remember that discussion and we needed 
the company's permission to be able to share more information 
with the family and healthcare provider, and with you.
    Senator Hoeven. Right.
    Dr. Hamburg. I do not know--I know our lawyers spoke with 
the company. Perhaps the company decided that they did not want 
that information shared. I will go back and learn more.
    Senator Hoeven. I would ask that you update us on that 
status and anything else you can do. Would you be willing to do 
that?
    Dr. Hamburg. I would be.
    [The information follows:]

    Answer. I will be happy to follow up with you in a letter, so as to 
avoid disclosure and privacy issues.

                           RIGHT TO TRY LAWS

    Senator Hoeven. The second thing is in our State, our 
legislative session is underway. They are considering passing a 
``right to try'' law. I think you are familiar with ``right to 
try'' laws that a number of States have now passed, which would 
perhaps afford an opportunity for this family to go directly to 
the manufacturer under a contractual arrangement and gain 
access to the drug.
    I just want your reaction to how you would handle that if 
in fact North Dakota is able to pass that ``right to try'' 
legislation, and then how would you approach that, how would 
you be able to facilitate that option for the family?
    Dr. Hamburg. Well, we do feel that we play a valuable role 
in the process. At the end of the day, it is the company that 
has to make the decision to make the product available through 
an expanded access process.
    In many instances, I can tell you that the FDA has played a 
very constructive role in encouraging the company to in fact 
make the decision to do so, and in some instances, we may have 
additional information that can help inform the decisionmaking 
about whether this is the right action to be taken.
    We feel that we play an important role in the system that 
enables patients to get access to unapproved drugs outside of a 
clinical trial process when they have a serious or life-
threatening condition, but we know many States have been 
looking at the notion of expanded access, and I do not know the 
specifics of what is happening in your State.
    From my perspective, I would say that the FDA actually is 
an important partner and makes many contributions to what 
ultimately will serve the patient best.
    Senator Hoeven. If the State proceeds with the ``right to 
try'' law, you would be willing to help with that process?
    Dr. Hamburg. As I said, I do not know anything about the 
specifics in your State. We certainly would be happy to provide 
technical assistance or input on aspects, but what I wanted to 
really emphasize is that we do believe that if you look at 
experience, FDA is not the barrier to access in the vast, vast 
majority of cases, and that in fact we do play a valuable role 
and can provide important information, and often support and 
almost a form of advocacy for the expanded access program.
    Senator Hoeven. I am asking for your help on both of those 
options. You are willing to do that?
    Dr. Hamburg. Yes.
    Senator Hoeven. You are willing to provide help for both of 
those options if we can make one of them work? That is what I 
am asking.
    Dr. Hamburg. I am willing to work with you to try to better 
clarify the expanded access program to provide expert input in 
terms of what might be under consideration, and certainly FDA 
is very eager to be helpful in expanded access cases.
    We actually just recently re-did the paperwork for expanded 
access requests to come to us, and it was actually described in 
one newspaper article as a ``breathtaking effort to diminish 
bureaucratic red tape.''
    We have been very hard to make this program clearer and 
more accessible and to help get patients and their healthcare 
providers access when it is appropriate.
    Senator Hoeven. Thank you.
    Senator Moran. Just a couple more questions, Commissioner. 
We will do one more round, although I will submit most of my 
questions for you to answer for the record.

                      MOBILE MEDICAL APPLICATIONS

    Senator Moran. Let me just ask quickly about digital health 
devices. The FDA has issued guidance that it does not intend to 
enforce compliance with the standard regulatory controls for 
medical devices. Let me make sure that my premise is true, 
unlike my last question. That is true?
    Dr. Hamburg. We have stated, I think, very clearly and put 
forth a number of documents and reports indicating that we want 
to take a risk-based approach. We have no need to be involved 
in the regulatory oversight of the full range of mobile medical 
apps that are coming into the marketplace, many of which can 
provide a great deal of important information to individuals 
about their health status.
    We really want to focus on the mobile medical apps where 
there is a very important diagnostic or medical device activity 
that really bears on medical decisions, medical interventions, 
and can have serious implications for health.
    It is not the platform, but it is the function, and we want 
to focus on the high risk.
    Senator Moran. Is there any more certainty that can be 
provided so that we do not stifle innovation in this arena? Can 
FDA make more clear what can be created, what can be innovated, 
without the threat of the regulatory burden?
    Dr. Hamburg. I think as you know this is sort of an area of 
a great deal of new activity really exploding in many ways, and 
a lot of companies that previously had not been working with 
the FDA in terms of regulatory oversight as well.
    We are trying very hard in a timely way to put out 
information in terms of our regulatory role and how we will 
undertake the oversight of these mobile medical apps.
    In addition, we have had a lot of public meetings, and will 
continue to do that, meetings with individual companies and 
stakeholders. I think it is going to be an ongoing process 
because there are misperceptions. People are very worried that 
we are going to be regulating products that we have no 
intention of providing that kind of regulatory oversight.
    We do want to focus on those higher risk products where 
important medical decisions may be made, and if it does not 
work, it is going to put the patient at risk, and if it was an 
EKG device in your doctor's office, it would be regulated by 
the FDA, and you would want it to be accurate so you would not 
have the wrong treatment. If it is an iPhone that is doing the 
same thing, you still want it to be accurate.
    I think there are a lot of good examples where it really 
matters. There are a lot of examples where we do not feel a 
need to step in and provide regulatory oversight because the 
implications of the procedure being undertaken, the function of 
that mobile medical app does not carry with it the same risks 
for patients and does not form the basis for the same kind of 
medical decisionmaking and action.

                  FOOD SAFETY MODERNIZATION ACT RULES

    Senator Moran. Will FDA be able to meet the court-ordered 
deadline on FSMA and its regulations?
    Dr. Hamburg. We are committed to that; yes.
    Senator Moran. Will the FDA be able to meet its deadline as 
ordered?
    Dr. Hamburg. Yes. This is something that is just enormously 
important, and we have been working very hard. The process took 
a little bit longer than we hoped in part because of the level 
of outreach that we have done, and we felt the responsibility 
to go back with the supplementals to get more feedback and 
clarify some of the areas that had been raised as concerns.
    Yes, we are on track to meet those goals, and we have been 
working closely with all of the components of the system that 
have to be part of that in terms of HHS and the White House 
review. We are all committed and determined to be successful.
    Senator Moran. Your budget, the administration's budget 
proposes substantial funding increases to modernize the food 
inspection system. We talked a little bit about that in other 
questions. Yet, this is considered transformational. FSMA is 
considered transformational.
    If it is transformational, is there something that we will 
spend less money on because we are doing things in a new way? 
If it is transformational, it seems to me it ought not always 
be that we need more money to transform. It ought to be we are 
spending less money over here doing things better and 
transforming to a better system that costs less.
    Dr. Hamburg. I think FSMA will be transformational in the 
sense of saving money and saving lives. We are shifting from a 
system that was reactive, waiting for problems to occur, and 
then trying to fix them after the fact, to one that will be 
preventive.
    It means we will prevent foodborne outbreaks. One in six 
Americans get ill from foodborne illness every year. There are 
$78 billion worth of preventable costs to the healthcare system 
because of foodborne illness, 3,000 deaths a year as well.
    The cost to industry, every time there is a recall, even if 
it is not your product, if it relates to your product, like 
there was a spinach and E. coli outbreak in California a number 
of years ago, it was one company, but the whole spinach 
industry was affected, and not just affected during the period 
of concern about the outbreak, but I am told it took years. It 
may not have even occurred that spinach purchasing went back up 
to the pre-outbreak levels.
    To be able to have a preventive approach, to be able to 
really enhance trust and confidence in the food supply, to 
prevent illness, to enhance the ability of industry to be able 
to excel in terms of food safety, the confidence of buyers and 
consumers in this country, and frankly, for trade and exports, 
all of that are going to be benefits of FSMA.
    We certainly appreciate what Congress did in giving us 
these new responsibilities and authorities, and I think it is 
going to make a lasting difference to the benefit of all.
    Senator Moran. Thank you.
    Senator Merkley.

                       FOOD SAFETY MODERNIZATION

    Senator Merkley. Thank you very much. I know it takes a lot 
of work to address the seven different categories and rules 
that are coming out in FSMA. There is a lot going on there in 
each one of those rules.
    I appreciate the enormous work that has gone in to 
realizing this vision for food safety.
    Back in 2009, there was a Salmonella outbreak in peanut 
butter, and 700 people became significantly ill, nine people 
died. Someone who almost died was a little 3-year-old boy named 
Jacob Hurley. This compelled his father, Peter, to become a 
major advocate of trying to tackle this challenge. I have had a 
number of conversations with Peter and his family in the course 
of the time we were considering this act.
    Now we are down the road to having this, as you put it, 
preventive approach rather than the reactive approach, which is 
exactly the right framing.
    What can I tell Peter and Jacob today about what will 
happen, using peanut butter as an example, making it much less 
likely for peanut butter to have a contamination that could 
cause an illness?
    Dr. Hamburg. Well, I think you can say that advocacy work 
has made a difference because FSMA was passed and it is now 
being implemented. We do need these additional resources now to 
actually go from what is being spelled out in a set of, I 
think, very thoughtful and responsible regs that have been 
developed, and actually seeing the difference on the ground.
    We need the money to make that happen, and I do not think 
while our budget authority request is bigger than you have seen 
before, that it is excessive in terms of what is needed.
    You may be aware at the time the law was passed, the 
Congressional Budget Office (CBO) estimated that it would take 
about $580 million over 5 years to implement FSMA 
appropriately. If we get the $109 million, we will be about 
halfway to what they thought we needed. We are trying to 
implement as efficiently as possible.
    We need to do a number of things. We need to modernize our 
inspections with training and education to reflect the needs of 
a preventive approach. We need to work with industry to really 
make sure they understand what is expected of us, the 
discussion I was having with Senator Tester and some of the 
others about the importance of the open communication and 
understanding and technical assistance.
    We need to work with our counterparts at the State level, 
and actually a significant amount of our ask, I think it is $32 
million, will be going to the States because they need to be 
working on the ground level to make sure this new approach is 
in place and working.
    We have to also address the international component, which 
is enormous and growing in terms of the foods that are coming 
in from other countries and countries with much less stringent 
oversight in terms of safety and quality, so we need to get the 
resources to implement the foreign supplier verification 
process, to be able to ensure an adequate number of foreign 
inspections, and to really make sure that both for consumer 
protection and to have a level playing field for domestic 
producers that the same standards and quality approach----
    Senator Merkley. I might just interrupt you here so I can 
follow up a little bit before I run out of time. Would it be 
appropriate for me to characterize it this way, going back to 
the peanut butter example, the way the ingredients are grown, 
the way they are harvested, the way they are processed, 
additional testing along the way, we are changing the systems, 
we are enhancing the testing all to create a system where the 
potential for contamination is absolutely minimized.
    Dr. Hamburg. Where the potential for contamination will be 
minimized and any problems we identify as swiftly as possible 
are addressed.
    Senator Merkley. Thank you.
    Senator Moran. Senator Merkley, thank you very much. 
Commissioner, thank you very much. Doctor, we wish you well. 
Thank you for your testimony. Thank you for your team's 
presence with us this morning.

                     ADDITIONAL COMMITTEE QUESTIONS

    For members of the subcommittee, any questions that you 
would like to submit for the record, and I will have several 
myself, should be turned in to subcommittee staff within 1 
week, which is Thursday, March 19, and we would appreciate if 
the FDA could respond to those questions within 4 weeks from 
that.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
               Questions Submitted by Senator Jerry Moran
    Question. Where is the FDA in the process of approving the 
backlogged applications for new sunscreen products?
    Answer. As required by the Sunscreen Innovation Act (SIA), FDA has 
completed several important steps in the review process for sunscreen 
active ingredient applications marketed for a material time and extent 
in other countries and determined eligible for review prior to 
enactment of the SIA. We have reviewed all eight pending sunscreen 
active ingredient applications, evaluated submitted data, and 
identified the missing information we need to determine that sunscreens 
containing each ingredient would be generally recognized as safe and 
effective. We have issued proposed orders outlining additional data 
needed in order to make a determination that each ingredient meets this 
standard.
    As outlined in the SIA, the data requested must be gathered and 
submitted to the FDA for evaluation before the agency can proceed to a 
final sunscreen order. We look forward to receiving and reviewing the 
data. The agency is committed to doing its best to continue to meet 
future deadlines under the SIA--and to provide American consumers with 
additional options for safe and effective sunscreen ingredients.
    Question. Shouldn't more focus and priority be placed on preventive 
care for skin cancer? Why are Americans having to wait so long for new 
sunscreen products?
    Answer. Americans currently have access to numerous sunscreen 
products. These include broad-spectrum products with an SPF value of 15 
or higher, which, if used as directed with other sun protection 
measures, decrease the risk of skin cancer and premature skin aging 
caused by the sun. As described in the preceding response, FDA is 
actively working to assure that sunscreens, including sunscreens that 
would contain the ingredients being evaluated under the SIA, provide 
safe and effective protection.
    Heightened concerns about the risk of skin cancer and premature 
aging have fundamentally altered consumers' use of sunscreen products 
over the past few decades. Americans once applied the products in 
modest amounts while at the beach or exercising during peak hours of 
summer sun exposure. In contrast today, Americans--young and old, fair-
skinned and not--now routinely spread on sunscreens all year round. A 
large increase in the amount and frequency of sunscreen exposure 
combined with advances in scientific understanding that some sunscreen 
ingredients may be absorbed into the bloodstream have raised safety 
concerns. Commercial marketing experience alone is inadequate to 
evaluate these concerns.
    The SIA does not relax the FDA's scientific standards for 
evaluating safety and effectiveness or the requirement that the agency 
have adequate data on which to base a generally recognized as safe and 
effective (GRAS/E) determination. FDA has proposed data requirements, 
unanimously supported by an Advisory Committee panel of independent 
scientific experts, to meet this standard. We look forward to receiving 
and reviewing industry data--and helping American consumers make 
informed decisions about these products.
    Question. The agency's tentative determination on partially 
hydrogenated oils represents a substantial shift from the current 
framework. Why did the FDA not undergo the customary rulemaking process 
and instead issue a determination?
    Answer. Our action conforms to FDA regulations which set forth a 
process by which the agency, on its own initiative or in response to a 
petition from an interested person, may determine that a substance is 
not GRAS. Specifically, title 21 of the CFR, section 170.38(b)(1), 
provides that FDA may initiate this process by issuing a notice in the 
Federal Register proposing to determine that a substance is not GRAS 
and is a food additive subject to section 409 of the FD&C Act. Section 
170.38(b)(2) requires the notice to include a period of 60 days for 
comment.
    Question. If the health concern is over trans fat, why focus on 
PHOs and not trans fat specifically?
    Answer. Partially hydrogenated oils (PHOs) are ingredients added to 
food to achieve specific technical effects, and are the primary dietary 
source of artificial trans fat in the United States.
    Question. Given that PHOs are used globally, the agency's 
determination could potentially impact trade compliance. Did the FDA 
consult Federal agencies with trade oversight before issuing this 
determination?
    Answer. FDA is charged with protecting the U.S. food supply, and 
applies its regulatory authorities to ensure that food, including all 
substances added to food, is safe. We believe our tentative 
determination complies with all relevant legal requirements. We further 
note that a number of other countries have already placed restrictions 
on the use of trans fat-containing ingredients, including Denmark, 
Austria, Hungary, and Switzerland. In addition, the European Commission 
is currently considering action on industrially produced trans fat in 
food.
    Question. This past December, Congress enacted legislation that 
gives the FDA authority to expediently add diseases to the Tropical 
Disease Priority Review Voucher Program to spur development of 
vaccinations for neglected diseases. Are you considering adding 
diseases to the program, and has FDA begun the work to make the 
additions?
    Answer. FDA is considering adding diseases to the list of tropical 
diseases in the Priority Review Voucher program. The legislation 
enacted last year expanded the voucher program to Ebola and streamlined 
the process for the agency to add other qualifying diseases, if it 
determines such additions are appropriate. We are working on these 
issues now.
    Question. Is Chagas disease under consideration?
    Answer. Yes, FDA is considering adding Chagas to the list of 
tropical diseases. Adding Chagas to the list was recommended by members 
of Congress and stakeholders attending a public meeting on tropical 
diseases that qualify for tropical disease vouchers.
    Question. How long will it take FDA to complete the process to add 
a new disease?
    Answer. While FDA cannot specify a particular timeframe for the 
designation process, the agency will follow this new, expedited process 
to make any changes as quickly as possible.
    Question. FDASIA was enacted by Congress 3 years ago and required 
FDA to issue new regulations for medical gases. Not only has there been 
no proposed rule, Congress has yet to receive the report that was due 
over a year ago. What is the status of the agency issuing these 
regulations?
    Answer. FDASIA requires FDA to:
  --Review current regulations regarding medical gases, obtain input 
        from medical gas manufacturers and other interested parties, 
        and determine if any changes are necessary.
  --Provide a report to the Senate Committee on Health, Education, 
        Labor and Pensions and the House Committee on Energy and 
        Commerce on its findings.
  --If changes are determined to be necessary, finalize such changes by 
        July 2016.
    As you note, the report to Congress is past due. We apologize for 
the delay and are working to complete and submit the report as soon as 
possible. We have sought and received comments from medical gas 
manufacturers and other interested stakeholders, and we have conducted 
an extensive review of the Federal drug regulations with regard to 
medical gases. We held a public meeting on this topic in December 2013. 
In addition, Dr. Janet Woodcock, the Director of FDA's Center for Drug 
Evaluation and Research, met with representatives of the medical gas 
industry in February 2014. Following this meeting, the Compressed Gas 
Association and the Gas and Welding Distributors Association submitted 
a joint revised set of proposed regulatory changes for FDA's 
consideration. We have completed our review of these proposed changes 
and are working to finalize and submit the Report to Congress.
    Question. Will the FDA have the final regulations in place by the 
January 9, 2016, deadline?
    Answer. FDASIA does not require regulation changes unless they are 
deemed necessary as a result of the regulation review. If changes are 
deemed necessary, section 1112 of FDASIA requires final regulations by 
July 9, 2016, 48 months after enactment of the act. We will do our best 
to meet the deadline.
    Question. As you know, CFSAN has for a number of years supported 
several Food Safety Centers of Excellence that help to support the food 
safety research needs of the FDA through basic research and various 
other tasks. The Committee has long been supportive of the work of 
these Centers. Can you please provide some background on Food Safety 
Center of Excellence funding for fiscal year 2015 and fiscal year 2016, 
and whether or not you can provide an increase in basic research 
support levels in fiscal year 2016?
    Answer. The FDA Food Safety Centers of Excellence (COEs) support 
critical collaboration between FDA and academic institutions to advance 
regulatory science through innovative research, education, and 
scientific exchanges.
    In fiscal year 2014 CFSAN awarded $11.025 million in funding to the 
COEs. While FDA intends to maintain strong support for these Centers, 
final decisions on precise funding amounts for fiscal years 2015 and 
2016 are still pending.
    Question. It is my understanding that the FDA requested authority 
from the Office of Management and Budget to conduct a study on the 
proposed changes to the Nutrition Facts Panel (NFP) related to consumer 
comprehension of an ``added sugars'' disclosure on the NFP in addition 
to ``sugars.'' Additionally, FDA published in the Federal Register on 
March 3, 2014, its plan to conduct a consumer study to better 
understand ``how consumers would comprehend and use this new 
information.'' Can you please provide me with the status of this study, 
the data produced to date, including the questions and responses 
specific to the declaration of added sugars on the Nutrition Facts 
label, and the FDA's plans and timing for making these results 
available to the public for comment?
    Answer. FDA has completed the study of consumer comprehension of an 
``added sugars'' disclosure on the NFP in addition to ``sugars.'' We 
are in the process of preparing a report summarizing the data from this 
study. We will make the report available to you and the public when it 
is complete.
    Question. About a month ago, the New York State Attorney General 
claimed that GNC and three other retailers were selling herbal products 
that did not contain the labeled ingredients. This caused and continues 
to cause quite a stir inasmuch as half of all Americans take 
supplements. The New York Attorney General's allegations were based on 
a series of tests known as DNA barcoding. DNA barcoding, I am told, is 
an inappropriate test for herbal extracts because the extraction 
process tends to destroy the DNA markers. I am also told that the U.S. 
Pharmacopeia and the FDA do not use this type of test to determine 
whether or not certain herbal extracts are present in a product. Can 
you confirm that, in fact, the FDA agrees that DNA barcoding is not an 
appropriate test for herbal extracts?
    Answer. Speaking generically, FDA does not use DNA sequencing for 
botanical authentication. The FDA's current research and development 
for DNA sequencing based methods for plants is focused on the 
development of a plant species DNA library and development of validated 
methods for identification of botanical materials.
    We are not privy to the details of methods employed during the NY 
Attorney General's investigation and, because of this, FDA has not 
stated whether DNA barcode testing is an appropriate test or 
examination for this investigation. Currently, if FDA were to use DNA 
methods on herbal extracts, we would use them in combination with 
established chemical or other acceptable methods historically used to 
verify the identity of these products. At this time, FDA does not use 
DNA sequencing by itself to analyze an herbal extract.
                                 ______
                                 
                Questions Submitted by Senator Roy Blunt
                              biosimilars
    Question. I want to state up front that I support the development 
and marketing of biosimilars. That is why I have been incredibly 
frustrated at the lack of transparency in the implementation process. 
The first approval should have been well understood and considered a 
real accomplishment. Instead, it has highlighted that all the policy 
and implementation questions we have been asking you to answer remain 
unanswered due to the lack of published guidance.
    Commissioner Hamburg, you stated at a hearing just last week before 
the House Appropriations Subcommittee that guidance on naming was 
coming soon. Two days after that hearing FDA approved the first 
biosimilar product, but we still don't have any guidance. Can you 
please share your exact timeline for publishing guidance?
    Answer. While the agency cannot provide a specific timeline for the 
release of any guidance, FDA continues to clarify our approach to 
implementation of the Biologics Price Competition and Innovation (BPCI) 
Act and provide guidance and information to assist biological product 
developers--sponsors/companies--with bringing biosimilar and 
interchangeable products to market.
    FDA has recently issued three final guidances:
  --Scientific Considerations in Demonstrating Biosimilarity to a 
        Reference Product
  --Quality Considerations in Demonstrating Biosimilarity of a 
        Therapeutic Protein Product to a Reference Product
  --Biosimilars: Questions and Answers Regarding Implementation of the 
        Biologics Price Competition and Innovation Act of 2009
    FDA has published the following draft guidances since 2012:
  --Clinical Pharmacology Data to Support a Demonstration of 
        Biosimilarity to a Reference Product
  --Reference Product Exclusivity for Biological Products Filed Under 
        Section 351(a) of the PHS Act
  --Formal Meetings Between the FDA and Biosimilar Biological Product 
        Sponsors or Applicants
  --Biosimilars: Additional Questions and Answers Regarding 
        Implementation of the BPCI Act of 2009
    The agency is continuing to review the comments received as we move 
forward in finalizing these draft guidances. In addition, FDA expects 
to issue draft guidance in 2015 on the following topics identified in 
CDER's Guidance Agenda:
  --Considerations in Demonstrating Interchangeability to a Reference 
        Product
  --Statistical Approaches to Evaluation of Analytical Similarity Data 
        to Support a Demonstration of Biosimilarity
  --Labeling for Biosimilar Biological Products
  --Nonproprietary Naming for Biological Products
    Question. Will the guidance document on naming address the 
confusion raised about labeling of biosimilars? Specifically, the label 
for the biosimilar product FDA approved on March 6 appears to 
contradict the agency's current draft labeling guidance. Does FDA still 
believe that health professionals should have a label that includes all 
the information necessary to make prescribing decisions, including a 
statement that a product is a biosimilar and whether a product has been 
determined to be interchangeable? The label for the product you just 
approved does neither.
    Answer. FDA believes that healthcare professionals should have 
product labeling that includes the essential scientific information 
necessary to make informed prescribing decisions for their patients. 
FDA expects to issue draft guidance on labeling for biosimilar products 
in 2015. The public will be provided with an opportunity to comment on 
this draft guidance when it is published.
    Question. Further, given the lack of clarity on the question of 
extrapolation in the product's label, when exactly is the guidance on 
that topic expected? How will physicians know which indications were 
actually researched and validated for the biosimilar?
    Answer. FDA undertakes a rigorous and thorough evaluation to ensure 
that a biosimilar product meets the statutory and regulatory standards 
for approval and has been determined to be safe and effective under the 
conditions of use described in approved product labeling. Approval of a 
biosimilar product is based on review of evidence that may include 
structural and functional characterization, animal study data, human 
pharmacokinetic and pharmacodynamics data, clinical immunogenicity 
data, and other clinical safety and effectiveness data that 
demonstrates that the product is highly similar to the reference 
product (notwithstanding minor differences in clinically inactive 
components) and that there are no clinically meaningful differences 
between the biosimilar product and the reference product in terms of 
safety, purity, and potency.
    Additionally, a biosimilar application must include information 
demonstrating, among other things, that the proposed biosimilar has the 
same route(s) of administration, dosage form(s) and strength(s) as the 
reference product, and that the condition(s) of use for the proposed 
biosimilar have been previously approved for the reference product. To 
determine which indications have been approved for a biosimilar 
product, healthcare professionals are advised to review the labeling--
prescribing information--of the biosimilar product.
    FDA has issued final guidances, ``Scientific Considerations in 
Demonstrating Biosimilarity to a Reference Product,'' and 
``Biosimilars: Questions and Answers [Q&A] Regarding Implementation of 
the Biologics Price Competition and Innovation Act of 2009'' (Q&A 
I.11), describing the potential for a biosimilar applicant to 
extrapolate data derived from a clinical study sufficient to 
demonstrate safety, purity, and potency in an appropriate condition of 
use to one or more additional conditions of use for which licensure is 
requested and for which the reference product is licensed, if 
sufficient scientific justification is provided. FDA expects to issue 
draft guidance on labeling for biosimilar products in 2015. The public 
will be provided with an opportunity to comment on this draft guidance 
when it is published.
    Question. How does FDA intend to update the label for the product 
with respect to the name? I understand that it was approved with a 
``placeholder'' for the name. What does this mean and why did FDA 
proceed this way?
    Answer. The agency had an application for a biosimilar product that 
was ready for approval and designated a proper name with a 
distinguishing suffix for this product (filgrastim-sndz) on a product-
specific basis while continuing to consider broader policy issues 
regarding the nonproprietary names of biological products. Some Agency 
communications used the term ``placeholder'' to describe this 
nonproprietary name. That term was intended to indicate that FDA's 
designation of a nonproprietary name for this product should not be 
viewed as reflective of the agency's decision on a comprehensive naming 
policy for biosimilar and other biological products. FDA intends to 
issue draft guidance on how current and future biological products 
marketed in the United States should be named in the near future. If 
the filgrastim-sndz name is inconsistent with the naming policy FDA 
adopts for biological products, however, FDA would work with the 
applicant to minimize the impact that labeling changes would have on 
the manufacture and distribution of this product.
                            untitled letters
    Question. I understand that the FDA uses untitled letters to 
increase public accountability of firms, which may deter future 
violations and increase compliance with the law. However, it has come 
to my attention that the Center for Biologics Evaluation and Research 
(CBER) may be systematically using untitled letters as a means to 
reclassify tissue products instead of following protocol established in 
the Administrative Procedure Act.
    Prior to issuing each of the untitled letters, does FDA issue 
guidance or regulations which provided clarity regarding the 
classification of the product(s)? If so, please provide the key 
citations.
    Answer. CBER does not systematically use untitled letters as a 
means to reclassify tissue products instead of following the 
regulations that have been established under the Administrative 
Procedures Act.
    The requirements for FDA's regulation of human cells, tissues, and 
cellular and tissue-based products--HCT/Ps--are found in 21 CFR part 
1271. Subpart A contains general provisions, including the criteria 
that must be met in order for an HCT/P to be regulated solely under 
section 361 of the Public Health Service Act (PHS Act) (21 CFR 
1271.10). In accordance with 21 CFR 1271.20, if an HCT/P does not meet 
the criteria under 21 CFR 1271.10, it will be regulated as a drug, 
device, and/or biological product under the Federal Food, Drug, and 
Cosmetic Act (FD&C Act) and/or section 351 of the PHS Act. These 
regulations were finalized after a period of public notice and comment, 
consistent with the Administrative Procedures Act.
    As required by law, FDA publishes regulations in the Federal 
Register. FDA usually uses ``notice and comment rulemaking'' to issue 
regulations. The first public step in the notice and comment rulemaking 
process is for FDA to issue a proposed rule, which explains what we 
intend to require, and asks for public comment. Based on the comments, 
FDA will then decide to end the rulemaking process, issue a another 
proposed rule, or issue a final rule. The final rule preamble responds 
to comments on the proposed rule and explains the new regulatory 
requirements.
    FDA issues guidance documents, which describe the agency's 
interpretation of or policy on a specific regulatory issue. They do 
this by providing recommendations for meeting the criteria or 
requirements in regulations. 21 CFR 10.115(b). Guidance documents may 
relate to the processing, content, and evaluation of submissions as 
well as inspection and enforcement policies. In the context of HCT/Ps, 
it is anticipated that guidance documents will improve stakeholders' 
understanding of the definitions in part 1271.3 and how to apply the 
regulatory criterion in 21 CFR 1271.10.
    An untitled letter is an advisory action that cites violations that 
do not meet the threshold of regulatory significance for a warning 
letter. The format and content of an untitled letter should clearly 
distinguish it from a warning letter. For example, as discussed in the 
FDA's Regulatory Procedures Manual, untitled letters are not titled; do 
not include a warning statement that failure to take prompt correction 
may result in enforcement action; do not evoke a mandated district 
follow-up; and request (rather than require) a written response from 
the firm within a reasonable amount of time. They are issued to address 
inspectional findings or compliance issues at a specific firm.
    Here is a link to FDA's Regulatory Procedures Manual for the 
record: http://www.fda.gov/ICECI/ComplianceManuals/
RegulatoryProceduresManual/ucm176871.htm.
    Question. Do you currently have any policies and procedures related 
to how soon after you issue an untitled letter to a company you 
subsequently post it on your Web site? If not, are you considering such 
a policy?
    Answer. CBER's policy is to post all untitled letters on its Web 
site as soon as practicable after confirmation of receipt by recipient 
and a review of the letter prior to disclosure to include redaction of 
any trade secrets or confidential commercial information. CBER started 
posting these letters in 2002; this complies with the commitment made 
by the agency in the Transparency Initiative.
    Question. Do you currently have any policies or procedures related 
to the issuance of an untitled letter related to the appearance of the 
letter? For instance, do you require that all untitled letters issued 
to a company have the header ``Untitled Letter?''
    Answer. As described in the FDA's Regulatory Procedures Manual, 
chapter 4-2, untitled letters are not titled, and therefore do not have 
the header ``Untitled Letter'' on the letter. Here is the link to FDA's 
Regulatory Procedures Manual for the Record: http://www.fda.gov/ICECI/
ComplianceManuals/RegulatoryProceduresManual/ucm176871.htm.
    Question. For the untitled letters in question, were any issued to 
the company without the header ``Untitled Letter''? If so, when the 
letter was subsequently posted on your Web site, did it include such a 
header?
    Answer. Untitled letters are not titled, and therefore do not 
include the header, ``Untitled Letter.'' For clarity, and to 
distinguish them from warning letters, untitled letters are identified 
as such on CBER's Web site.
    Question. Prior to issuing each of the untitled letters, did you 
have any communications (formally or informally) with the company 
regarding the issue that was the subject of the untitled letter?
    Answer. If the untitled letter was issued subsequent to an 
establishment inspection, the FDA investigator may have informally 
discussed the situation, although they are not required to do so. An 
untitled letter can often be the initial communication with regulated 
industry concerning regulatory violations.
    Question. Prior to issuing each of the untitled letters, did you 
use alternative regulatory options to resolve questions related to 
product classification, which may include formal inquiries (whether via 
official correspondence or via telephone) or directed inspections with 
appropriately qualified inspectors?
    Answer. In determining whether to issue an untitled letter, FDA 
officials generally consider whether evidence shows that a firm, 
product, and/or individual is in violation of the law or regulations. 
Such evidence may have been obtained during a routine or directed 
inspection, or other means of surveillance, such as Internet Web site 
surveillance. Untitled letters are often used as an initial 
correspondence and can be an alternative to other regulatory options, 
such as a warning letter.
    Regarding jurisdictional questions, FDA's Tissue Reference Group--
also known as the TRG--was created as specified in the ``Proposed 
Approach to the Regulation of Cellular and Tissue-based Products'' 
published by FDA in February 1997. The purpose of the TRG is to provide 
a single reference point for product specific questions received by FDA 
--either through the Centers, or from the Office of Combination 
Products (OCP)--concerning jurisdiction and applicable regulation of 
Human Cells, Tissues and Cellular and Tissue-Based Products (HCT/Ps). 
FDA has publically posted information on how manufacturers can submit 
inquiries to the TRG, as well as publically disclosing TRG 
recommendations regarding HCT/P classification, on its Web site.
    Here is a link to FDA's Tissue Reference Group's Web site: http://
www.fda.gov/biologicsbloodvaccines/tissuetissueproducts/
regulationoftissues/ucm152857.htm.
    OCP issues classification and jurisdiction assignments for medical 
products. Classification and jurisdiction assignments can be made 
informally or formally. Informal assignment requests should be made by 
directly contacting OCP. Formal assignment requests can be made by 
submission of a Request for Designation Document, also known as RFD, to 
OCP.
    Here are links to the Office of Combination Products' 
Jurisdictional and RFD Information: http://www.fda.gov/
CombinationProducts/JurisdictionalInformation/default.htm and http://
www.fda.gov/CombinationProducts/RFDProcess/default.htm.
    Question. Subsequent to receiving an untitled letter, did any 
company request that you post a response to such letter? If so, did you 
post the response to the letter?
    Answer. FDA policies and procedures do not currently include the 
posting on the Internet of manufacturers' responses to FDA's untitled 
letters. CBER has only rarely received a request to post the response 
to an untitled letter and declined to do so. However, a company is 
always able to post information on its own Web site, including its 
response to the untitled letter and any other information in regards to 
addressing FDA's concerns.
    Question. Have you considered issuing formal ``close out'' letters, 
similar to what is done for warning letters?
    Answer. FDA policies and procedures do not currently call for 
issuing untitled letter close-out letters.
                       fda food safety activities
    Question. I have heard from many organizations that are requesting 
appropriate funding for FDA's food safety activities in fiscal year 
2016 and continue to oppose the proposed industry user fees, which have 
been repeatedly rejected by Congress, to pay for food safety 
activities. Commissioner Hamburg, do you still believe the user fees 
are necessary and do the user fees have industry and political support?
    Answer. In fiscal year 2016, FDA has requested an increase of 
$301.2 million to support its FSMA implementation efforts. The request 
includes a net increase of $109.5 million in Budget Authority and 
$191.8 million in User Fees. The total request is critical to ensure 
full implementation of FSMA. FDA continues to work with its 
stakeholders to build support for the proposed food safety User Fees. 
However, FDA is most concerned with having an appropriate level of 
funding for successful implementation, not the funding source.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
    Question. I submitted five questions for the record last year, but 
never received a response from your agency on a single question. Why 
has nearly a year gone by without a response from your agency?
    Answer. FDA did not receive questions for the record from 
Appropriations subcommittee staff last year. While we were not aware of 
your questions, we are happy to answer them this year or in a briefing 
or letter.
    Question. Prescription drug abuse remains a serious problem in my 
home State of Kentucky where more than 80 Kentuckians die each month as 
a result of this epidemic. In fact, the demand for opiates has led to a 
heroin epidemic in Northern Kentucky, and heroin overdoses caused 61 
deaths in this part of the State in 2012. Approving drugs with abuse-
deterrent features is one tool among many available to FDA to help 
prevent prescription drug abuse. While much attention has been given to 
abuse-deterrent formulations for extended-release, long-acting opioids, 
what steps has FDA taken to encourage the development of these 
formulations in immediate release opiates? Furthermore, what is the 
rationale behind FDA's decision not to require a Risk Evaluation and 
Mitigation Strategy (REMS) for immediate release opioids?
    Answer. The FDA looks forward to a future in which most or all 
opioid analgesic medications--not just extended-release/long-acting 
(ER/LA) opioids products--are available in formulations that are less 
susceptible to abuse than the formulations that are on the market 
today. While ER/LA opioid analgesics typically contain larger amounts 
of drug and therefore carry a higher risk for overdose and death, abuse 
of immediate-release (IR) products is also a significant concern.
    FDA plans to finalize guidance on the evaluation and labeling of 
all abuse deterrent opioid formulations, both IR and ER/LA, in the near 
future. The guidance--based, in part, on comments received during a 
public meeting held to discuss the development, assessment, and 
regulation of such products--will suggest the types of studies that 
should be conducted to demonstrate that a given opioid formulation has 
abuse-deterrent properties. The guidance will also discuss the 
evaluation of those studies and the labeling that may be approved based 
on the results.
    FDA's focus on incentivizing development and use of all opioid drug 
products with abuse-deterrent features has significantly increased 
interest in producing these products. Some 30 investigational new drug 
applications (INDs) have been submitted by manufacturers seeking to 
conduct clinical trials on potentially abuse-deterrent products. FDA is 
working with drug makers to advance the science of abuse deterrence and 
navigate the regulatory path to market as quickly as possible. 
Companies are exploring promising alternatives to currently marketed 
abuse-deterrent formulations in an innovative array of scientific 
techniques and approaches.
    Additionally, abuse-deterrent opioid products, both IR and ER, may 
be eligible for one or more of FDA's expedited review and approval 
programs, including fast track designation and priority review 
timelines, if they meet applicable criteria.
    ER/LA opioid analgesics typically contain higher doses of opioids 
than IR opioids or opioid/non-opioid combinations products because they 
are intended to release the drug over a longer period of time. As a 
result, ER/LA opioid analgesics may be more desirable to individuals 
who misuse or abuse opioids--and pose a greater risk of fatality in the 
event of an overdose. These concerns informed the FDA's decision to 
require the ER/LA Opioid Analgesics REMS.
    FDA has received a citizen petition asking the agency to require IR 
opioids to include labeling changes that parallel those required of ER/
LA opioid analgesics. The agency is in the process of reviewing and 
responding to that petition. If the agency determines that a REMS is 
necessary to ensure that the benefits of IR opioid analgesics outweigh 
the risks, we will take appropriate action.
    Question. In a statement you released last year, strengthening 
surveillance efforts at FDA to actively monitor the prescription drug 
abuse epidemic and emerging trends was identified as a priority action 
item for the agency. It is my understanding that FDA has various 
surveillance methods either in place or in the pilot phase to monitor 
post-marketing safety issues. Will you please explain all of the post-
marketing surveillance efforts underway at FDA related to prescription 
drug abuse, including if and how the Sentinel program will be used to 
support surveillance efforts related to prescription drug abuse trends? 
What other agencies is FDA coordinating with on surveillance efforts, 
and how is that coordination being implemented?
    Answer. FDA actively monitors adverse event and medication error 
reports submitted by pharmaceutical manufacturers and the general 
public (e.g., doctors, nurses, patients, and family members of 
patients) through the FDA Adverse Event Reporting System (FAERS). 
FAERS, a key component of postmarketing surveillance, helps to identify 
new drug safety issues that were not observed during the clinical 
trials that served as the basis for drug approval. FDA safety 
evaluators regularly screen FAERS reports.
    To supplement surveillance efforts, FDA has required new 
postmarketing studies for all ER/LA opioids. These studies will help to 
better assess the risks of misuse, abuse, addiction, overdose and death 
associated with long-term use of ER/LA opioids.
    The Sentinel Program is a vital tool in FDA's surveillance efforts. 
Sentinel utilizes administrative healthcare claims data from healthcare 
providers and facilities and may at some point help us to understand 
issues brought to medical attention by patients prescribed opioids, 
once the claims for events such as overdoses are appropriately 
validated. As part of the required safety studies, FDA is requiring 
manufacturers to validate administrative claims that may be indicative 
of opioid overdoses. We are hopeful that this effort will yield 
reliable algorithms that can be used more broadly in administrative 
claims data, like Sentinel, to study these types of outcomes of 
prescription opioid abuse.
    The agency is also collaborating in several efforts to collect more 
robust and comprehensive data on opioid abuse, including ER/LA opioid 
abuse. FDA is working with the National Center for Health Statistics at 
the Centers for Disease Control and Prevention (CDC) to obtain detailed 
national data on emergency department visits relating to drug abuse 
from hospitals participating in the new National Hospital Care Survey. 
FDA is also working with the National Electronic Injury Surveillance 
System--Cooperative Adverse Drug Event Surveillance Project (NEISS-
CADES) to expand the data collection and abstraction process to include 
abuse-related clinical encounters. In addition, the agency is leading 
an ongoing collaborative project with CDC to identify and quantify 
deaths related to specific drugs, including those due to overdoses 
caused by prescription opioid products. Finally, FDA is exploring ways 
to use data from State-based Prescription Drug Monitoring Programs to 
better understand prescribing and dispensing behaviors of controlled 
substances that play a role in the evaluation of prescription drug 
abuse.
    FDA is committed to making a difference in this epidemic. We 
continue to actively partner with others to implement the 
Administration's National Drug Control Strategy and Prescription Drug 
Abuse Prevention Plan--and reduce prescription drug misuse, abuse and 
addiction. FDA is also continuing its close participation in 
surveillance efforts through the Prescription Drug Abuse Subcommittee 
of the HHS Behavioral Health Coordinating Council.
    Question. As you know, FDA approval of innovator drugs that lack 
abuse-deterrent features is a major concern in my home State of 
Kentucky. Why has FDA refrained from granting an abuse-deterrent label 
to products that meet the requirements of abuse-deterrence under any 
one of tiers 1, 2 and 3 of the FDA Draft Guidance for Industry on 
Abuse-Deterrent Opioids? How does FDA recognize and communicate, or 
plan to recognize and communicate, that although a product may not have 
the ability to meet the requirements outlined under all the tiers 
listed in the FDA Draft Guidance for Industry on Abuse-Deterrent 
Opioids, it may still offer technology that makes the product more 
difficult to abuse than others?
    Answer. FDA has approved four ER/LA opioid analgesics with labeling 
describing the product's abuse-deterrent properties consistent with the 
draft guidance. They include: OxyContin; Targiniq ER; Embeda ER; and 
Hysingla ER.
    We have rejected abuse-deterrent claims for products when the data 
were insufficient to support such claims. FDA will approve labeling 
describing a product's abuse-deterrent properties when the data show 
that a product's abuse-deterrent properties can be expected to result, 
or actually have resulted, in a meaningful reduction in that product's 
abuse.
    We are still in the early stages of abuse-deterrent product 
development--the market has a small number of products using abuse-
deterrent technologies, and the agency is assessing each opioid drug 
product's safety and efficacy on a case-by-case basis. FDA expects 
these technologies to improve and expects products containing them 
(both innovator and generic) to become more widely used. FDA looks 
forward to a time, hopefully not so far in the future, when the 
majority of opioids are in effective, abuse-deterrent forms; forms that 
substantially reduce abuse, including by oral, intranasal, and 
intravenous routes.
    FDA hopes that the final guidance, to be released soon, will 
clarify abuse-deterrent labeling claims. Abuse-deterrent labeling will 
be approved for products. All abuse-deterrent labeled products can be 
expected to result, or will have actually resulted, in a meaningful 
reduction in that product's abuse.
    Question. The incidence of newborns suffering withdrawal has 
tripled throughout the country since 2000. To put this in perspective, 
in 2009, approximately one infant was born each hour showing signs of 
drug withdrawal. In Kentucky, this condition increased more than 2,400 
percent from 2000 to 2012. Babies suffering from drug dependence are 
more likely than other newborns to have complications such as low birth 
weight and respiratory complications, placing additional hurdles in 
place to becoming healthy and adding costs to the healthcare system. 
What activities is FDA involved in to address the rising number of 
babies being born dependent on opioids?
    Answer. The agency is also alarmed by the dramatic increase in the 
number of babies born with Neonatal Opioid Withdrawal Syndrome (NOWS) 
and recently augmented the labeling warnings about this risk for ER/LA 
opioid analgesics. Product labeling is FDA's primary tool to inform 
prescribers about approved uses of medications and to assist them in 
making the best decisions for their patients.
    For women with chronic pain, there are no analgesics that come 
without some risk to a developing fetus. Nonsteroidal anti-inflammatory 
drugs (NSAIDs) cannot be used during the third trimester. Other non-
opioid medications used for the treatment of pain also have risks.
    Given the risks associated with alternative products, opioid 
analgesics may be an appropriate treatment option during pregnancy. We 
are committed to providing the necessary information to prescribers and 
patients so that they may make informed decisions regarding appropriate 
use of these drugs during pregnancy.
    As noted above, FDA is also continuing its close participation in 
surveillance efforts through the Prescription Drug Abuse Subcommittee 
of the HHS Behavioral Health Coordinating Council.
    Question. Incidence of skin cancer continues to rise in the United 
States. One American dies every hour from melanoma, the deadliest form 
of skin cancer. We know that sun exposure is a high risk factor for 
melanoma and we know that using sunscreen effectively can reduce that 
risk. Yet, Americans still do not have access to sunscreen ingredients 
that have been on the market all over the world. To encourage the FDA 
to review the backlog of sunscreen applications that had been pending 
for more than a decade, Congress passed and I supported the Sunscreen 
Innovation Act, which was signed into law by President Obama last 
November. What steps are being taken by FDA to see that sunscreen 
ingredients that have been on the market and used safely all over the 
world are accessible to Americans?
    Answer. It is very important that consumers have access to safe and 
effective preventive skin care drug products. FDA is actively working 
to assure that sunscreens containing the ingredients being evaluated 
under the Sunscreen Innovation Act (SIA) provide such protection.
    As required by the SIA, FDA has completed several important steps 
in the review process for sunscreen active ingredient applications 
marketed for a material time and extent in other countries and 
determined eligible for review prior to enactment of the SIA. We have 
reviewed all eight pending sunscreen active ingredient applications, 
evaluated submitted data, and identified the missing information we 
need to determine that sunscreens containing each ingredient would be 
generally recognized as safe and effective. We have issued proposed 
orders outlining additional data needed in order to make a 
determination that each ingredient meets this standard.
    As outlined in the SIA, the data requested must be gathered and 
submitted to the FDA for evaluation before the agency can proceed to a 
Final Sunscreen Order. We look forward to receiving and reviewing the 
data. The agency is committed to doing its best to continue to meet 
future deadlines under the SIA--and to provide American consumers with 
additional options for safe and effective sunscreen ingredients.
    Heightened concerns about the risk of skin cancer and premature 
aging have fundamentally altered consumers' use of sunscreen products 
over the past few decades. Americans once applied the products in 
modest amounts while at the beach or exercising during peak hours of 
summer sun exposure. In contrast today, Americans--young and old, fair-
skinned and not--now routinely spread on sunscreens all year round.
    A significant increase in the amount and frequency of sunscreen 
exposure combined with advances in scientific understanding that some 
sunscreen ingredients may be absorbed into the bloodstream have raised 
safety concerns.
    The SIA does not relax FDA's scientific standards for evaluating 
safety and effectiveness or the requirement that the agency have 
adequate data on which to base a generally recognized as safe and 
effective (GRAS/E) determination. FDA has proposed data requirements, 
unanimously supported by an Advisory Committee panel of independent 
scientific experts, to meet this standard. We look forward to receiving 
and reviewing industry data--and helping American consumers make 
informed decisions about these products.
                                 ______
                                 
              Questions Submitted by Senator Steve Daines
    Question. Earlier this month, FDA took the significant step of 
approving the first biosimilar drug. It is disappointing, however, that 
important guidance is still not forthcoming from the agency on issues 
such as naming, interchangeability, and others. In fact, in the almost 
exactly 5 years since enactment of the biosimilars law, no final 
guidance on any biosimilars topic has come from FDA.
    What is the anticipated timeline for these important guidance 
documents, which are essential to encouraging and assisting companies 
to develop biosimilars that will benefit patients?
    Answer. While the agency cannot provide a specific timeline for the 
release of any guidance, FDA continues to clarify our approach to 
implementation of the BPCI Act and provide guidance and information to 
assist biological product developers--sponsors/companies--with bringing 
biosimilar and interchangeable products to market.
    FDA has recently issued three final guidances:
  --Scientific Considerations in Demonstrating Biosimilarity to a 
        Reference Product
  --Quality Considerations in Demonstrating Biosimilarity of a 
        Therapeutic Protein Product to a Reference Product
  --Biosimilars: Questions and Answers Regarding Implementation of the 
        Biologics Price Competition and Innovation Act of 2009
    FDA has published the following draft guidances since 2012:
  --Clinical Pharmacology Data to Support a Demonstration of 
        Biosimilarity to a Reference Product
  --Reference Product Exclusivity for Biological Products Filed Under 
        Section 351(a) of the PHS Act
  --Formal Meetings Between the FDA and Biosimilar Biological Product 
        Sponsors or Applicants
  --Biosimilars: Additional Questions and Answers Regarding 
        Implementation of the BPCI Act of 2009
    The agency is continuing to review the comments received as we move 
forward in finalizing these draft guidances. In addition, FDA expects 
to issue draft guidance in 2015 on the following topics identified in 
CDER's Guidance Agenda:
  --Considerations in Demonstrating Interchangeability to a Reference 
        Product
  --Statistical Approaches to Evaluation of Analytical Similarity Data 
        to Support a Demonstration of Biosimilarity
  --Labeling for Biosimilar Biological Products
  --Nonproprietary Naming for Biological Products
    Question. Within 30 days, please provide the subcommittee with a 
list of biosimilars guidance documents you expect to publish this 
calendar year. With respect to any draft biosimilars guidance, please 
indicate when you expect to make that guidance final.
    Answer. Please see the previous response.
                                 ______
                                 
              Questions Submitted by Senator Jeff Merkley
                  state inspection standards for fsma
    Question. The budget includes $32 million to train approximately 
1,000 State food safety inspectors, and to help the States implement 
real-time information sharing capacity with FDA. That comes out to 
training about 20 inspectors in each State, which isn't that many.
    What oversight will FDA provide to make certain that State 
inspections are up to FDA standards, and how will they monitor the 
States?
    Answer. For State inspections performed under FDA food inspection 
contracts, FDA will evaluate the contracted State agencies' overall 
performance throughout the contract period. Inspectional performance 
evaluation will include review of inspection reports, audit assessments 
and joint Federal/State inspections. State inspections will be 
collaboratively scheduled by the FDA district offices and each 
contracted State agency. In addition, there are 40 State-manufactured 
food regulatory programs enrolled in the Manufactured Food Regulatory 
Program Standards (MFRPS), which represents 89 percent of contracted 
inspections, which are used by the States as a guide for consistent, 
continuous improvement for State food manufacturing programs. MFRPS 
standards promote development of a high-quality State-manufactured food 
regulatory program and include a process for continuous improvement. 
The MFRPS are updated, when applicable, to facilitate compliance with 
new legislation, regulations, guidance, inspection programs, and agency 
rules as they are developed.
    Finally, FDA recognizes the need to establish training programs for 
Federal and State inspectors who will conduct inspections on behalf of 
FDA for the new FSMA regulations. The expected outcome of the 
evaluation is to ensure competency in the performance and quality of 
inspections regardless of the regulatory entity that performs such 
inspections.
                        imported food inspection
    Question. GAO recently published a report regarding FDA's foreign 
offices and made a couple of significant findings. The first was that 
FDA is not conducting nearly the number of foreign inspections as FSMA 
mandated. They conducted approximately 1,300 inspections in 2012, and 
plan to conduct only 1,200 in fiscal year 2015. FSMA mandated 600 
inspections in 2011, with a doubling of the previous years' inspection 
level for the following 5 years. The second finding was that 44 percent 
of foreign office positions were vacant as of October 2014.
    I understand that the FDA has indicated that they don't intend to 
fulfill the FSMA mandate, and don't necessarily believe that would be 
useful.
    However, how is FDA determining what the appropriate level of 
physical foreign inspections should be?
    Answer. Under the FDA Food Safety Modernization Act (FSMA), FDA was 
directed to inspect at least 600 foreign food facilities in 2011 and, 
for each of the next 5 years, to inspect twice the number of facilities 
inspected during the previous year. FSMA provides FDA a multi-faceted 
toolkit to better ensure the safety of imported food. This toolkit 
includes increased foreign inspections, as foreign inspections provide 
direct accountability for inspected firms, incentives for all foreign 
firms exporting to the United States to comply with U.S. requirements, 
and critical intelligence for FDA concerning foreign food safety 
practices. The toolkit also includes sharpening private sector 
accountability for import safety, leveraging private sector resources, 
and taking advantage of any resources and services the foreign 
governments can provide to elevate assurances that food imported into 
the United States meets FSMA's prevention-oriented standards and 
requirements.
    Foreign inspections are an important part of the new import safety 
system mandated by FSMA, but they cannot alone ensure comparable safety 
of imported and domestic food. FDA has been clear in its Report to 
Congress under section 110(a)(1) of FSMA that the agency does not 
anticipate going significantly beyond 1,200 foreign food facility 
inspections per year in the foreseeable future until after other parts 
of the new import safety system have been implemented. FDA's position 
is based on the enormity of the additional funding that would be needed 
to meet FSMA's foreign inspection goals, coupled with FDA's view that 
additional resources would be more effectively spent first on 
implementing tools in the FSMA import safety toolkit that leverage both 
FDA and private sector resources to ensure the safety of foods exported 
to the United States by foreign firms.
    FDA is committed to allocating its resources using a risk-based 
inspection model for the selection of firms and the number of firms per 
country. This risk-informed approach is based on the strategic 
allocation of programmatic resources by integrating in a systematic 
manner the relevant quantitative, qualitative, and deterministic public 
health safety factors to obtain a decision to select firms and 
countries. This approach better protects the safety of the U.S. food 
supply and gives the agency flexibility to adjust FDA resources 
effectively and efficiently as emerging issues arise.
    FDA Centers and Offices work collaboratively on an inspection work 
plan each year. For example, the FDA India Office works with ORA and 
CFSAN to develop a work plan for food facilities inspections in India. 
The FDA India Office provides information to FDA headquarters regarding 
high-risk facilities and high volume facilities that have not been 
inspected. The FDA India Office requests other food facilities 
inspections based on local intelligence, e.g. complaints, informants, 
local news, and other sources. In March 2015, FDA signed a memorandum 
of understanding with the Indian competent authority that has oversight 
of some food exports. The FDA India Office hopes to be able to leverage 
information from this authority to further target high-risk food 
facilities that export to the United States.
    Another example is from the FDA China Office. The FDA China Office 
develops a list of recommended firms for inspection to share with ORA 
and the Centers. Similar to the FDA India Office, the FDA China Office 
uses local intelligence to help select which firms should be included 
on the list in addition to those higher risk food facilities that have 
not had a previous inspection and are known to be active suppliers to 
the United States.
    FDA also is working diligently to fill vacancies within our foreign 
offices. In fact, since the time of the GAO report, FDA has already 
reduced the vacancy rate from 44 percent to 40 percent.
    Question. Since you aren't planning to fulfill the FSMA mandate, 
what is your plan?
    Answer. As discussed, FSMA provides FDA a multi-faceted toolkit to 
better ensure the safety of imported food. For example, the foreign 
supplier verification programs mandated by FSMA will be the foundation 
of a new system under which importers will take greater responsibility 
for ensuring that foreign manufacturers produce food in compliance with 
U.S. safety requirements. Another import-related program, the Voluntary 
Qualified Importer Program (VQIP), will make it easier for participants 
in the program to import items into the United States, based on 
demonstrated high-performance in food safety, and enable FDA to better 
focus its resources on potentially higher risk imports. FSMA also 
directs FDA to establish an accredited third-party audit program, under 
which third-party auditors can assure importers and FDA that foreign 
producers are using effective preventive controls. Final rules 
requiring foreign supplier verification programs and establishing the 
accredited third-party audit program are scheduled to publish this 
year.
    The agency is expanding its collaborations with foreign governments 
so that FDA can rely as appropriate on foreign government food safety 
programs and gain knowledge about the safety of foreign exports. This 
allows FDA to focus its own resources more efficiently.
    FDA's current focus with respect to foreign facility inspections is 
targeting them to achieve the greatest public health benefit. FDA's 
selection of foreign food facilities for inspection is based on an 
overall, cross-cutting risk profile. The primary factors contributing 
to a facility's risk profile include: (1) the food safety risk 
associated with the commodity (the type of food), (2) the manufacturing 
process, and (3) the compliance history of the facility, such as 
refusal rates for products that were denied entry into the United 
States. In addition, section 201 of FSMA requires FDA to identify high-
risk facilities and allocate resources to inspect facilities according 
to the known safety risks of the facilities, and includes several 
factors to consider when making that assessment.
    FDA is committed to reconfiguring import screening and field exam 
activities to complement oversight of FSMA's foreign supplier 
verification requirement and ensure that FDA is making strategic, risk-
based use of its import oversight resources. This initiative is 
documented in FDA's Operational Strategy for the Implementation of FSMA 
(http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm395105.htm). FDA is 
also committed to building data integration and analysis systems to 
strengthen risk-based targeting of resources. As FDA moves forward with 
implementing the new FSMA toolkit for imports, FDA intends to monitor, 
analyze, and reconsider a host of factors, including the number of 
foreign inspections we conduct and how we target establishments. FDA 
will adjust its plan as necessary, and as funding permits, to further 
our public health mission. All of these activities will contribute to 
FDA's ability to ensure comparable safety of imported and domestic food 
and also rely on FDA receiving sufficient resources.
    Question. How has a vacancy rate that high affected the ability of 
the foreign offices to do their jobs, and how are you addressing this 
issue?
    Answer. As noted in the GAO report, FDA has undertaken efforts to 
improve staffing in its foreign posts but has experienced some 
challenges. For example, following expanded funding under the China 
Safety Initiative, FDA's China Office has been working extensively and 
over an extended period of time with Chinese counterparts to obtain 
visas for an increased number of FDA staff to be based in China. In a 
positive development, the FDA signed two Implementing Arrangements 
(IAs) with its Chinese counterparts in November and December 2014. The 
documents, signed with China's General Administration of Quality 
Supervision, Inspection and Quarantine (AQSIQ) and China's Food and 
Drug Administration (CFDA), frame the work of regulatory personnel 
posted in each country, outline the expectations of FDA and AQSIQ 
regarding inspections of food facilities, and detail the expectations 
of FDA and CFDA regarding inspections of drug facilities.
    As of May 2015, there are now 11 FDA FTEs in the FDA's Beijing, 
China Office. This includes an additional seven staff who have recently 
been issued visas and deployed to the China Office. We have one foods 
investigator who is preparing to deploy, but has not yet applied for 
her visa. We currently also have two drug investigators on short-term 
detail. The FDA China Office is actively recruiting staff to reduce the 
current vacancies and is working closely with FDA's Office of Human 
Resources (OHR). FDA continues to augment the staff in China with 
temporary duty details and foreign cadre inspections to complete its 
inspectional work plans in China.
    The FDA India Office also has faced recruitment challenges but is 
working to hire additional staff. At present, the FDA India Office has 
five positions filled, including two food investigators. The FDA India 
Office has set an inspection target for in-country investigators to 
ensure inspection performance expectations are met. For fiscal year 
2014, FDA India Office food inspections met work plan goals. Fiscal 
year 2015 inspectional targets are currently on track to meet 
expectations. FDA will conduct inspections with temporary duty details 
and foreign cadre inspectors until full staffing is achieved.
    More generally, to address some of the recruitment challenges for a 
foreign assignment, FDA's Office of International Programs has:
  --Developed continuous vacancy announcements for multiple geographic 
        sites to maximize the pool of applicants.
  --Developed an SOP for foreign post renewals and extensions to remove 
        obstacles to retaining staff.
  --Created interview panels that include relevant Center involvement 
        to promote the selection of subject matter experts 
        knowledgeable about Centers' programs.
  --Strengthened the OIP deployment process(es).
  --Created temporary details.
  --Made more strategic utilization of locally employed staff (LES) in 
        foreign posts.
  --Leveraged other U.S. Government agencies field deployment 
        processes/programs.
    Despite some challenges to recruit highly qualified investigators 
to our foreign offices, OIP has been successful in strengthening 
inspection capabilities in FDA's offices overseas. In the past year 
alone, FDA's foreign offices have increased the total number of 
inspections and expanded the countries in which foreign inspections are 
being conducted by in-country investigators and investigators on 60-120 
day detail assignments to foreign offices.
     fda office of regulatory affairs (field staff) reorganization
    Question. You started an initiative last year to reorganize your 
field staff in order to make them more specialized. The goal appears to 
be to have inspectors who are very focused on one type of inspection--
drug facility inspections, for example, instead of having inspectors 
who have to play many different roles. With the increasing complexity 
of drug and food manufacturing, as well as FSMA implementation, this 
seems like a good idea.
    Will this reorganization require additional funding and training? 
If so, how much?
    Answer. FDA is working to realign inspection and compliance staff 
and managers by program (e.g. food, pharmaceutical, etc.). Training is 
a critical component of enhancing specialization of FDA's inspectorate 
and ensuring the staff has the expertise and tools needed to keep pace 
with changing and advancing technology in the industries FDA regulates.
    As part of FDA's program alignment efforts, ORA is working with FDA 
Centers to evaluate current training programs, develop new and novel 
approaches for training staff, and work toward more collaborative 
training leveraging both Center and Field experts. FDA will train our 
staff, State partners, and educate industry on new regulations 
resulting from FSMA, FDASIA, and other recently enacted laws. At this 
time, however, it is unclear whether or not the agency will require any 
additional resources or training related to the realignment effort.
    Question. Do you anticipate hiring additional staff as part of this 
effort?
    Answer. It is too early to precisely predict the Office of 
Regulatory Affairs' (ORA's) future staff requirements, transitioning 
from a geographically based management model to a program-based 
management model, where investigations, compliance, and operational 
managers are aligned by program. ORA is comparing its current staffing 
level with the staffing needs for each program area. This information, 
along with data from each program's inventory, will be used to 
determine the gaps in staffing by program area. Once this gap analysis 
is complete, ORA will begin aligning staff to the new program 
management model and employ specific hiring requirements by program.
    Question. How will you make sure the inspection staff is properly 
allocated across the country?
    Answer. As FDA works to align inspection and compliance staff and 
managers, FDA is evaluating the current inventory of regulated firms 
across the country and across the globe. In the past decade, FDA has 
seen unparalleled growth of imported products which necessitates FDA to 
allocate staff across the United States based on domestic industry and 
at ports of entry and in foreign countries to ensure protection of the 
American public. FDA will align current staff not only by program but 
also by operational needs ensuring staff will be best positioned to 
inspect, examine, and collect samples of both domestic and imported 
products. In addition, FDA will target any inspectional hiring in those 
specialties and locations where there is a need.
                        electronic drug inserts
    Question. FDA recently published a rule requiring electronic-based 
labeling for healthcare providers, but there have been many concerns 
raised about them. The ag report last year actually included language 
directing FDA not to publish a rule that would require electronic 
labeling in lieu of paper inserts. Concerns raised include 
cybersecurity issues, a lack of access to the Internet in parts of 
rural America, and the loss of Internet access everywhere during a time 
of disaster. I understand that this rule only applies to healthcare 
providers and not packages provided directly to patients, but I believe 
these concerns are still valid.
    Why did FDA move forward on this rule, and will these issues be 
addressed in the final rule?
    Answer. On December 18, 2014, FDA issued a proposed rule entitled 
``Electronic Distribution of Prescribing Information for Human 
Prescription Drugs, Including Biological Products.'' We believe that 
this proposed rule addresses the Committee's concerns about the use of 
electronic labeling, while at the same time ensuring that the most up-
to-date prescribing information is available for use by healthcare 
providers.
    If finalized as proposed, this rule would generally require that 
prescribing information intended for healthcare professionals be 
distributed electronically, but also provide for continued access to 
prescribing information in paper format in a number of circumstances. 
For example, the proposed rule allows for drugs to be exempted from 
electronic-only distribution if electronic-only distribution could 
adversely affect the safety, effectiveness, purity, or potency of the 
drug; is not technologically feasible; or is otherwise inappropriate. 
Also, the proposed rule requires manufacturers to provide a toll-free 
telephone number that healthcare providers can call 24 hours a day, 7 
days a week to request a paper copy of the label.
    FDA would like to emphasize that this is a proposed rule, subject 
to notice-and-comment procedures. We granted a request to extend the 
comment period for 60 days, until May 18, 2015. FDA will consider all 
comments submitted in response to the proposal as we work to finalize 
the rule. We fully expect that the concerns you have raised will be 
addressed through that process.
                   food safety centers of excellence
    Question. As you know, CFSAN has for a number of years supported 
several Food Safety Centers of Excellence that help to support the food 
safety research needs of the FDA through basic research and various 
other tasks. The Committee has long been supportive of the work of 
these Centers.
    Can you please provide some background on Food Safety Center of 
Excellence funding for fiscal year 2015 and fiscal year 2016, and 
whether or not there will be an increase in basic research support 
levels in fiscal year 2016?
    Answer. The FDA Food Safety Centers of Excellence (COEs) support 
critical collaboration between FDA and academic institutions to advance 
regulatory science through innovative research, education, and 
scientific exchanges.
    In fiscal year 2014 CFSAN awarded $11.025 million in funding to the 
COEs. While FDA intends to maintain strong support for these Centers, 
final decisions on precise funding amounts for fiscal years 2015 and 
2016 are still pending.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein
             fda oversight of antibiotic use and resistance
    Question. Commissioner Hamburg, I am pleased to know that your 
agency expects drug companies to fully participate in the agency's 
policy for withdrawing growth-promoting uses of medically important 
antibiotics in food animals. To what extent does the agency expect this 
policy to reduce antibiotic use in agriculture? Does the agency have 
specific performance goals for this policy?
    Answer. FDA is confident that the changes outlined in Guidance for 
Industry (GFI) #213 will be fully implemented by the December 2016 
target date. These measures will significantly change how these drugs 
have been used for decades. Production uses of medically important 
antimicrobials will be eliminated as will over-the-counter access to 
the remaining therapeutic uses of these products in the feed or water 
of food-producing animals. In addition to tracking completion of these 
changes, FDA is enhancing data sources in a number of ways to help 
monitor the effects of GFI #213 over time. For example, FDA intends to 
publish a proposed regulation that would enhance the quality and 
utility of antimicrobial drug sales and distribution data it receives 
on antimicrobial drugs intended for use in food-producing animals by 
requiring reporting of such data by animal species. FDA is also working 
with State partners to perform whole genome sequencing on samples 
collected under the National Antimicrobial Resistance Monitoring System 
(NARMS), which will provide unprecedented data on the traits of 
resistant strains of foodborne bacteria from animals and animal-derived 
foods. Further, FDA is working with the Centers for Disease Control and 
Prevention (CDC) and the United States Department of Agriculture (USDA) 
to develop a plan for collecting additional data on antibiotic use and 
resistance to help provide a comprehensive, objective, and balanced 
summary assessment of antibiotic drug use and resistance in animal 
agriculture. FDA is continuing to work with USDA and CDC in developing 
this plan and expects to hold a public meeting in the summer of 2015 to 
obtain input from the public.
    Question. Commissioner Hamburg, I am concerned that some 
antibiotics approved for disease prevention or control do not have an 
explicitly defined duration or use or may be approved for use at a sub-
therapeutic dose. What steps is the agency going to take to ensure 
these antibiotics are not used inappropriately in agriculture?
    Answer. As FDA moves forward with implementing the changes outlined 
in Guidance for Industry (GFI) #213, FDA is also focusing on the 
remaining therapeutic uses of those products and evaluating whether 
additional improvements can be made to better align those uses with 
current antibiotic stewardship principles. For example, concerns have 
been raised about the use of medically important antibiotics for 
prevention purposes. FDA considers uses that are associated with the 
treatment, control, and prevention of specific diseases to be 
therapeutic uses that are important for assuring the health of food-
producing animals, but would not consider the administration of a drug 
to apparently healthy animals in the absence of any information that 
such animals were at risk of a specific disease to be judicious. In 
addition, when such uses of medically important antibiotics are deemed 
necessary, it is important that the duration of administration be 
appropriately limited. Therefore, as part of FDA's overall effort to 
ensure the judicious use of medically important antibiotics, FDA is 
currently developing a process and timeframe for evaluating and 
addressing that issue.
    Question. Commissioner Hamburg, I strongly support your agency's 
move to bring antibiotics under veterinary oversight. In your policy on 
judicious antibiotic use, you establish guidelines for veterinarians to 
consider when directing that an antibiotic be used for disease 
prevention, such as using antibiotics only for animals at risk of 
developing an infection and when no other reasonable alternatives 
exist. What steps is the agency going to take to ensure these 
guidelines are followed?
    Answer. In highlighting the importance of veterinary oversight of 
medically important antibiotics, FDA noted in Guidance for Industry 
(GFI) #213 that veterinarians in the course of their professional 
practice take into consideration a number of relevant factors for 
determining the risk of a specific bacterial disease and for 
determining whether the use of medically important antimicrobials for 
prevention purposes is appropriate in a particular situation. These 
factors include whether: (1) there is evidence of effectiveness; (2) 
such a preventive use is consistent with accepted veterinary practice; 
(3) the use is linked to a specific etiologic agent; (4) the use is 
appropriately targeted to animals at risk of developing a specific 
disease; and (5) no reasonable alternatives for intervention exist.
    A critical step that is being taken through implementation of GFI 
#213 is to change the over-the-counter (OTC) status of these products 
so that licensed veterinarians have an oversight responsibility and are 
in a position to ensure that factors such as those described above are 
taken into consideration. Once the feed use products are changed from 
OTC to Veterinary Feed Directive (VFD) status, veterinary authorization 
of these products must be done in compliance with the procedures 
described in the VFD regulation. In conjunction with implementing the 
updated VFD regulation, FDA intends to enhance its inspectional 
activities to ensure compliance with the VFD requirements. FDA is also 
directing resources towards education and training on the VFD process 
and on judicious use. FDA is also engaging veterinary and producer 
organizations in this issue, as they play a key role in veterinarians' 
practical application of judicious use principles at the farm level. 
FDA is very encouraged by the strong commitments organizations like the 
American Veterinary Medical Association have made to this effort.
    Question. Commissioner Hamburg, Congress provided an additional $3 
million for the National Antimicrobial Resistance Monitoring System 
(NARMS) in fiscal year 2015, and this increased funding level was 
requested in the fiscal year 2016 budget. Can you describe how your 
agency will use these increased funds to make critical improvements to 
NARMS, and how these improvements will allow it to collect 
statistically valid data on antibiotic resistance trends in foodborne 
pathogens and to identify more outbreaks involving antibiotic-resistant 
pathogens?
    Answer. FDA is using the extra funds to collect additional retail 
meat samples for the analysis of antimicrobial resistance and to 
implement advanced technologies in molecular characterization to 
improve microbial analysis.
    Prior to its receipt of the additional monies, NARMS was only able 
to sample approximately 6500 retail meats, resulting in the recovery of 
300-500 Salmonella isolates. This did not provide enough data for 
statistically valid analysis of antimicrobial resistance trends for 
most products. With the additional monies NARMS is working to increase 
the number of samples tested by the current participating laboratories 
and expand testing to include additional geographic areas not currently 
under surveillance. With these changes FDA will be able to collect 
enough Salmonella isolates to improve the statistical confidence around 
NARMS resistance trends, thereby making NARMS data more useful for 
regulatory decisionmaking. This enhancement also meets Sub-Objective 
2.4.1 of the White House's National Action Plan for Combating 
Antibiotic Resistant Bacteria, ``Enhance surveillance of antibiotic 
resistance in animal and zoonotic pathogens and commensal organisms by 
strengthening NARMS and leveraging other field- and laboratory-based 
surveillance systems.''
    The advent of whole genome sequencing (WGS) is poised to vastly 
improve the microbiology and epidemiology of infectious diseases. At 
relatively low costs, comprehensive genetic information can be gleaned 
in a short time. With the enhanced funding, NARMS has been able to 
continue efforts to implement WGS, as well as the information 
technology and bioinformatics infrastructure needed to sustain it, 
through the purchase of additional equipment, software, and reagents. 
Furthermore, NARMS now has the capacity to sequence all Salmonella 
isolates collected from retail meats from 2002 (the inception of the 
retail meat program) to present. By expanding the whole genome sequence 
database with retail meat isolates collected through NARMS, FDA will 
greatly improve the detection of foodborne outbreaks, the attribution 
of resistant infections, and research on the evolution and spread of 
resistant bacteria in the food supply, among other things. By the end 
of the year, NARMS will publish the sequence information and 
accompanying metadata for all retail Salmonella isolates tested through 
2014.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
                     food safety modernization act
    Question. The premium Vermont brand depends on adhering to the 
highest standards of quality and food safety. However, Vermont's 
diversified farms are very concerned that implementation of the Food 
Safety Modernization Act may crush them under a burden of fees, paper 
work, and poorly targeted and confusing rules. I appreciate that your 
food safety team, led by Mike Taylor, has visited Vermont several times 
and has listened many of my constituent's concerns, resulting in better 
rules, yet many questions still remain for our farmers and our State 
agencies.
    The budget request includes an increase of $109.5 million for a 
total of a total of $1.3 billion in budget authority for FSMA 
implementation. By your own estimate this leaves a gap of $166 million. 
I am worried that your budget falls short on the needs for your State 
partnerships, staff training, and education and technical assistance 
for producers and value added agriculture.
    With this gap and your current funding request, please explain to 
me how you are going to educate before you regulate?
    Answer. In addition to the increase of $109.5 million in Budget 
Authority, FDA has also proposed an additional $191.8 million in User 
Fees. Taken together, FDA believes this additional $301.2 million will 
allow FDA to fully implement FSMA.
    FDA intends to continue partnering with other Federal, State, and 
foreign government agencies and organizations; land grant universities 
and other academic institutions; produce farm and food industry 
associations; and food safety professional organizations during the 
implementation phase. We remain committed to increasing education and 
accessibility to technical assistance to foster and facilitate 
compliance. At our recent public meeting on the implementation strategy 
for the FSMA rules, we received additional input from the public on the 
best ways for us to help educate industry to assist in compliance and 
improve public health. However, FDA's ability to complete the 
activities described depends on receiving the proposed funding in the 
fiscal year 2016 President's budget. Without this funding, these 
activities would need to be scaled back.
                           dietary guidelines
    Question. The FDA's Dietary Guidelines Advisory Committee (DGAC) 
recommended on February 19, 2015, an update to the Dietary Guidelines 
and urged the FDA to re-consider its advice that pregnant women or 
those that may become pregnant eat no more than 6 ounces of albacore 
tuna per week, concluding that ``for the majority of commercial wild 
and farmed species, neither the risks of mercury nor organic pollutants 
outweigh the health benefits of seafood consumption, such as decreased 
cardiovascular disease risk and improved infant neurodevelopment,''. A 
number of consumer and public health stakeholders have raised 
significant concerns with the reliability of the risk/benefit risk 
analysis on which the recommendation is based as compared to the 
volumes of peer reviewed literature on which the current tuna 
consumption advisory is based.
    How will the FDA have reconcile the new risk benefit approach 
recommended by the Dietary Guidelines Advisory Committee with the 
established scientific literature to publish final guidelines that best 
promote public health?
    Answer. In developing the draft updated fish consumption advice 
released in June 2014, FDA and EPA reviewed the totality of the 
scientific evidence, including the research that influenced the 
recommendation in the Dietary Guidelines for Americans 2010. That 
totality of science included evidence on the harmful effects of 
methylmercury and beneficial effects from eating fish. In addition, an 
FDA analysis of seafood consumption data from over 1,000 pregnant women 
in the United States found that 21 percent of them ate no fish in the 
previous month. Those who ate fish ate far less than the Dietary 
Guidelines for Americans recommends, with 50 percent eating fewer than 
2 ounces a week.
    Before issuing final advice, FDA and EPA committed to accepting and 
considering public comment as well as seeking the advice of the FDA's 
Risk Communication Advisory Committee (RCAC). RCAC held a public 
meeting on the draft updated advice on November 3-4, 2014, which 
provided a forum for open discussion of the issues. The public comment 
period closed on March 26, 2015.
    The agencies are now considering the public comments and whether 
any modifications to the advice are needed. We expect this process to 
be completed in 2015. Please be assured that completing the updated 
advice remains a priority.

                          SUBCOMMITTEE RECESS

    Senator Moran. This subcommittee will meet again at 10 a.m. 
on Tuesday, March 17. Our witness will be the Secretary of 
Agriculture, Secretary Vilsack.
    We thank you all for your presence. Wish you well, 
Commissioner, in your future endeavors.
    Dr. Hamburg. Thank you.
    Senator Moran. I thank everyone for their attendance. This 
meeting is adjourned.
    [Whereupon, at 11:34 a.m., Thursday, March 12, the 
subcommittee was recessed, to reconvene at 10 a.m., Tuesday, 
March 17.]



   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016

                              ----------                              


                        TUESDAY, MARCH 17, 2015

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:02 a.m. in room SD-192, Dirksen 
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
    Present: Senators Moran, Blunt, Cochran, Collins, Hoeven, 
Daines, Merkley, Tester, and Udall.

                       DEPARTMENT OF AGRICULTURE

STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY
ACCOMPANIED BY:
        DR. ROBERT JOHANSSON, ACTING CHIEF ECONOMIST
        MR. MICHAEL L. YOUNG, BUDGET OFFICER

                OPENING STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. The subcommittee will come to order. Senator 
Merkley, the ranking member, is en route. We have a time 
challenge today. Two votes are scheduled at 11:00. And so we're 
going to forego opening statements. Senator Merkley and I will 
make no comments more than what I'm making right now. And 
Secretary Vilsack, welcome.
    What I think will happen at around 11 o'clock is that we 
will have a rotating chairman of this subcommittee, so that 
during the first vote, I will go vote and come back, and then 
as the second vote is called, my hope is that we have concluded 
our hearing. So we will try to keep this going, and mostly 
directed toward statements.

                           PREPARED STATEMENT

    Let me thank you for your public service, your care for 
farmers and ranchers of our country. Thank you for this weekend 
being at the National Farmers Union annual meeting, this time 
in Wichita, Kansas. We are delighted to have you in our State.
    [The statement follows:]
               Prepared Statement of Senator Jerry Moran
    This hearing will come to order. Good morning. The purpose of 
today's hearing is to discuss the Department of Agriculture's fiscal 
year 2016 budget request, and thank you to Secretary Vilsack, Dr. 
Johansson, and Mr. Young for being here today. Secretary Vilsack, I 
enjoyed getting to visit with you the other day and look forward to 
having another discussion about the Department's budget and priorities 
for the year.
    Agriculture remains one of the bright spots in our nation's 
economy, supporting more than 16 million jobs nationwide and forming 
the backbone of our rural communities. American farmers and ranchers 
are the best at what they do when given the opportunity to compete on 
an even playing field.
    After a long, arduous process and a great deal of economic 
uncertainty, Congress enacted the Agricultural Act of 2014 one year 
ago. The Farm Bill authorized sweeping changes to commodity and crop 
insurance programs, consolidated and reinforced conservation efforts, 
and reauthorized vital research and rural development programs. 
Agriculture is Kansas's #1 industry--directly responsible for 37 
percent of the state's economy. Enactment of a new Farm Bill was 
welcome news for producers, research institutions, and rural 
communities in my home state.
    It is now the responsibility of this Committee to continue 
oversight of Farm Bill implementation and provide USDA the resources it 
needs to ensure its effectiveness. Producers are facing a series of 
important decisions for their operations in the coming weeks, and the 
Department's guidance will be vital in educating farmers to determine 
which program best suits their interests.
    The challenges farmers and ranchers face are not limited to factors 
in their control. Unpredictable weather conditions and volatile foreign 
markets wreak significant impacts on a producer's bottom line. Many 
parts of the country are still suffering from persistent drought 
conditions, and this year's snowpack deficit appears to offer little 
relief to western states. Pests and diseases also pose significant 
threats to plants and animals--and their respective industries--as we 
are witnessing with citrus greening and avian influenza. Investments in 
agriculture research help mitigate these impacts, both environmentally 
and economically, and prepare producers for future adverse conditions.
    This year's budget request for the Department of Agriculture 
proposes a $900 million increase above the enacted levels in fiscal 
year 2015. I support many items in the request, but we must work to 
prioritize investments based in fiscal reality. As Chairman, I look 
forward to working with Senator Merkley and other members of the 
subcommittee to identify those priorities and make the most effective 
and efficient decisions on behalf of American taxpayers.
    I look forward to discussing these issues and others with our 
witnesses today. I would now like to turn to our Ranking Member, 
Senator Merkley, for his opening statement.

    Senator Moran. And Senator Merkley, it is my understanding 
we have both agreed to no opening statements, although I may 
have just violated that. And I have called the meeting to 
order. I would defer to the Senator from Oregon.
    Senator Merkley. Well, thank you very much. I'm delighted 
to be here, and I'm happy for us to expeditiously proceed.
    Senator Moran. Recognize the Secretary of Agriculture, 
Secretary Vilsack.

              SUMMMARY STATEMENT OF HON. THOMAS J. VILSACK

    Secretary Vilsack. Mr. Chairman, thank you very much, and I 
certainly appreciate the opportunity to be here.
    [The statement follows:]
              Prepared Statement of Hon. Thomas J. Vilsack
    Mr. Chairman and distinguished members of this Subcommittee, I 
appreciate the opportunity to appear before you to discuss the 
Administration's priorities for the Department of Agriculture (USDA) 
and provide you an overview of the President's 2016 budget. Joining me 
today are Robert Johansson, USDA's Acting Chief Economist, and Michael 
Young, USDA's Budget Officer.
    The President's budget strengthens the middle class and helps 
America's hard-working families get ahead in a time of relentless 
economic and technological change. Investments made by USDA work 
together to support the most productive agricultural sector in the 
world, attract and retain a talented labor force, improve connectivity 
and access to information in rural communities, move more American-
grown products to market, and make rural communities places where 
businesses--farm and non-farm alike--want to innovate, grow, and create 
more good paying jobs. These investments reward hard work, generate 
rising incomes, and allow everyone to share in the prosperity of a 
growing America.
    In the past 6 years, USDA assisted more than 900,000 rural families 
to buy or refinance a home, helping 146,000 rural Americans become 
homeowners in fiscal year (FY) 2014 alone. Since 2009, we have invested 
a total of $48.3 billion in new or improved infrastructure in rural 
areas, which helped 15.7 million rural residents get access to clean 
drinking water and better waste water disposal. Modernized electrical 
service was delivered to more than 5.5 million subscribers. More than 
21,000 grants and loans helped approximately 89,000 rural small 
businesses grow, creating or saving an estimated 418,000 jobs between 
fiscal year's 2009 and 2014.
    We have also continued our StrikeForce Initiative, which represents 
a broad commitment to increase investments in poverty-stricken rural 
communities through intensive outreach and stronger partnerships with 
community organizations. Since the inception of StrikeForce in 2010, 
USDA has partnered with almost 500 community and faith-based 
organizations, businesses, foundations, universities and other groups 
to support 109,000 projects with almost $14 billion in investments in 
rural America. We are providing a pathway to success and expanding the 
middle class.
    Critical to our efforts is the 2014 Farm Bill, which enhanced the 
array of authorities and resources to improve agricultural 
productivity, to strengthen the foundation for helping rural 
communities prosper, to enhance the resiliency of forests and private 
working lands, and to ensure access to a safe, diverse and nutritious 
food supply. Farmers, ranchers and those working in supporting 
industries maintain an agriculture sector that has seen strong growth 
over the past 6 years. Agriculture and agriculture-related industries 
account for about $775.8 billion in economic activity, support one out 
of every 11 jobs in the economy, and help to maintain vibrant, thriving 
rural communities.
    The Department has completed implementation of many new Farm Bill 
authorities. This includes major new safety net programs providing 
certainty to American agricultural producers going into the 2015 crop 
year. We have made available over $5 billion in critical assistance to 
producers across the country since sign-up for the disaster programs 
began on April 15, 2014. Significant new crop insurance protections 
were also made available. America's new and beginning farmers and 
ranchers, veteran farmers and ranchers, and women and minority farmers 
and ranchers were given improved access to credit.
    In fiscal year 2014, exports of U.S. food and agricultural products 
set a new record, reaching $152.5 billion and supporting nearly one 
million jobs here at home. Agricultural exports have climbed more than 
58 percent in value since 2009, totaling $771.7 billion over the past 5 
years. Agricultural exports have increased in volume, demonstrating an 
increasing global appetite for American-grown products. Between 2009 
and 2014, more than 6,000 U.S. companies participating in USDA-endorsed 
trade shows reported total on-site sales of more than $1.3 billion and 
more than $7.2 billion in 12-month projected sales. Rural exports 
support farm income, which translates into more economic activity in 
rural areas. In 2012, each dollar of agricultural exports stimulated 
another $1.27 in business activity. As requested by the President, we 
need trade promotion authority to protect our workers, protect our 
environment, and open new markets to products stamped ``Made in the 
USA.''
    USDA is also helping producers tap into growing consumer demand for 
locally-grown and organic food. USDA data indicate that local food 
sales totaled at least $6.1 billion in 2012. Demand for organic food 
products also continues to grow and this sector now accounts for $35 
billion in annual U.S. sales. In 2013, the National Organic Program 
helped an additional 763 producers become certified organic, an 
increase of 4.2 percent from the previous year.
    USDA's investments support strong local and regional supply chains 
and the rural jobs that come with them. Since 2013, USDA has made over 
500 investments in local food infrastructure and direct marketing 
opportunities to help connect farmers and consumers and create jobs all 
along the supply chain for local food. In addition, USDA has made 
expanding SNAP recipients' access to fresh fruits and vegetables 
through farmers markets a priority in recent years. In 2008, about 750 
farmers markets and direct marketing farmers accepted SNAP. As of 
January 2015, over 5,300 participated in markets accepting SNAP.
    USDA continues to work with land-grant universities to deliver 
science-based knowledge and practical information to farmers, ranchers 
and forest landowners to support decisionmaking, innovation and 
economic opportunity. USDA leverages its research by making data more 
widely available. In 2014, 60 new cooperative research and development 
agreements were executed, 119 patent applications were filed, 83 
patents were received, and 412 income-bearing license agreements were 
in effect. As authorized by the Farm Bill, USDA created the $200 
million Foundation for Food and Agriculture Research, which will 
advance the research mission of the Department and foster collaboration 
with public and private research efforts.
    Advances in biotechnology require thorough review by USDA before 
being approved, a practice commonly call deregulation. USDA needs to 
complete its review in a timely manner to facilitate planning and 
adoption of new technologies. To address this need, in 2012, USDA 
streamlined and improved the process for making determinations on 
petitions involving biotechnology. Because of the enhancements, we 
reduced the length of the petition review by over 600 days for 
petitions that do not require an environmental impact statement (EIS). 
USDA estimates that the cumulative number of actions taken to 
deregulate biotechnology products based on a scientific determination 
that they do not pose a plant pest risk will increase from a cumulative 
total of 87 actions in 2011 to an estimated cumulative total of 119 
actions in 2016.
    USDA's conservation efforts have enrolled a record number of acres 
in programs that have saved millions of tons of soil, improved water 
quality, preserved habitat for wildlife and protected sensitive 
ecological areas. To accomplish these goals, USDA has expanded beyond 
its traditional conservation programs and partnered with a record 
number of farmers, ranchers and landowners on landscape-scale 
conservation projects since 2009. As an example, under the newly 
authorized Regional Conservation Partnership Program (RCPP), USDA 
funded 115 projects that will build on the results achieved by USDA's 
traditional programs. RCPP empowers communities to set priorities and 
lead the way on conservation efforts important for their region. Such 
partnerships also encourage private sector investment so we can make an 
impact that's well beyond what the Federal government could accomplish 
on its own.
    USDA continues to lead the way for renewable energy by supporting 
the infrastructure needed to grow the new energy economy. In 2014, more 
than 500 new awards under the Rural Energy for America Program helped 
USDA to reach a milestone of adding more than 8,000 projects between 
2009 and 2014. Currently, REAP funds a total of 10,800 projects around 
the country to help producers and rural businesses save energy and 
increase their profitability. To support farmers producing biomass for 
renewable energy, USDA offered insurance coverage for farmers growing 
biofuel crops like switchgrass and camelina, and we are helping 
identify American farmland most suitable for growing energy crops. 
Under expanded authority provided by the 2014 Farm Bill, we are working 
to expand the number of commercial biorefineries in operation that 
produce advanced biofuels from non-food sources through the Biorefinery 
Assistance Program. We also took new steps to support biobased product 
manufacturing that promises to create new jobs across rural America--
including adding new categories of qualified biobased products for 
Federal procurement and establishing reporting by Federal contractors 
of biobased product purchases.
    Combating foodborne illness is one of our top priorities. In 2013, 
the Food Safety and Inspection Service (FSIS) developed the Salmonella 
Action Plan that outlines the measures FSIS will employ to achieve 
lower contamination rates in agency regulated products. The Plan 
includes strategies, such as the newly developed performance standards 
for ground poultry and chicken parts that will reduce illnesses. In 
addition, the recently implemented poultry inspection system will 
prevent an additional 5,000 foodborne illnesses each year through the 
improved control of Salmonella and Campylobacter.
    The Administration strongly supports the Supplemental Nutrition 
Assistance Program (SNAP) and other critical programs that reduce 
hunger and help families meet their nutritional needs. SNAP is the 
cornerstone of the Nation's nutrition assistance safety net, touching 
the lives of millions of low-income Americans, the majority of whom are 
children, the elderly, or people with disabilities. SNAP kept over 5 
million people, including nearly 2.2 million children, out of poverty 
in 2013. Recent research has shown that SNAP not only helps families 
put food on the table, but it has a positive long-term impact on 
children's health and education outcomes. We also support the ongoing 
implementation of the Healthy, Hunger-Free Kids Act. Over 90 percent of 
schools report that they are successfully meeting the new nutrition 
standards, serving meals with more whole grains, fruits, vegetables, 
lean protein and low-fat dairy, and less sodium and fat.
    We must continue our efforts to address the challenges that 
continue to confront rural America. The 2016 budget builds on our 
success and proposes a set of investments to spur innovation, create 
new markets and job opportunities, enhance climate resiliency, improve 
access to a safe, nutritious food supply, and modernize infrastructure.
    USDA's total budget for 2016 we are proposing before this 
Subcommittee is $144 billion, of which approximately $124 billion is 
mandatory funding. The majority of these funds support crop insurance, 
nutrition assistance programs, farm commodity and trade programs and a 
number of conservation programs. The budget includes mandatory funds to 
fully support estimated participation levels for the Supplemental 
Nutrition Assistance Program (SNAP) and Child Nutrition programs. For 
discretionary programs of interest to this Subcommittee, our budget 
proposes $20 billion, approximately $908.5 million above the 2015 
enacted level. That level fully funds expected participation in the 
Special Supplemental Nutrition Program for Women, Infants, and 
Children. It includes the funding needed to meet our responsibility for 
providing inspection services to the Nation's meat and poultry 
establishments. The budget also includes over $1 billion to renew 
approximately 255,000 expiring contracts for rental assistance and 
includes new authorities to ensure the long term sustainability of this 
program.
    Agriculture is an engine of growth and prosperity, directly or 
indirectly supporting 16 million jobs. The 2016 budget provides a 
strong farm safety net and makes investments to meet challenges of a 
competitive global market, changing climate, and making agriculture a 
reality for new and beginning farmers. The budget proposes a loan level 
of about $6.145 billion for direct and guaranteed farm ownership and 
operating loans, 85 percent of which will be made to beginning farmers 
and ranchers and socially disadvantaged producers. The budget also 
includes about $4 million to help new and beginning farmers and 
ranchers overcome the barriers they face when entering agriculture. In 
addition to providing funding to establish a Military Veterans 
Agricultural Liaison as authorized by the 2014 Farm Bill, the budget 
also establishes a $2.5 million program to help veterans develop 
farming and ranching skills needed to become producers.
    The rural economy will be even stronger because of the investments 
in rural infrastructure made by USDA. We will make over $1 billion in 
investments in rural businesses estimated to provide approximately 
32,000 jobs in rural areas. Over $2.2 billion targeted to community 
facilities will expand educational opportunities for students, 
facilitate delivery of affordable healthcare, and ensure the 
availability of reliable emergency services. Funding for broadband is 
more than doubled. Through a pilot called Rural Corps, USDA will work 
in partnership with local organizations to deploy highly trained staff 
and increase the likelihood that investments in infrastructure and 
economic development are strategic, creating jobs and long-term 
economic benefits. In 2016, USDA will provide over 170,000 rural 
residents the assistance needed to become homeowners by making 
available nearly $25 billion in loans to increase housing opportunities 
in rural area. Approximately $900 million in direct loans will ensure 
that the very-low and low-income borrowers with the ability to repay 
mortgage debt are provided with a vehicle to access mortgage financing 
for homes located in rural areas.
    Despite these investments, 85 percent of America's persistent 
poverty counties are in rural areas and rural childhood poverty rates 
are at their highest point since 1986. To address this need, $20 
million is provided for a Rural Child Poverty initiative, which would 
support innovative strategies to combat rural child poverty through a 
demonstration program. Additionally, funding is more than doubled for 
the Community Facilities Grant Program, which enables USDA to support 
investments in high-need areas and also leverage partnerships aimed at 
reducing child poverty, such as co-locating healthcare, nutrition 
assistance, and job-training programs. In both cases, this funding will 
be used in rural areas experiencing severe economic distress, such as 
StrikeForce, Promise Zones, and Tribal areas.
    Access to a plentiful supply of safe and nutritious food is 
essential to the well-being and productivity of all Americans. As many 
as 200,000 families with children could benefit each year, beginning in 
the summer of 2016, from the proposed expansion of summer EBT 
demonstration projects, including $67 million to support the second 
year of the Summer Electronic Benefit Transfer (EBT) pilot to reduce 
food insecurity among urban and rural children during the summer months 
when school meals are not available. The budget also includes $35 
million in school equipment grants to aid schools in serving healthy 
meals and provides continued support for other school-based resources. 
The budget proposes an additional $25 million to bolster SNAP 
Employment and Training programs, which will allow some of our nation's 
poorest individuals to work toward self-sufficiency and continue to 
receive critical food assistance while doing so. Nationwide, USDA 
estimates that 23.5 million people, including 6.5 million children, 
live in low-income areas without easy access to a supermarket. To 
expand access to nutritious foods, the budget invests $13 million in a 
newly authorized Healthy Food Financing Initiative that will provide 
funding for developing and equipping grocery stores and other small 
businesses and retailers selling healthy food in communities that 
currently lack these options. Americans will be better protected from 
foodborne illness with nearly 23,000 fewer illnesses projected in 2016 
from 2014 as a result of improved food inspection.
    Food for Progress and the McGovern-Dole International Food for 
Education and Child Nutrition Program will continue to provide benefits 
to millions of people overseas. These programs have helped to engage 
recipient countries not only by delivering food assistance, but also by 
fostering stronger internal production capacity and infrastructure, 
generating employment, boosting revenue, and developing new markets and 
productive economic partnerships. The budget provides $20 million to 
support the local and regional procurement of food aid commodities for 
distribution overseas to complement existing food aid programs and to 
fill in nutritional gaps for targeted populations or food availability 
gaps caused by unexpected emergencies. Also, the budget proposes the 
authority to use up to 25 percent of Title II resources for these types 
of flexible emergency interventions that have proven to be so critical 
to effective responses in complex and logistically difficult 
emergencies.
    USDA research plays a key role in fostering innovation and 
advancing technologies that increase the efficiency, sustainability, 
and profitability of American agriculture. Economic analysis finds 
strong and consistent evidence that investment in agricultural research 
has yielded high returns per dollar spent. The budget includes an 
increase of $125 million for the Agriculture and Food Research 
Initiative. Funding for USDA's role in Federal efforts combatting anti-
microbial resistant bacteria and improving pollinator health totals $77 
million and $79 million, respectively. As part of the Administration's 
multi-agency initiate to support continued investment and innovation in 
the manufacturing sector, the budget also includes $80 million to 
support two new Federal-private manufacturing institutes, with one 
dedicated to advanced biomanufacturing, while the other will focus on 
development of nanocellulosics. Investments to upgrade the Department's 
aging laboratory infrastructure include $206 million to fully fund five 
priority construction and renovation needs, as identified in the 
Congressionally-mandated report issued by the Department in 2012.
    To enhance resilience to climatic events, the budget provides $200 
million for the Watershed and Flood Preventions Operations (WFPO) to 
help communities adapt to changing natural resource conditions and 
climate change, and to minimize the impacts of natural disasters, 
including coastal flooding. USDA will utilize the broad authorities of 
WFPO to help communities create more resilient infrastructure and 
natural systems.
    To protect the integrity of the programs we administer, we continue 
to work aggressively to identify and eliminate waste, fraud, and abuse. 
Program integrity is critical to the overall success of the programs we 
administer and funds must be used properly to earn America's trust that 
these programs deliver results while protecting taxpayer dollars. The 
budget builds on existing efforts and provides strategic increases, 
including an increase of $14.5 million to automate and streamline 
reporting, increase operational efficiency, reduce improper payments, 
and otherwise enhance program integrity for Child Nutrition Programs. 
The budget requests an additional $4 million to ensure that States are 
meeting the highest standards of program integrity in administering 
SNAP. The budget also includes $2.1 million for the Risk Management 
Agency to enhance regulatory compliance, with a focus on improving 
error rate sampling for improper payments.
    While providing record levels of service to rural America, USDA has 
improved management operations. Through the Blueprint for Stronger 
Service, USDA has taken proactive steps in recent years to reduce 
spending, streamline operations and cut costs. Our savings and cost 
avoidance results for the American taxpayer through the end of fiscal 
year 2014 were recently revised upward to $1.368 billion from the 
previous $1.197 billion figure reported in January 2014. I appreciate 
the Subcommittee's approval of authority allowing the Department to 
establish a nonrecurring expense fund for facilities infrastructure 
capital acquisition. This fund will provide much needed resources in 
future years for USDA's infrastructure modernization.
    The President is again asking Congress for authority to submit 
fast-track proposals to reorganize or consolidate Federal programs and 
agencies to reduce the size of Government or cut costs. Granted the 
authority, the Administration is proposing to consolidate the FSIS and 
the food safety components of the Food and Drug Administration to 
create a single new agency within the Department of Health and Human 
Services. The President also proposes the consolidation of certain 
business programs in a new department dedicated to promoting U.S. 
competitiveness and exports.
    The Farm Bill included several reforms to the Federal crop 
insurance program; however, there remain further opportunities for 
improvements and efficiencies. The President's 2016 budget includes two 
proposals to reform crop insurance, which are expected to save $16 
billion over 10 years. This includes reducing subsidies for revenue 
insurance that insure the price at the time of harvest by 10 percentage 
points and reforming prevented planting coverage, including adjustments 
to payment rates. These reforms will make the program less costly to 
the taxpayer while still maintaining a quality safety net for farmers.
    I believe that the future is bright for America and in particular 
for rural Americans. The investments we make today are having an impact 
and creating a future full of opportunity. The budget presented to you 
will achieve the President's vision for the middle class by restoring 
the link between hard work and opportunity and ensure that every 
American has the chance to share in the benefits of economic growth. At 
this time, I will be glad to answer questions you may have on our 
budget proposals.

    Secretary Vilsack. And in the interest of time, I'm 
prepared to take your first question.

                           DIETARY GUIDELINES

    Senator Moran. Let me start with one related to dietary 
guidelines, a question that you and I discussed in my office 
and a question that you have not had to respond to previously.
    I was looking back at the history to find out what the 
purpose of the dietary guidelines, what's the statutory 
authority, what are the criteria by which those dietary 
guidelines are to be determined. And I have now read that, and 
it talks about nutritional and dietary information.
    I've been most recently interested to see what Senator Dole 
had to say in February. Just a few days ago, he talked about 
being the co-author of the dietary goals for the United States 
with Senator McGovern and indicated his concern about the 
direction that the advisory committee report is heading.
    These dietary guidelines, when you and I talked, you talked 
about how you're coloring within your lines, a phrase that I 
remember. And I am interested in knowing whether you have the 
ability to insist that others color within their lines, what 
conversations you've had with Secretary Burwell, and what your 
expectation is for the next step in the dietary guideline 
process.
    Secretary Vilsack. Mr. Chairman, we are in a comment period 
right now, so we are soliciting comments from folks. I have 
talked briefly with Secretary Burwell, primarily about the 
request for an extension of time in terms of the comment 
period. We obviously are under a deadline to get this done 
before the end of the year. So we will be working with the 
folks at the Department of Health and Human Services (HHS) to 
determine what's best in terms of an extension if one is 
granted.
    I would say that we understand, or I understand, my 
responsibility is to focus on diet and nutrition, and well we 
should, given the challenges that we face with the obesity 
epidemic among our children and some of the concerns of chronic 
diseases. I have been interested in the testimony that 
Commissioner Hamburg has provided in which she has indicated a 
desire also to stay within the statutory guidelines, to color 
within the lines, as you say.
    And I think we understand and appreciate that folks can 
have many recommendations and many opinions, but at the end of 
the day, our decisionmaking process has to be focused on 
dietary nutrition, so that we can give a general guideline to 
American families, and that we can then inform our Federal 
nutrition programs.
    Senator Moran. So it is your understanding that what the 
goal is is dietary and nutritional guidelines, nothing more or 
broader.
    Secretary Vilsack. That's the direction that you have given 
us, and that's the direction that I intend to follow.
    Senator Moran. Mr. Secretary, let me ask you then about the 
public comment. You mentioned that we are in the process of 
public comment right now, granting 45 days for those public 
comments. The report is 571 pages long. That's not a lot of 
time for stakeholders and interested parties to digest that 
information. Are you considering an extension of that deadline?
    Secretary Vilsack. I would point out, Mr. Chairman, that 
that is longer than the last guidelines. I think the last time 
we went 30 days. We have extended it to 45 days. And I 
recognize that there is a lot of issues and controversy 
associated with this. So I would certainly be willing to 
consider lengthening that time. I'm not sure that we can afford 
to go as long as some have suggested, but it may very well be 
appropriate for us to extend the deadline a bit.

                   CONSERVATION TECHNICAL ASSISTANCE

    Senator Moran. Mr. Secretary, let me turn to another topic 
of importance in Kansas and across the country, conservation. 
One of the confusing things to me about the President's budget 
is a proposed reduction in funding of technical assistance at 
the Natural Resources Conservation Service (NRCS).
    And even the budget states that, in terms of environmental 
outcomes, the funding reduction will result in lost 
conservation opportunities and reduce natural resources 
benefits. You know, it's a $74 billion budget. Why is there a 
$44 million reduction in technical assistance funding?
    Secretary Vilsack. Well, the challenge in this budget, Mr. 
Chairman, is that 50 percent of our budget is in four areas. It 
is in fire suppression and forest restoration, it is in food 
safety, WIC, and in rental assistance. And unfortunately, in 
several of those four line items, we have seen increases that 
we believe need to be dealt with through some congressional 
direction and action. So we are constrained a bit by the fact 
that those increase.
    We are also cognizant of the demands that you all placed on 
us relative to sequester and to make sure that we stay within a 
reasonable budget. This is a budget, by the way, that is less 
than the first full budget that I worked with in fiscal year 
2010. So we are trying to be conscious.
    Let me say as far as the technical assistance, it doesn't 
necessarily mean that less work is going to get done, and I say 
that for two reasons. One, because I think we are going to see 
significant increases in the utilization of technology that 
will provide us the opportunity to expand our reach in terms of 
conservation. And secondly, we are extending the number of 
partnerships that we have with a variety of other organizations 
and entities that can provide technical assistance as well.
    So it doesn't necessarily translate to less conservation. 
It just simply means that we are going to be more reliant on 
technology and partnerships.

                             CROP INSURANCE

    Senator Moran. Thank you. Let me ask about another 
President's budget recommendation, this one related to crop 
insurance. I am sure that you have heard as I have about the 
importance of crop insurance. When they have a conversation 
with the farmer, that's generally the point they would 
highlight about the importance and value of crop insurance to 
them.
    We are seeing, in the President's budget recommendation, a 
reduction in the support levels for farmer's crop insurance 
premiums. I would like to have your response on that.
    And then I would like to tell you that, in voting for the 
farm bill, one of the things I thought was most important for 
farmers, particularly Kansas farmers, was changes in crop 
insurance related to the ability to have separate enterprise 
units by practice, separate coverage levels by practice, and an 
APH yields exclusion available to take out a year of, in our 
case, drought.
    What I discovered when I returned home after the farm bill 
and people started looking at the farm bill and taking a look 
at their crop insurance for winter wheat, elimination of that 
year and the other two provisions that I thought were so 
valuable were not available for winter wheat because of timing. 
And my question is, can you assure me, and I can assure my 
farmers, that the timing will not be a problem and that those 
provisions will be updated sufficient to be used as they make 
decisions and have the consequences of the new farm bill for 
winter wheat?
    Secretary Vilsack. I believe so on the second question, Mr. 
Chairman. We are working very carefully to make sure that the 
2016 crop year for winter wheat is covered under Actual 
Production History (APH), and we are working diligently to get 
the irrigated enterprise issues resolved.
    As it relates to the budget, $8.2 billion, we believe, is 
adequate and sufficient to cover the $109 billion risk that is 
covered by crop insurance. There are two issues that I would 
point out.
    One is on the prevented planting. The Government 
Accountability Office (GAO) and our own inspector general have 
been critical of the way in which that program has been 
utilized. It is discouraging the planting of a second crop, and 
it ends up, essentially, overcompensating folks. So in response 
to the GAO concerns and our own inspector general's concerns, 
we made adjustments, and that is part of the reason why you see 
a reduced amount.
    The second area that I would point out, too, is on the 
harvest price loss aspect. Crop insurance is designed to 
protect against Mother Nature. The harvest price loss option 
basically provides coverage not just against Mother Nature, but 
also against market decisions that producers make. And so I 
think it is important to ask the question, what is the nature 
of the partnership between the taxpayer and the Federal 
Government and the farmer as it relates to that.
    When you see potential premium subsidies as high as 80 
percent for some farmers in some crops in that area, you have 
to ask yourself whether or not it's appropriate to adjust that 
downward a bit, which is what is reflected in the budget. So I 
think there are justifications for what we are proposing, but 
understand and appreciate that we do understand fully the 
importance of crop insurance.
    Senator Moran. I will follow up that would my time returns.
    Senator Merkley.

                      RURAL ENERGY SAVINGS PROGRAM

    Senator Merkley. Thank you. Thank you, Mr. Secretary. I 
wanted to start by asking you about the Energy Efficiency and 
Conservation Loan Program. This program provides loans to rural 
electrical co-ops, so that they can in turn provide loans to 
folks for energy-saving retrofits, both residential and 
commercial. It has not worked real well yet, and there have 
only been a couple of loans made to rural electrical co-ops.
    There is a program that has been authorized in the farm 
bill, the Rural Energy Savings Program, that is designed to try 
to make a more effective form of this strategy, because it's a 
win-win all the way around, creates a lot of jobs in rural 
areas, improves energy efficiency, and make homes more 
comfortable. Have you taken a look at this program and 
considered ways to improve on it and--well, I'll just stop 
there.
    Secretary Vilsack. Yes, we have, Senator. We basically are 
focusing primarily on a major initiative in a State that is 
very interested in pursuing energy efficiency, and we are very 
close to getting that statewide program in place, which will, I 
think, significantly increase interest in the energy efficiency 
program.
    One of the concerns, and I think you are well aware of this 
given your advocacy for this, is the interest rate and the fact 
that this is a relatively new program for the Rural Electric 
Cooperatives (RECs) is to implement, so it has been a learning 
curve, both for our folks and for the RECs. I think if we were 
to take a look at the interest rate, it would obviously 
increase the cost of the program, but it might increase the 
interest as well. We would continue to work with you and 
continue to work with Congress to make sure that we implement 
this in an appropriate way.
    But we are focused on it, and I am asking our team at the 
Rural Utilities Services (RUS) to get this done.

                              POLLINATORS

    Senator Merkley. Great. Well, I appreciate that very much. 
Look forward to continuing that conversation, because done 
right, it could be a powerful force for rural jobs. And as I 
head to my 36 counties every year and talk to folks in the 
rural counties, rural jobs would be a wonderfully welcomed 
item.
    Let me turn then to the concern over the loss of 
pollinators. And as you are very aware, and folks in the 
agricultural community are very well, we have suffered a lot of 
losses of honeybee colonies. We have seen the monarch butterfly 
migration collapse over the last 10 years. And this is 
significant for agriculture, since pollinators contribute more 
than $24 billion to the U.S. economy, and at least 90 of 
America is commercially grown crops are dependent on 
pollination.
    So can you talk a little bit about the proposal that you're 
putting forward in both be Agriculture and Food Rearch 
Institute (AFRI) and the Agriculture Research Service (ARS).
    Secretary Vilsack. Senator, the effort with pollinators is 
a complicated one, because it involves parasites, pesticides, 
pests, the stress of the travel that the pollinators undertake, 
the lack of crop diversity in some areas, so what is required 
is a holistic approach that involves research, and involves 
public education, and also involves habitat.
    In all three areas, we are working, and the request in the 
budget would reflect a desire to do more work on the research 
side, to understand better the stresses, to understand better 
the issue of parasites and pesticides and the like, the 
multiple causes. And we are also working through the Natural 
Resources Conservation Service (NRCS) and our Conservation 
Reserve Program (CRP) program to expand habitat, particularly 
in the upper Midwestern States where 65 percent of the hives 
basically end up during the summer months.
    The goal here is to get down from where we've been the last 
10 years, roughly 29 percent of our hives being lost, to 
getting it closer to 18 percent, which is a sustainable level. 
Last year, it was 23 percent, which is good news, but it's 
still not good enough.
    Public education is also important, and I think that's 
where--effort can undertake to make sure that people understand 
that they have a role to play here, from community gardens to 
the plantings that they make in their own individual personal 
gardens. You can create additional habitat. So it's a greater 
awareness, more research, and more habitat.
    Senator Merkley. So you have proposed an increase of just 
over $30 million in these activities. Is that high on your list 
of priorities?
    Secretary Vilsack. It is certainly a significant priority, 
particularly as it relates to the statistics that you provided 
in terms of the importance of pollinators. I am particularly 
focused on the fact that our almond crop, which is a fairly 
significant crop and an export opportunity for us, is very much 
dependent on us getting this right. And you mentioned the 
monarchs, that's another issue as well.

                           RENTAL ASSISTANCE

    Senator Merkley. Well, thank you, Mr. Secretary. I am going 
to switch to a different challenge which is that, over the next 
3 years, about 120 multifamily housing loans will mature each 
year, representing over 10,000 units of affordable housing that 
will be exiting the program. And this problem gets even worse 
down the road.
    In 2019, the number of maturing mortgages will exceed 1,100 
and continue to increase thereafter. When these loans are paid 
off, the projects will no longer be in USDA's affordable 
housing program, and the families will not have access to 
rental assistance or servicing options that the Department can 
offer. This is a real substantial challenge for real 
communities seeking affordable housing and I thought I would 
offer you the chance to comment on the strategies to address 
this.
    Secretary Vilsack. Well, Senator, we really appreciate you 
bringing this to the attention of the body. It is a critical 
issue. Seventy-five percent of our rental units could 
potentially get out of the program without access to vouchers 
as a result of mortgages being paid off. We are requesting a 
series of tools that would allow us to manage this more 
effectively.
    Those tools can include extending the life of an existing 
loan, re-amortizing that loan, using the resources potentially 
to improve the properties. We have also requested additional 
resources for new construction, which has not been the case for 
quite some time because of the rental assistance challenges 
that we face. We have also asked for a consideration of the 
voucher program to be available for a limited period of time as 
well for these expiring mortgages.
    It is a serious issue, and you are absolutely correct, 
these people have no place to go, given their current status. 
So we hope to be able to work with you to get a series of tools 
to be able to deal with this issue and the other issue with 
rental assistance in terms of the ever-increasing budget 
challenge that we face with rental assistance.
    Senator Merkley. Thank you very much.
    Senator Moran. Senator Merkley, thank you. Senator Cochran, 
the chairman of the full committee.

                      FARM SERVICE AGENCY FUNDING

    Senator Cochran. Mr. Chairman, thank you. Welcome, Mr. 
Secretary, to the hearing, and thank you for the good job you 
do as Secretary.
    One question occurs to me right off the bat here is why the 
administration has reduced its request for funding for people 
who will be used at the Department to help producers comply 
with provisions of the farm bill so they will be eligible for 
support in farm bill reforms that have occurred. There is 
concern, I'm told, that the President's budget request, for 
specific example, for the Farm Service Agency (FSA), is $12 
million below the 2015 enacted level. There is concern that we 
have received that this is not enough to carry out and help 
producers comply with farm bill provisions enacted by Congress 
and now must be implemented by producers and Department of 
Agriculture (USDA) workers around the country.
    My question is, would you please look at this level of 
funding and let us know whether this is really adequate? Is $12 
million below the enacted level for fiscal year 2015 for the 
Farm Service Agency to implement and help carry out provisions 
of the 2014 farm bill, there is concern that the FSA 
appropriation, if we gave you what you're asking for, is not 
enough to do the job. Would you look into that and tell us what 
your plans are?
    Secretary Vilsack. Mr. Chairman, we obviously would respect 
your request. I would say that one of the reasons why we are 
asking for a bit less is because there may not be quite as much 
of a need for technology money as in the past, because of the 
completion of the MIDAS effort. There is still an ongoing IT 
need, but perhaps not at the level that we have seen in the 
past.
    Secondly, I would say that the performance of our folks at 
FSA offices across the country in terms of the implementation 
of the farm bill has been, in my view, well done, given the 
fact that over 600,000 disaster payments have been made by 
those FSA offices, given the fact that nearly 90 percent of 
folks have made the decision to reallocate their base acres and 
adjust their yields. We are now close to 70 percent of farmers 
making the election of Agricultural Risk Coverage (ARC) and 
Price Loss Coverage (PLC), and we are not yet at the March 31 
deadline. There are series of other things that our FSA folks 
have been doing, so I am confident that we will be able to get 
the job done.
    But these budgets are challenging, and they are challenging 
in large part because of four areas that continue to increase, 
or several areas that continue to increase, from rental 
assistance, to fire suppression, to the WIC program, that 
places a great burden when we are trying to constrain our 
budget based on instructions from Congress.
    Senator Cochran. Thank you. Thank you, Mr. Chairman.
    Senator Moran. Mr. Chairman, thank you. Senator Tester.

                            ARC/PLC SIGNUPS

    Senator Tester. Well, thank you, Mr. Chairman, and I want 
to thank you, Mr. Secretary, for the job that you have done 
over 6 years now in this position. And as a person that is 
directly involved in production agriculture, I just want to 
thank you. Thank you for what you've done. I think you've done 
a great job in running the agency, and I think the people you 
have on the ground in the Farm Service Agency, in Montana at 
least, are doing a great job.
    The question I have to begin with is, can you tell me--you 
have got some deadlines coming up on PLC and ARC as of March 
31. Computer programming has always been a concern. If the 
programming is there, when the producer walks in it can meet 
the needs. Can you give us a quick update on where the 
programming is, if it's where it needs to be?
    Secretary Vilsack. Well, Senator, I think roughly 70 
percent of producers that we expect have to make an election 
have already made the election. I think they are finding that 
the times can be as quick as 12 minutes through the process, in 
part because of the technology changes that we have made. We 
had an initial glitch that arose in Kansas, which we have 
addressed. So I think we are okay.
    What we are concerned about, and producers have responded, 
is a crush at the end of the deadline. But given the fact that 
we're now at nearly 70 percent of signups in elections, I think 
we are going to be just fine in terms of being able to handle 
the volume.

                           RURAL OUTMIGRATION

    Senator Tester. Good. Good. Now, I want to go up to 30,000 
feet. I've been involved and run our farm for almost 40 years 
now and been involved in everything from set-asides to payment 
in-kind (PIK) payments to direct payments to countercyclical 
payments. Now we've got ARC, and we've got PLC. All these 
programs are passed by Congress, and you are asked to 
administrate them. You have been doing this job, as I've said, 
for over 6 years.
    And over the last 30 or 40 years, I have seen a mass exodus 
off the land. A mass exodus. The school where I went to school, 
165 kids, now has less than a third of that directly associated 
with consolidation and agriculture. We have seen consolidation 
in the marketplace, not as much competition as we would like. 
We are seeing consolidation in production agriculture, and I am 
a big supporter of family farms.
    And to be honest with you, I've been a big supporter of the 
farm bill, too. I mean, my grandfather would have told me that 
we would not be on the farm we have today if it wasn't for FDR 
and the farm program that was out there. We wouldn't have 
electricity if it wasn't for that Agriculture Department in the 
1930s, in the 1940s, and many of us would not have water 
without them. So it's done a lot of good things.
    You have been in this position for a while. You have seen 
the impacts on the ground, and I don't think Big Sandy, 
Montana, is any different than any small town in Iowa as far as 
depopulation and the mass exodus. As you look at this farm 
bill, is it helping keeping people in rural America, or is it 
encouraging more consolidation and people to move out of rural 
America?
    Secretary Vilsack. Senator, I think it's significant in 
terms of the assistance it can provide, because I think it 
supports a companion economy that can essentially combine with 
production agriculture and experts to focus on local and 
regional food systems and major investment in that opportunity 
for smaller sized operators to have a direct line with their 
consumer where they are able to negotiate a price. I think 
there is significant opportunity for expanded conservation and 
tying that into the development of ecosystem markets, which is 
another income. And then the bio economy, I think, is also--
were going to bring manufacturing back to rural areas. So I 
think this will help.
    I would say that there are two issues on the horizon that 
we need to be concerned about. One is this issue of the aging 
nature of farmers today in America and the issue of land 
tenure, who is going to own the land, who is going to operate 
the land, and what is their focus going to be in the next 10 to 
15 years, because I think we are going to have a significant 
turnover. And then finally, just the public relations effort to 
acquaint people in this country of the importance of rural 
America and the need for continued investment and continued 
focus. It's easy for many in America to forget about the 
importance of rural America.

                           LOCAL FOOD SYSTEMS

    Senator Tester. I agree with the local food system stuff 
and the conservation. I want to get in that in a second. But I 
also think that there is plenty of room for manipulation. 
Farming the farm bill isn't something that is not done. It is 
done regularly, and I'm not sure that's input. And by the way, 
that's not your problem, that's Congress's problem. You are 
there to administer it, we set the rules, and we thank you for 
that.
    Local food systems, can you tell me in your budget if there 
are additional dollars for local food systems, or has it been 
cut?
    Secretary Vilsack. There are additional resources as a 
result of the farm bill, and there's additional focus in rural 
development on making sure that we support local and regional 
food systems. Just yesterday, we announced $26 million 
available for----

                              CONSERVATION

    Senator Tester. Okay. Good. How about conservation?
    Secretary Vilsack. Conservation increases over what was 
spent last year, it's not as much as would have been 
appropriated if we had followed the farm bill, and I'm happy to 
talk about that if you wish.
    Senator Tester. Well, we'll put it forth to you in writing. 
But I think the conservation is important. I think it's all 
important. It just depends on how it can be manipulated, quite 
frankly. And I think that the conversation that we need to have 
in Congress is, is the farm bill really supporting family 
farms, or is it supporting agribusiness? Thank you, Mr. 
Secretary.
    Senator Moran. Senator Tester, thank you. Senator Collins.

                BIOENERGY PROGRAM FOR ADVANCED BIOFUELS

    Senator Collins. Thank you, Mr. Chairman. I think Senator 
Tester just raised an absolutely essential issue that does 
deserve our attention. And before I begin my questions, I also 
want to associate myself with the concerns expressed by Senator 
Merkley about the pollinators. They are very important to our 
wild blueberry crop in Maine and the health of those bees, 
which has been a real concern in the last few years.
    Mr. Secretary, I appreciate the attention that you have 
given to promoting the development of homegrown bio energy and 
wood products which are so important to rural communities 
across America but particularly to my State where the forest 
products industry is such a vital part of the economy.
    I have been hearing from wood pellet fuel manufacturers in 
Maine who have alerted me to concerns with an interim rule that 
your Department has issued for the bioenergy program for 
advanced biofuels authorized by section 9005 of the 2014 farm 
bill. And I believe that Virginia Manuel, who is one of your 
key people in Maine, has also passed onto the Department the 
same kinds of concerns that she is hearing.
    Wood pellets, which are recognized by USDA as advanced 
biofuels, represent a very efficient and use for material that 
otherwise is a waste byproduct. I'm told however, that the 
program is being implemented in a way that severely 
disadvantages solid based advanced biofuels, including wood 
pellets used in heating applications.
    USDA has imposed deep discounts on the payments to solid 
biofuel producers, it's like an 85-percent discount, and an 
overall payment cap on companies in this sector, which 
contrasts starkly with the payments being made to liquid 
advanced biofuel producers used in the transportation sector. 
And what I am told by the pellet manufacturers is that these 
discounts are so steep that it's such a small amount of money 
that it's barely worth participating.
    I don't understand what the rationale of the Department is 
in implementing the program in a way that is not fuel and 
technologically neutral. It seems to me that that should be the 
goal of the advanced biofuels program. I wondered if you could 
comment. I realize this is just an interim rule, and I am 
hoping that the Department will reconsider in issuing a final 
rule.
    Secretary Vilsack. Senator, when initial proposal was put 
forward, we received a lot of comments from the liquid biofuel 
industry indicating that their belief was that it disadvantaged 
their industry and advantaged, unfairly, the wood pellet 
industry. So there was an effort in the interim rule to try to 
respond to those comments. The wood pellet industry didn't 
initially respond to that first iteration.
    But I get your point, and I think you're absolutely correct 
that we ought to be looking for that sweet spot where we are 
not advantaging or disadvantaging any, but we are encouraging 
all. And we would be happy to continue to work with you and the 
folks in the wood pellet industry to find where that sweet spot 
is. I suspect that there will be some adjustments based on the 
concerns that you've expressed, but I think we are still 
working on trying to figure out exactly how to do it so that we 
get the right balance.
    Senator Collins. Thank you very much. I can assure you that 
the industry is organized and aware now and weighing in, and I 
will make sure they've officially communicated with you. I have 
a letter from the Maine Pellet Fuels Association that explains 
the problem very clearly, which I will share with you and ask 
unanimous consent be included in the record as well.
    Senator Moran. Without objection, so ordered.
    [The information follows:] 
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
                        SCHOOL EQUIPMENT GRANTS

    Senator Collins. Mr. Chairman, I see that my time has 
virtually expired. I'll just raise one more issue very quickly 
and ask for response for the record.
    Nationwide, 88 percent of schools report that they need at 
least one piece of kitchen equipment and over half need more 
significant infrastructure improvements in order to comply with 
the Department's guidelines for the school lunch and school 
breakfast program. I'm pleased that you have announced a new 
round of funding for State competitive equipment grants.
    And I wanted you to know that Senator Heitkamp and I have 
introduced a bill that would actually authorize the program. I 
hope you will take a close look at our bill, with an eye 
towards endorsing it. And for the record, I would be interested 
in the impact that you're seeing as you award these grants that 
participate in the school lunch and breakfast programs. Thank 
you, Mr. Chairman.
    [The information follows:]

    Since 2009, USDA has provided $185 million in kitchen equipment 
funding to states and schools participating in the National School 
Lunch and School Breakfast Programs. USDA provides the funding to 
states, which then competitively award grants to school districts in 
order to purchase necessary equipment.
    State agencies participating in the National School Lunch and 
School Breakfast Programs were directed to target equipment assistance 
grants to low income school districts via a competitive grant process, 
giving priority to high need schools, including schools in underserved 
areas, schools with limited access to other resources, the age of 
current food service equipment, and where 50 percent or more of the 
enrolled students are eligible for free or reduced price meals. In 
addition, school districts were required to give priority to schools 
that did not receive previous equipment assistance grant awards.
    Based in large part on previous experience with equipment grants 
and on-going discussions with States and school districts, equipment 
funding has provided opportunities for purchasing new, energy efficient 
equipment facilitating the production of healthier, more attractive and 
tasty food for students. According to a report released by Kids' Safe 
and Healthful Foods Project (Pew Charitable Trusts/Robert Wood Johnson 
Foundation), most school districts in the United States (88 percent) 
need at least one additional piece of kitchen equipment to serve 
healthier school meals that meet the updated, science-based nutrition 
standards. Therefore, the President's Budget request for fiscal year 
2016 includes $35 million to provide needed funding for schools to 
upgrade equipment to help support nutritious meals, better ensure food 
safety, improve energy efficiency in the cafeteria, and expand 
participation in school nutrition programs.

    Senator Moran. Senator Collins, thank you very much. 
Senator Udall.

                          WATER INFRASTRACTURE

    Senator Udall. Thank you, Chairman Moran. And let me echo 
also, Secretary Vilsack, what was said about you. I think you 
have done an excellent job as Ag Secretary. I think sticking in 
there for 6 years really makes the difference as a cabinet 
secretary, because by doing that, you really learn the 
Department, and you learn the problems, and then you focus on 
them and work with us to come up with solutions.
    I also just want to echo what others have said about family 
farms. I think if you go back to the history of the farm bill, 
the idea was helping family farms, and I think we could do a 
lot more there. I see in my State a younger people going back 
and doing small farming, and if we could try to work with the 
farm bill to give them the support to stay there, I think that 
would be a welcome thing to happen.
    But let me ask you a little bit about water infrastructure, 
Secretary Vilsack. Come from a State where water infrastructure 
is a top priority in almost every community, it's critically 
important that we have strong support for water and wastewater 
disposal grant programs and the additional resources to provide 
technical assistance, which is the real issue, as you know in 
some communities that have no ability to do technical 
assistance, and make sure that those grants go to the 
communities with the most need.
    We currently have many low-income communities near the 
United States-Mexico border, known as colonias, that have an 
urgent need for water infrastructure, no way to pay for their 
water infrastructure needs, and are left to find the funding. 
And according to a recent GAO report, the cost of replacing 
critical infrastructure in rural communities like these is 
estimated to be more than $140 billion in coming decades.
    USDA is not the only agency that provides funding and 
technical assistance to rural communities for water 
infrastructure. Can you tell me about your interagency 
cooperation to ensure that these rural communities are being 
served with an all hands on deck effort by the Federal 
Government?
    Secretary Vilsack. Senator, I say, first of all, our budget 
would support 1,300 water projects in terms of wastewater and 
water treatment, and that would bring to a total of, I think, 
in excess of 8,000 projects that we funded in the time that 
I've been secretary. Secondly, we do work with sister agencies, 
Environmental Protection Agency (EPA) and others, to make sure 
that we coordinate our resources and we're using them most 
efficiently.
    And third, we are now encouraging the private sector to get 
engaged and involved in investing in these infrastructure 
projects. The challenge is that in order to get capital markets 
interested, we need to figure out how to bundle these projects. 
They're not interested in funding a $2 million or $3 million 
project in New Mexico, but they would be very interested in 
funding 100 projects around the country.
    And so we are now in the process of working with the 
Treasury Department and others to try to figure out how we 
could potentially bundle. We've had an assessment of our own 
portfolio to determine what the strengths and weaknesses of 
that would be. So we are trying to look at all areas to try to 
increase investment.
    Senator Udall. Secretary Vilsack, you believe the USDA has 
adequate resources to provide technical assistance to these 
communities with the most need?
    Secretary Vilsack. You asked me if I have adequate 
resources. I suppose I should answer no. But let me just say 
this. Whatever you all deem as appropriate, we will try to use 
in the most efficient and effective way to reach as many people 
as possible. That is why we're reaching out to the private 
sector. It's why we've also worked with CoBank to create a $10 
billion infrastructure fund so that we can figure out ways, if 
we can't say yes, we've got somebody else who can.
    I know that we can support 1,300 projects based on the 
budget that we submitted, and I think we have the adequate 
staff to be able to do that.

                          COLONIAS COMMUNITIES

    Senator Udall. Yeah, thank you. And we want to work with 
you on that. I know my time's running out, a quick question. We 
have two communities in southern New Mexico that are designated 
colonias, called Chaparral and Sunland Park. They have high 
poverty rates, limited public sector funding, and many miles 
from the New Mexico city of Las Cruces, but they are close to 
the city of El Paso, but they don't get any help.
    And so these communities need rural development funds for 
critical housing projects and infrastructure improvements. 
Would you work with me to ensure these two communities do not 
fall through the cracks by granting a waiver making them 
eligible for rural development assistance?
    Secretary Vilsack. At this point in time, not sure I have 
the permission from Congress to do that, but I would be happy 
to work with folks to try to create as much assistance and 
help. And if we can't provide help, then maybe we can steer 
them to an agency or entity that can.
    Senator Udall. Okay. Thank you very much. Appreciate it.
    Senator Moran. Senator Udall, thank you. Senator Daines.

                  PORT OF VANCOUVER GRAIN INSPECTIONS

    Senator Daines. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here this morning.
    Last summer, the USDA failed to conduct federally mandated 
grain inspections at the Port of Vancouver, the west coast's 
largest grain terminal, for several weeks to the safety 
concerns, the result of an ongoing labor dispute. And it was 
over a month that tens of millions of dollars of wheat harvest 
were put at risk.
    I remember driving in my pickup across Montana, stopping in 
Great Falls, our family roots are north of Great Falls, there 
in the Conrad area, they were wheat farmers, homesteaders, 
where you've got farmers coming off of their combines to meet 
with me, desperate, looking what's going on with the back up 
going on out at the port.
    And I don't think anybody disputed the need for the 
Secretary to have discretion in case of emergency, but it took 
the USDA 5 weeks, until after the safety concerns were 
resolved, to provide these following mitigations. There was a 
crosswalk removed, some Jersey barriers installed, backup power 
sources for surveillance video, additional parking spots, some 
temporary inspectors. And to me, it's unacceptable. It took 5 
weeks to produce the simple and low-cost mitigations, all the 
while the livelihoods of grain growers in Montana, across much 
of the West, were threatened.
    As you know, the United Grain Company and others offer to 
provide extensive mitigations during this disruption in 
inspections, including several of these USDA ultimately put 
forward. So considering UGC's willingness to address any safety 
concerns, could Montana grain have been exported sooner if 
USDA's analysis was completed more promptly?
    Secretary Vilsack. Senator, I would like an opportunity to 
delve more deeply into your question to be able to respond to 
it accurately. I was not under the impression that there was a 
significant delay. There was some uncertainty as to precisely 
who was going to inspect the grain and how safe the 
circumstances and conditions were.
    But I would be more than happy to take a look at this to 
determine whether or not it negatively impacted and affected 
your producers. Obviously, that would be the intent.
    Senator Daines. Well, I'd be happy to get our farmers 
together here and chat, because it was a great concern as we're 
looking at backing up here and not seeing an end as the port we 
shut down for 5 weeks. And back in November 2013, 8 months 
before the inspections were interrupted in July 2014, there 
were several members of Congress, including myself, who urged 
the Department to be prepared and have an executable plan in 
place that can be implemented immediately to ensure the 
inspections were not interrupted. And that was in direct 
reference to the labor dispute and the situation occurring at 
the port of Vancouver.
    So we were just curious why they were not these plans put 
in place when this disruption of inspections occurred.
    Secretary Vilsack. Well, I think there are plans that are 
in place. The challenge, though, is knowing precisely what is 
happening on the ground at that particular time, which is why 
there had to be a safety assessment to determine precisely what 
needed to be done to protect our people. And there are a 
variety of other options that were being looked at and examined 
relative to patrols and law enforcement involvement as well. So 
that's why I would like to be able to refresh my memory 
specifically as it relates to that particular circumstance.

                             SAFETY REPORTS

    Senator Daines. Sure. What I think would helpful is I know 
some of my Montana producers have expressed concerns that the 
Department simply played out the clock by not identifying the 
mitigations until after the labor dispute was resolved.
    And I guess in the interest of transparency and to help 
address these concerns, I'd like to put this to bed. I'd ask if 
you'd release the three safety reports that were conducted 
during the duration of the lockout, and am happy to do that in 
a non-public setting, if necessary. Would you be willing to 
release those reports?
    Secretary Vilsack. I don't know what the rules and 
regulations are relative to the safety reports, Senator, so I 
don't want to run afoul of any technical regulation, but I 
would be more than happy to have an opportunity to talk to my 
staff and see whether there is any objection. If there's not, 
I'd be more than happy to provide them to you.
    Senator Daines. I'd be happy to see those reports. And I 
think it's relevant. To me, it's relevant to grain growers 
across Montana that the USDA's decisions are transparent and 
held to account, and I would ask you to release those reports 
for review as soon as possible.
    Secretary Vilsack. If I can, Senator, I'd be glad to 
cooperate with you. I just do not want to make a commitment to 
you, because I don't know what the rules and regulations are 
relative to disclosing these reports, if there's some security 
reason or some reason we can't do it by statute or by 
regulation. But if there's not, I'm more than happy to get 
those to you.
    [The information follows:]
    USDA acknowledges the interest in having the safety reports 
available for the sake of transparency. For this reason, USDA would be 
glad to meet with Members of Congress to go through the reports. 
Unfortunately, we would not be able to make the safety reports 
publically available as those groups that wish to disrupt operations 
could use the information in the reports to contravene the measures 
outlined in the reports. To make the reports publically available would 
be inconsistent with Departmental Regulation 3440-2.
    Regarding the impact on producers by the lockout at the United 
Grain Corporation of Vancouver, Washington, the views of your 
constituents are very important to us. If you have producers that are 
willing to share contracts that were invalidated as a result of the 
shutdown or some demonstration of harm, we would welcome the 
information.

    Senator Daines. I think it's important to remember that 
we're here to serve the people, not the other way around. 
Having transparency in that process, particularly with the 
Montana farmers were gravely concerned about getting their 
products to port, I think it would help restore the trust, 
because I think it, frankly, has broken down. Mr. Chairman, out 
of time.
    Senator Moran. Senator Daines, thank you very much. Senator 
Blunt.

                        WATERS OF THE U.S. RULE

    Senator Blunt. Thank you, Chairman. And Secretary, it's 
great to see you here. And I want to join others who have said 
how much we appreciate the 6 years now that you've served in 
the job, and I continue to see the Department benefit, and I 
think Missouri and American agriculture benefit by your 
leadership.
    One of the things that I continue to hear about probably 
most from local officials, ag interests, is the EPA's proposed 
waters of the U.S. rulemaking, the interagency part of that 
involves you in a significant way. I've got about three things 
I want to get you here, I don't want this to become a 4-minute 
answer, but a sense of where you are on your comments to EPA as 
they've got that proposal out there and the impact that you 
think it might have on U.S. agriculture.
    Secretary Vilsack. Well, Senator, I think we have been very 
specific with EPA, expressing concerns about some of the 
definitions and the clarity of those definitions, especially as 
it relates to ephemeral streams, is it a river, is it a bank, 
is it a bed, is it a constant flow. And I think administrator 
McCarthy's comments yesterday to the National Farmers Union 
reflected an awareness of that concern when she acknowledged 
that perhaps things could've been done a little bit better in 
terms of rolling this out and that there are likely going to be 
changes based on what she has heard from us and from the 
countryside.

                                BIG DATA

    Senator Blunt. Well, keep talking, because I think the idea 
that somehow any water that can run into any water that can run 
into any water that could be navigable meets the standards of 
the Clean Water Act is a real problem.
    On another area that I wonder what you're doing on is the 
aircraft drone, aircraft system for drones. Many of our farmers 
think there is a lot of potential here. They want to be sure, 
of course, that the drones that give them advantages they 
wouldn't otherwise have don't become aerial ways to look at 
things on a farm that the government would otherwise have to go 
to court and asked to come and see.
    What's your advice on how these drones can best be used and 
how that rulemaking should go about?
    Secretary Vilsack. Well, I think the Federal Communications 
Commission (FCC) is doing a pretty good job of trying to figure 
out precisely where the sweet spot is relative to getting the 
information and maintaining the secrecy or privacy of the 
information. Frankly, our focus has been on sort of a larger 
piece, which the drone is part of, which is this whole issue of 
big data, where we been working with the businesses, and the 
companies, and the farm organizations, and the Farm Bureau in 
particular, to make sure that there is an understanding of the 
need for tight firewalls to ensure that someone's information 
is not inappropriately used or inappropriately disclosed.
    The big data is important for us, because it really does 
create the opportunity for us to do a better job of research, a 
better job of understanding the condition of soil, the better 
job of using inputs more efficiently and effectively, all of 
which will help the bottom line for producers. But I know that 
producers are a bit concerned about whether or not this is 
going to be used to regulate them. I don't think that's the 
intent.

                             MIDAS PROGRAM

    Senator Blunt. Well, I would hope not, and I hope you 
continue to make that case on the privacy issues. Certainly, if 
any endeavor leads to someone's sense of individualism, in our 
country, it's always been American agriculture, and the 
decision of what you do and how you do it is better informed by 
lots of information, but you and I both know that farmers and 
farm families want that information to be tightly held. And it 
can be used in a good way, and you continue to advocate for 
that and understand where those privacy walls are very 
important.
    On another topic, Secretary, we talked several times over 
the last 2 years about where the Department was with the MIDAS 
program, which has been discouraging for me and probably for 
you. I think the original estimate was it would cost about $305 
million and be completed by March of last year. Last count I 
heard, we were over $400 million. And the GAO recently said 
that it is on the high-risk list of programs as to whether we 
get there or not. Where do you think we are on this program?
    Secretary Vilsack. We're in a better place today than we 
were when this began. Unfortunately, there was not a consensus 
in the offices in Kansas City and the offices in DC in terms of 
where the focus should be, whether should it be on farm 
records, whether it should be on integrity. There was a 
mismatch of vision. I think there was a lack of a project 
manager.
    We now have a--MIDAS is basically now completed. The farm 
records is in place. The integrity, business integrity, stuff 
is in place. We have a project manager. We incrementally tested 
the business integrity part of it effectively. We are now in 
the process of developing, for this year, the acreage 
reporting, and we are going to do this in a very systematic, 
focused way. There's a project manager for that job. It's very 
tightly defined.
    The question will be whether or not we use existing 
software and hardware, or whether we are required to do 
something beyond that, but we are going to make an informed 
decision. We are not going to jump into it. And when we 
implement, we're going to implement it in stages so that we are 
confident that it's actually going to do the job it is intended 
to do.
    So I think we're a much better place, but I will be the 
first to admit that we didn't do as good a job on this as we 
should have.

                      ELECTRONIC ACCESS TO RECORDS

    Senator Blunt. Thirty more seconds, Mr. Chairman. On this 
topic, last year at the same hearing you said that you thought 
that, by sometime in 2015, farmers would be able to be at their 
kitchen table and look at records and FSA programs. I assume we 
no longer think that's possible.
    Secretary Vilsack. Well, it's possible, but I don't want to 
over commit. I think that we want to do this systematically and 
thoughtfully. We are working on two separate issues here. We 
are working on the farm service piece of this. We are also 
working on the Natural Resources Conservation Service (NRCS). 
And what we've discovered in our NRCS efforts is that we can 
use that as a gateway for the farm service that will 
potentially save money and save time, so we are in the process 
of interfacing those two efforts.
    We're going to get there, Senator. And I think we've 
already created a much more convenient effort, and that's one 
of the reasons why we been able to move through the farm bill 
implementation as quickly as we have, because farmers can go 
into one office, access all records of all land that they own, 
regardless of where it's located. That's a significant 
convenience. And we're also able to access records quickly so 
we're going to significantly reduce mistakes, and it has really 
streamlined the process.
    So there has been benefit, and this year will be another 
forward, if you will.
    Senator Blunt. Unless we get another question in here 
today, will have a couple of more questions on that for the 
record. Thank you, Mr. Chairman.

                            AVIAN INFLUENZA

    Senator Moran. Mr. Chairman, thank you. I think our 
intention is short in the second set of questions, try to be 
done by the end of the first vote, and then we wouldn't come 
back.
    Let me ask a question related to the avian influenza. It 
has been detected. It is in several States, including some 
represented here on this panel today. I'd like to hear what the 
Department is doing to combat avian influenza and its spread. 
It appears to me that the only commercial detection has been in 
turkey flocks, but we have countries who are banning chicken, 
poultry, chicken products as well as turkey, and is there 
something that can be done to narrow the scope of any trade 
disruption?
    And then Dr. Johansson might be able to answer this 
question in response. I wanted to give him a chance, in case 
it's important for you to be able to say that you actually 
testified before a Senate committee. But a K-State agricultural 
economist, Dr. Glynn Tonsor, indicated that this may have 
consequences for other livestock producers and pricing within 
the livestock sector. As people make decisions, exports 
decline, prices change, is there something for the beef side 
that has a consequence to avian flu as well?
    Secretary Vilsack. Senator, this is a very complicated set 
of circumstances here. Fifty-eight incidences have occurred. I 
think it's in 11 or 12 States in several of the flyways. It is 
in both chicken and turkey. It is in both commercial 
enterprises and sort of individual farming operations.
    The Animal and Plant Health Inspection Service (APHIS) has 
a responsibility to work with States to identify, as quickly as 
possible, the fact that there is AI and what type of AI it is, 
we're seeing several different types, and then work with the 
States to impact and affect biological controls to try to 
contain the spread of this within a flock, within a particular 
area, and then to indemnify the producers for any loss that 
they've incurred. And that's ongoing today. We are going to go 
to the resources that are budgeted for that, and if necessary, 
if we need additional resources, we have the CCC that we can 
trigger.
    As far as it relates to exports, there are three 
classifications of countries. There are 11 or 12 countries, I 
think, that have basically banned all poultry, regardless of 
where it comes from, in the United States. There are somewhere 
in the neighborhood of 33, 34 countries that have essentially 
regionalized their bans based on where this is actually 
occurred, which is more consistent with the World Organization 
for Animal Health (OIE) guidelines. And there are a variety of 
States and countries that don't do a lot of business with us 
that have not instituted a ban of any kind.
    We've focused our attention on those countries that have 
created an all ban to try to encourage them to take a more 
reasoned approach and look at this from a regional perspective. 
That obviously requires them to be reasonable, which, in some 
cases, is not easy to attain. But we are educating them through 
communication with their embassies, communication with the ag 
secretaries and commissioners and my counterparts, if you will, 
letters, efforts and phone calls, some of which, frankly, have 
not--some phone calls have actually been refused, which is 
unfortunate.
    But we are trying to put folks on notice that the most 
appropriate way is to regionalize this. This represents roughly 
14 percent or so of exports at this point in time, but its 
impact on markets, I think, Dr. Johansson can elaborate, but we 
are focused on this. There is no cure for this. It's 
essentially the identification, containment, and 
indemnification, and trying to limit the impact from an export 
basis.

                             OIE STANDARDS

    Senator Moran. Mr. Secretary, is a clear that those 
countries in the first category, the ones you're now dealing 
with, is a clear that they are violating the OIE standards?
    Secretary Vilsack. It is clear to us that they--yes, it's 
clear to us that they ought to be regionalizing their bans and 
not doing a blanket ban, but this is not unusual. This happens 
from time to time. We have been working with several of our 
trading partners for an extended period of time on bans that 
are still in place from incidents that occurred many, many, 
many years ago. And in some cases, they've banned States that 
aren't even connected in any way, shape, or form to an AI 
incident.

                      DISRUPTION IN POULTRY TRADE

    Senator Moran. Dr. Johansson, to my knowledge, the only 
time I've ever been rude, and this was unintentional, was to 
Joe Glauber, your predecessor, when he was a witness and I was 
a House member, and so I want to demonstrate that I can get 
along with the ag economist at USDA.
    Dr. Johansson. Well, that's very kind of you. I'm sure that 
Dr. Glauber would remember that exchange fondly, as you do.
    Dr. Tonsor is, I think, referring to the fact that, if we 
do see significant disruption in poultry trade that that would 
potentially lead to lower price poultry products in the United 
States and perhaps consumer, which we've seen this trend 
occurring over time, the movement toward increasing consumption 
of poultry in the United States relative to beef, and that's 
due to a number of factors. Beef prices right now are extremely 
high. But as the Secretary pointed out, we're working with our 
trading partners right now, and right at this point in time, 
that doesn't seem to be an issue. We seem to be able to ensure 
access of our poultry products, turkey and chicken, to our 
external trading partners for the most part.
    And if some countries do make that more difficult, then we 
have other outlets for those goods. So right now, I wouldn't 
expect there to be a significant impact on the beef sector from 
this current situation with the high path avian influenza.
    Senator Moran. That's good to hear. And Mr. Secretary, 
please let us know how we can help, either resources or 
encouraging countries to comply with those OIE standards. 
Senator Merkley.

                       SELF-HELP HOUSING PROGRAM

    Senator Merkley. Well, thank you very much. I'm going to 
try to quickly touch on five topics in 5 minutes. Self-help 
housing program that involves sweat equity housing, empowerment 
through homeownership, pretty popular program. You suggested 
cutting it from $27 million to $10 million. Why?
    Secretary Vilsack. Help us fix the rental assistance 
account, Senator. We basically are faced by a dilemma created 
by Congress. When rental assistance first came into being, you 
all funded these rental units for the life of the unit. Then 
budget constraints required you to lessen the amount of time, 
so now we are in the process of having 20-, 15-, 10-year 
projects coming on line, having to again finance them, which 
puts a constraint on the budget. So you've got a trade off.
    If we solve the rental assistance problem, then that would 
free up resources in rural development to do self-help. It's 
not an indication of the lack of importance of that program. 
It's just budget numbers.

           INNOVATION INSTITUTE FOR CELLULOSIC NANO-MATERIALS

    Senator Merkley. Switching gears, I want to much follow-up 
here, given the shortage of time. But you proposed funding in 
innovation institute in cellulosic nano-materials. Anything 
involving wood, cellulose, is of interest in my State. The 
conversation is about potential materials that are flexible and 
stronger than Kevlar. A comment?
    Secretary Vilsack. We do research at the forest product 
lab, but this would allow us to create an entity that would not 
be run by the Department of Agriculture, but would be 
implemented by the Department of Agriculture, modeled after a 
similar innovations institute in Berkeley on energy.
    We think nanotechnology creates enormous opportunities for 
us, not only in the wood area but in the plant area as well, to 
create new manufacturing jobs and to create a new bio economy 
within rural America. We'd like to have this institute set up 
so that, in turn, we could have greater and more quick 
technology transfer, getting ideas.
    And what these institutes basically do is they help small 
businesses that could otherwise not have the capital to ramp up 
to be able to ramp up more quickly, which means it gets the 
product into the commerce more quickly, creates jobs more 
quickly.

                         SUMMER FEEDING PROGRAM

    Senator Merkley. I visited that laboratory in Berkeley a 
number of years ago. Fascinating work that's being done there.
    Turning to summer lunch programs for children. Last year, 
the subcommittee provided $60 million for that summer program. 
Can you update us on how that's working in terms of assistance 
for child nutrition?
    Secretary Vilsack. Certainly an important component of our 
summer feeding program. We've increased the number of sites, 
sponsors, and meals, 23 million more meals being served across 
the program. And one of the strategies is to provide additional 
resources to families that may not have the access to a 
congregate site. We did this in 10 States. Eight of the 10 are 
re-upping. We think that we learned from that that in remote 
rural areas in particular, this is an effective way to expand 
our summer feeding effort.
    The reality is that we've got 21 million kids in free and 
reduced lunch in the country, and we were able to feed 3.3 
million in our summer feeding program, so there's still quite a 
delta there, and this is the way we think that can allow us 
greater tools and more flexibility to reach more kids.

                        PUBLIC LAW 480, TITLE I

    Senator Merkley. Thank you. Public Law 480, title I, there 
hasn't been any new loans since 2006. In the long-term, a lot 
of these loans are eventually forgiven. We're still 
administrating the old loans. Is there an effort to analyze the 
255 outstanding loans and determine whether some of them should 
just be forgiven and reduce administrative overhead?
    Secretary Vilsack. It's a good point, Senator, and I 
appreciate your raising the question. I would say that we are 
collecting somewhere between $250 million to $300 million a 
year, which is one of the reasons why we need some 
administrative resources.
    But I think your point is well taken. And by virtue of this 
question, I'm going to go back and ask. We looked at our 
portfolio in other areas. This is a good question to ask.

                      MOBILE SLAUGHTER FACILITIES

    Senator Merkley. And finally, let me turn to mobile 
slaughter facilities. And many of my rural counties, I hear a 
lot about the difficulty of shipping livestock of various types 
to a slaughter facility. Can we get your cooperation in 
exploring the potential expansion and support for mobile 
slaughter facilities?
    Secretary Vilsack. Absolutely. We're very consistently 
supportive of mobile slaughter units as a vehicle for 
increasing local and regional food systems.
    Senator Merkley. We have 20 seconds left. Thank you.
    Senator Moran. Well done, Senator Merkley. Senator Cochran.

                           YAZOO RIVER BASIN

    Senator Cochran. Mr. Chairman, thank you very much. Mr. 
Secretary, we appreciate your leadership, and we know you've 
got a lot of jurisdictional area that's affected by the 
appropriations bill that this subcommittee has an opportunity 
to influence. And specific programs that are in need of funding 
that somehow, year in and year out, come up for review, and 
people say, well, if we just had some more money. Well, the 
good news is, that we got some more money.
    We have money that is available and can be spent and is 
authorized for funding in the Yazoo River basin in Mississippi. 
And I bring this specific area of the State to the attention of 
the subcommittee and the Secretary because it is a fertile area 
for agriculture. The Yazoo River basin is the largest drainage 
basin in Mississippi. It covers more than 13,000 square miles 
and 30 counties. So it is a big deal.
    And the management and conservation and thoughtful use of 
these lands in this Yazoo River basin are important to our 
national economy and certainly to the economies in the States 
of the lower Yazoo River basin. So I invite your attention to 
opportunities to use funding that, and heaven help us, is 
earmarked, hello, for certain areas of the country. This is one 
of those high-priority areas, and it would be almost sinful not 
to provide funding for this particularly stressed area, which 
has not been supported by appropriated dollars through specific 
designation.
    So I hope that the subcommittee will support providing some 
suggestions and directions for how these funds could be used in 
the Yazoo River basin. Our State has $45 million in unfunded 
authorized water projects under this program, and I hope that 
we can see the Department looking into the situation, and if 
possible, carrying out the intentions as expressed by the 
Congress with respect to appropriated dollars for these 
activities.
    Senator Moran. Mr. Secretary, before you respond, the vote 
has been called. We're going to try to finish all questions 
before the vote and not come back. So if everyone can be very 
brief between now and the next 5, 6, 7 minutes, that would be a 
great experience. Mr. Secretary.
    Secretary Vilsack. Fifteen seconds. Mr. Chairman, 
basically, I would suggest two things. One, the Regional 
Conservation Partnership Program is a great opportunity for 
that area to apply for resources. And secondly, this budget 
does contain $200 million in watershed resources. Obviously, we 
work to figure out if that's appropriated by Congress to spend 
it wisely.
    Senator Cochran. Thank you very much, Mr. Secretary.
    Senator Moran. Mr. Chairman, thank you very much. The 
Senator from North Dakota, Senator Blunt has agreed to allow 
his time to go to you, and so you owe him an expression of 
appreciation, but don't do it right now, we don't have time.

                         SCHOOL MEAL STANDARDS

    Senator Hoeven. I'd like to thank the outstanding Senator 
from Missouri, and also you, Mr. Chairman. Thanks for being 
here, Mr. Secretary.
    First question goes to the nutrition standards. We're going 
to be reauthorizing the dietary guidelines. On sodium, schools 
are having--you know, I mean, they're meeting the target one, 
and they feel that was a reduction, that it works for them. But 
as you know, we included in the ag approps legislation last 
year not going to the target two and three until additional 
study has been done. Has additional study been done, and what's 
your view on that?
    Secretary Vilsack. There have been additional studies, and 
I think there is a game plan that provides for an extended 
period of time before phase two and phase 3 would be 
implemented.
    Senator Hoeven. So I have introduced, or I will be 
introducing legislation that addresses the sodium piece, and 
I'd be willing to work with you on it. I'm trying to come up 
with something that the School Nutrition Association supports 
based on what works for them and also something that you may 
feel works as well. But they are concerned about going to that 
target two level and being able to meet it.
    Secretary Vilsack. We obviously want to provide flexibility 
where it's appropriate, Senator.
    Senator Hoeven. Same thing on the whole grains requirement. 
The 100-percent requirement is problematic for them with some 
products and then some flexibility and discretion there. So 
again, my legislation will address both, but would certainly be 
willing to have a dialogue on what we can do in terms of 
working with you on that.
    Secretary Vilsack. Well, we had provided flexibility on 
whole grain, understanding the challenges of the food 
processing industry. And again, we've been willing to provide 
flexibility where we think it's appropriate. We are concerned, 
Senator, about taking a step back. We don't want to do that. We 
think we're on the right track. We think we are headed in the 
right direction. We just don't want to take a step back.
    Senator Hoeven. Well, and I understand that. But we are 
going to be doing reauthorization this year, so we are going 
to, obviously, be reauthorizing the program. It's a logical 
time to look at that and then determine what certainty we can 
give the schools in terms of handling those two issues with 
your recognition that they need some help on both of them.
    Is there a point person in your shop we should be talking 
to you on this issue?
    Secretary Vilsack. Me.

                             BUDGET SAVINGS

    Senator Hoeven. Great. Thank you. One other question. Where 
do you see--as we work to the budget process and have to find 
some savings, give me your thoughts on where we do that.
    Secretary Vilsack. Well, actually, my thought was that you 
need to be careful about the application of sequester on both 
the defense and nondefense segments, so I am not sure on the 
right person to ask that question.
    I would point out, Senator, that this budget that we have 
submitted is less than the first full budget that we submitted 
in fiscal year 2010 and not too far from where we were in 2009. 
We, I think, have done a good job at USDA of trying to manage 
on limited resources without a lot of growth in our budget.
    Secondly, we've got those four line items, several of which 
are going to increase. Fire suppression, that's got to get 
fixed. That's got to get fixed. Rental assistance has got to 
get fixed. Otherwise we're going to continue to see an erosion 
of all the other programs that you folks think are important 
and that we think are important.
    Senator Hoeven. Well, and I feel like we've worked hard to 
find savings in the farm bill that we passed last year and that 
ag has stepped up and been part of reforms and savings. And I 
think we'll be called on to do more, but I also want to note 
that we've worked hard to find real savings from agriculture 
and still produce a good farm bill and have farmers and 
ranchers out there that are producing the highest quality, 
lowest cost food supply in the world. Thank you, Mr. Chairman.
    Senator Moran. Thank you very much, Senator Hoeven. Mr. 
Secretary, thank you. You were saved by the bell, in a sense. 
We, I think, have had a satisfactory opportunity to ask you 
questions. I hope this hearing is not just a benefit to us. I 
hope it's a benefit to you to see what we are hearing and 
thinking from across the country, what are farmers, ranchers, 
or consumers are telling us. And we appreciate your testimony 
and your service. I think it's been a good hearing.

                     ADDITIONAL COMMITTEE QUESTIONS

    For members of the subcommittee, any additional questions 
that you'd like to submit for the record should be turned into 
the subcommittee staff within 1 week, which is Tuesday, March 
24. We appreciated if the Department could respond from USDA--a 
response from USDA within 4 weeks from that date.
    And Mr. Secretary, on the two issues you mentioned, fire 
suppression and housing, if there's something that we need to 
know to help solve that problem, please make certain we do, or 
other issues that need our attention.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
               Questions Submitted by Senator Jerry Moran
                                  cuba
    Question. Secretary Vilsack, I have been an advocate of lifting the 
economic embargo against Cuba for the past 15 years, and I am 
encouraged by the newfound momentum since the President's announcement 
in December. I recognize there is still a lot to be done to restore 
diplomatic relations, but the potential for US agricultural exports to 
Cuba is undeniably significant. U.S. wheat farmers believe they can 
supply two-thirds of the wheat Cuba is already importing from other 
countries.
    Has USDA begun work to identify potential market access?
    Answer. Although USDA does not have an on-the-ground presence in 
Cuba to assess the market firsthand, USDA's Foreign Agricultural 
Service monitors trade data on Cuba's agricultural imports that 
provides insight into the potential of the Cuban market.
    If the embargo is removed, the United States could be poised to 
become a major agricultural trading partner with Cuba. Cuba depends on 
imports to feed its 11 million citizens. According to the World Food 
Program, Cuba imports about 80 percent of its food, which means the 
potential demand for U.S. products is significant. The United States 
has potentially huge advantages in exporting to Cuba, including lower 
shipping costs and transit times, especially compared to our current 
top competitors--Brazil and Europe.
    In fiscal year (FY) 2008, U.S. agricultural exports to Cuba reached 
$658 million. However, by the end of last fiscal year, they had fallen 
to $300 million. At the same time, global agricultural exports to Cuba 
have doubled over the past decade to approximately $2 billion. In 
fiscal year 2014, the largest U.S. agricultural export to Cuba was 
poultry, followed by soybean meal, soybeans, and corn.
    U.S. agricultural exporters can capture the market in Cuba, but 
there are factors to be considered. Cuba is a country with limited 
foreign exchange. The United States is also behind foreign competitors 
in market development. USDA remains prohibited from providing export 
assistance and credit or guarantees for exports to Cuba. These 
restrictions in law apply to USDA's successful market development 
programs like the Market Access Program and the Foreign Market 
Development program. Another factor is Cuba's import policy requiring 
all U.S. agricultural imports be channeled through one state 
corporation, called Alimport.
    Question. Since the U.S. government has had no formal relationship 
with Cuba for several decades, is there a lack of agricultural data 
available to accurately assess their markets?
    Answer. Cuba last reported its trade data to the United Nations in 
2006. In order to conduct more current trade analysis on the Cuban 
market USDA relies on export data to Cuba as reported by other 
countries to assess the dynamics of Cuba's import market. While direct 
and consistent import data from Cuba would be a preferable option, the 
use of export data to Cuba serves as good proxy to understand how trade 
patterns are changing in the country. However, there is very limited 
information available regarding Cuba's production and consumption 
trends. Elsewhere, FAS utilizes its network of overseas offices coupled 
with on-site assessments by Washington-based staff to gather 
comprehensive market intelligence. This type of comprehensive 
assessment has not been an option in Cuba. As the United States begins 
the process of re-establishing diplomatic relations with Cuba, 
including the opening of an Embassy, USDA is prepared with the 
expertise to provide on-the-ground assessments.
                            it modernization
    Question. Secretary Vilsack, one issue that has been raised 
repeatedly by this subcommittee in recent years is the IT modernization 
effort at the Farm Service Agency. Despite significant investments by 
Congress spanning several fiscal years, the MIDAS project as we 
understand it has been abandoned. Your budget indicates that FSA is 
conducting a Business Strategy and IT Strategy to establish new 
objectives to seemingly replace MIDAS. What is the status of those 
efforts?
    Answer. MIDAS has not been abandoned nor are there any plans to 
replace MIDAS. MIDAS remains at the core of the FSA IT modernization 
strategy. With any IT modernization effort there comes a time when the 
project must transition from the ``development'' stage to the 
``sustainment'' stage. With the successful delivery of Product Master, 
Farm Records, and Business Partner, the MIDAS system has moved into 
sustainment. During sustainment MIDAS will receive incremental 
improvements to the deployed functionality and, in order to keep it 
operational for field office staff, ongoing maintenance of processes 
and technical infrastructure, including defect resolution and minor 
adjustments to maintain continuity with program business rules. 
Following the Business Partner release in December 2014, the U.S. 
Department of Agriculture (USDA) Executive Information Technology 
Investment Review Board recommended that additional functionality, such 
as the ability of agricultural producers to interact with FSA online, 
be developed separately in smaller, more modular, investments that 
reflect the current vision for FSA's role and opportunities to improve 
service, including provisions of the 2014 Farm Bill.
    The FSA Farm Programs IT Plan for Expenditure that will be 
submitted in the coming weeks will provide details on the Farm Programs 
IT investments for fiscal year 2015. FSA Executive Leadership, in 
coordination with the Office of the Chief Information Officer, 
continues to leverage the Business Strategy, IT Strategy, and Roadmap 
to refine IT investment plans for fiscal year 2016. A non-USDA 
independent third-party will be engaged to conduct an analysis of the 
enterprise solution to determine if the current enterprise solution 
provides the necessary functionality and identify a proposed strategic 
direction for modernizing and ensuring the most cost-effective means 
for delivery of IT Services in FSA's dynamic program environment. The 
results of this third-party analysis will be used to guide the 
development of additional capabilities for the current MIDAS system.
    Question. While these IT challenges are ongoing for FSA, producers 
will soon be enrolling in the new Farm Bill commodity programs. Can the 
system currently in place handle the workload in a timely manner?
    Answer. Following the deployment of MIDAS Business Partner 
capabilities in December 2014, one performance-related issue was 
reported and resolved. USDA recognizes modernization of the current 
national telecommunications architecture is required to further improve 
performance and enable efficient delivery of program services to 
farmers, land owners, and agricultural partners. In March 2015, the 
Service Center Agencies (FSA, RD, and NRCS) approved the USDA Client 
Technology Services plan to upgrade 1,035 offices. These sites were 
determined as most critical based upon bandwidth saturation thresholds 
coupled with site populations and customer traffic demands. In fiscal 
year 2015, 300 sites are being upgraded with an additional 735 Service 
Center Agency sites planned in fiscal year 2016. Sites that have been 
upgraded will be consistently monitored to ensure that the initial 
upgrade is sufficient to support the customer's changing application 
and data requirements. Sites not upgraded in the initial phase will be 
evaluated on a continuous basis to determine if saturation thresholds 
have changed based on new demands.
    Question. Can producers rely on the security of the system to 
protect their financial information?
    Answer. Producers can rely on the security of the system to protect 
their financial information. The USDA and FSA provides several layers 
of information security by implementing physical, network/server, 
application and business process security controls. Security controls 
are compliant with the Office of Management and Budget, the National 
Institute of Standards and Technology and USDA requirements for systems 
that process individual's personal and financial information.
     implementation of new methods of poultry slaughter inspection
    Question. Where exactly do you stand now regarding implementation 
of the modernized poultry slaughter program? Will implementation be 
completed during fiscal year 2016?
    Answer. The implementation of the New Poultry Inspection System 
(NPIS) is moving forward as expected with 40-50 eligible plants 
expressing an interest in converting to the new system. Agency 
officials and union representatives are in ongoing negotiations at the 
present time. Full implementation is expected to be completed over a 5 
year period.
    Question. I understand that adopting these new methods is at the 
discretion of the plants. What is the level of interest in 
participation that you are seeing from the industry?
    Answer. The level of interest we are seeing from plants is what we 
had predicted. At present, FSIS has between 40-50 eligible plants 
inquiring about converting to NPIS.
                        biotech review in aphis
    Question. One issue that has been raised by this Subcommittee is 
the backlog of applications for biotech products. I am pleased at the 
Department's efforts to clear out the backlog and hope those 
applications can be cleared by the end of this fiscal year. Moving 
forward, how can we further improve and shorten the process to put us 
on an even playing field with competing countries and give companies 
regulatory certainty?
    Answer. Since 2012, USDA identified and implemented innovative ways 
to improve the biotechnology petition review process. The goal of these 
efforts was to significantly decrease the length and variability of the 
process without compromising the quality of the analysis that supports 
our decisions. Results of the 2012 process improvement are substantial. 
For example, published petitions are currently taking, on average, 1.8 
years, a time savings of approximately 1.2 years over the petitions 
that did not require an environmental impact statement and were 
published between 2010 and 2012. USDA ensures that its environmental 
analysis and plant pest risk analysis documents are thorough, accurate, 
and can withstand legal challenges. The process improvement analysis 
revealed a minimum estimated timeframe of 13-15 months required to 
conduct quality analysis and solicit public input to support regulatory 
decisions and protect plant health. These targeted timeframes are 
comparable to the average time it takes for product deregulation in 
other countries around the world. USDA appreciates the efforts of 
Congress to provide the necessary resources to USDA's biotechnology 
program and its continuing efforts to oversee certain genetically 
engineered organisms that might pose a risk to plant health. The 
President's fiscal year 2016 budget proposal for biotechnology 
regulatory services will provide sufficient funding to meet the new 
process timelines.
                          rice entering china
    Question. The U.S. Animal and Plant Health Inspection Service 
(APHIS) has been working with the China Administration of Quality 
Supervision, Inspection and Quarantine (AQSIQ) since early 2007 to 
develop the mechanism to allow US rice entry into the China market. The 
current negotiation centers on a phytosanitary protocol, which sets out 
the technical requirements for US rice entering China. It is our 
understanding that the last official communication on the draft 
protocol was spring of 2014 when APHIS provided a response to the 
Chinese latest offer. In the last three scheduled bilateral meetings 
between APHIS and AQSIQ, one was canceled by the Chinese without 
explanation and at the other two AQSIQ did not have present the 
appropriate parties to negotiate on rice. It appears as though the 
Chinese are dragging their feet and not negotiating in good faith on 
this issue.
    Since APHIS cannot compel their Chinese counterparts to negotiate, 
what more is USDA prepared to do to move this issue to an amicable 
solution?
    Answer. To date, China has not authorized imports of U.S.-origin 
milled rice, but we understand that China is an important potential 
market for United States rice exports. The issue has been addressed in 
bilateral meetings with both Beijing-based and Washington-based USDA 
personnel. Since the spring of 2014, there were several letter 
exchanges with China's General Administration of Quality Supervision, 
Inspection and Quarantine (AQSIQ). The latest letter from AQSIQ, 
reworked the original language in the proposed draft protocol, but did 
not address a key USDA objection on the requirement of pest-free 
production sites. USDA shared the information with United States 
industry and rice producers, and together we are working to develop a 
solid technical response. From the USDA perspective, we expect to 
participate in on-going negotiations with China in fiscal year 2016, 
about the AQSIQ rice storage site requirement to more accurately 
reflect current pest management measures in U.S. rice storage 
facilities.
                                 ______
                                 
             Question Submitted by Senator Susan M. Collins
                              potato wart
    Question. Potato wart is a serious, internationally-quarantined 
disease of cultivated potato that is not known to be present in the 
United States. The fungus is present, however, in Prince Edward Island, 
Canada, a region that is approved to export potatoes to the United 
States, which is the subject of significant concern to potato growers 
in Maine.
    With few effective measures to control the fungus, potato wart is 
readily transmitted to new areas in a variety of ways: by tubers grown 
in infected soil, by tools used in potato cultivation, by footwear, and 
by manure from animals that have fed on infested tubers. Even more 
problematic is that infested tubers do not always show outward signs of 
infection.
    Effectively controlling potato wart is possible primarily by 
appropriate production and handling practices, as well as statutory 
measures.
    I commend APHIS for acting quickly in issuing the current Federal 
Order with respect to potato wart. I am concerned, however, that it 
does not address soil, machinery, or potato movement from PEI to other 
areas in Canada. Unrestricted movement of these materials from PEI to 
other potato producing areas of Canada is troubling because it risks 
spreading disease beyond PEI, including into the United States. This 
risk comes from the movement of these materials.
    Will you evaluate the current Federal Order to help ensure that it 
is effectively protecting the potato industry in the United States, 
including in Maine, from being contaminated by this fungus that has the 
potential to devastate our industry?
    Answer. I recognize your concern about preventing the introduction 
of potato wart into the United States. USDA has worked closely with the 
U.S. potato industry, States, and our Canadian counterparts to put in 
place a scientifically-based policy that allows for the safe 
importation of potatoes from Canada. As a result of the recent new 
detections of potato wart on Prince Edward Island (PEI), the Animal and 
Plant Health Inspection Service (APHIS) issued a Federal Order 
strengthening our import requirements for potatoes from that province. 
The revised requirements apply to potatoes for consumption, processing, 
and seed from fields outside the regulated area, and were agreed upon 
by the U.S. Potato industry. The Canadian Food Inspection Agency (CFIA) 
quarantines infested fields and fields associated with them and 
conducts measures (monitoring, surveillance, and movement restrictions 
for potatoes as well as soil) to prevent further spread of Potato Wart 
within and from PEI to other parts of Canada or in exports. The 
measures also include prohibition of exports of potatoes from regulated 
fields to the United States and require that machinery used on 
regulated fields be cleaned and disinfected according to CFIA 
regulations before it can be moved. Under the Federal Order, potatoes 
from non-regulated areas of PEI must meet requirements to mitigate the 
risk of potato wart, such as washing to remove soil, sprouting 
inhibition, and phytosanitary inspection. Seed potatoes must originate 
from a field that has been tested and found free of the fungus that 
causes potato wart within 1 year of harvest. The Federal Order was put 
in place as an interim measure in response to concerns about possible 
risks from areas of PEI not regulated by Canada. APHIS and CFIA have 
committed to further technical discussions to review the current 
regulatory approach and if necessary, to make changes to the regulatory 
framework or other approaches to prevent the introduction of the 
disease into the United States while minimizing negative impacts on 
trade. Importation of PEI potatoes for non-propagative uses and for 
seed plays a significant role within the U.S. economy. USDA has worked 
to preserve this important import trade while protecting the U.S. 
industry from the risk of potato wart.
                                 ______
                                 
              Questions Submitted by Senator Steve Daines
                 consolidation of food safety agencies
    Question. Earlier this month before this subcommittee, I voiced 
concerns I've heard regarding the President's proposal to consolidate 
food safety agencies into a new agency entirely within HHS. In that 
hearing, FDA Commissioner Hamburg stated that FDA and USDA have ``very 
different approaches'' and ``different areas of expertise'' as it 
relates to food safety.
    Would you agree with Dr. Hamburg's assessment and the idea that 
USDA brings expertise and a unique perspective to the table regarding 
food safety?
    Answer. While USDA does bring expertise and a unique perspective to 
food safety and while the U.S. food safety system is among the safest 
in the world, consolidating food safety functions is an essential step 
to reforming the Federal food safety system overall. A single Federal 
food safety agency would provide focused, centralized leadership, a 
primary voice on food safety standards and compliance with those 
standards, and clear lines of responsibility and accountability that 
will enhance both prevention of and responses to outbreaks of food-
borne illnesses. It would rationalize the food safety regulatory regime 
and allow the Federal Government to better allocate resources and 
responsibilities.
    Question. Are you concerned about the potential loss of expertise 
if USDA is removed from the food safety process?
    Answer. The Budget highlights several opportunities for 
reorganizing and reforming government, including the new proposal to 
consolidate USDA's Food Safety and Inspection Service and the food 
safety components at FDA into a single new agency responsible for food 
safety inspection and enforcement, and foodborne illness outbreak 
prevention and response. The new agency would be charged with pursuing 
a modern, science-based food safety regulatory regime drawing on best 
practices of both agencies, with strong enforcement and recall 
mechanisms, expertise in risk assessment, and enforcement and research 
efforts across all food types based on scientifically supportable 
assessments of threats to public health.
    Question. How would USDA ensure that agriculture's perspective and 
concerns are accounted for should such a consolidation occur?
    Answer. While the Administration believes that this is an 
opportunity to drive efficiency and accountability, prevent 
duplication, and make government work better and smarter for the 
American people, USDA will still work to ensure that USDA and 
agriculture's perspectives and concerns are taken into account when 
consulting with the new agency.
          environmental concerns within the dietary guidelines
    Question. In the fiscal year 15 Omnibus, there was a Congressional 
directive that expressed concern that the advisory committee was 
``showing an interest in incorporating environmental factors into their 
criteria'' and directed the Secretary to ``only include nutrition and 
dietary information, not extraneous factors'' in the final guidelines.
    As you know, the Scientific Report of the 2015 Dietary Guidelines 
Advisory Committee was just released last month. It included, and I 
quote, ``environmental approaches are needed to complement individual-
based efforts to improve diet and reduce obesity and other diet-related 
diseases.''
    Is the advisory committee report compliant with the Congressional 
directive?
    Answer. As noted above, the Congressional directive is aimed at the 
Departments, not the Advisory Committee. Congress did not mandate that 
HHS and USDA use an Advisory Committee to review evidence, so it does 
not specifically define or limit what the Advisory Committee considers. 
It's worth noting that the Committee's report is advisory in nature--it 
is not a draft of the Dietary Guidelines for Americans. Additionally, 
the 2015 Advisory Committee used the terms ``environment''/
``environmental'' in a variety of ways in its advisory report.
    Question. In a hearing before the House Agriculture Appropriations 
Subcommittee, you indicated that USDA needs to ``color inside the 
lines'' with regards to the directions you've received from Congress. 
Can you confirm that the final report will follow Congressional intent 
and focus only on nutrient and dietary recommendations, and not factor 
in environmental factors and other extraneous material?
    Answer. Working with our colleagues at the US Department of Health 
and Human Services, we will follow the statutory parameters for the 
Dietary Guidelines for Americans, focusing on providing food-based 
dietary recommendations that are grounded in the strongest body of 
scientific evidence.
    Question. Do you believe that environmental issues are within the 
purview of developing these dietary guidelines?
    Answer. While environmental issues are important overall and are a 
priority for USDA elsewhere as they intersect with the food supply, I 
do not believe they are within the confines of our Congressional 
mandate for development of the Dietary Guidelines. As the National 
Nutrition Monitoring and Related Research Act of 1990 (NNMRRA) 
stipulates, the Dietary Guidelines for Americans, published by USDA and 
HHS ``shall contain nutritional and dietary information and guidelines 
for the general public,'' and we will focus on food-based, dietary 
recommendations based on the strongest evidence on diet and health.
                     u.s. sheep experiment station
    Question. The U.S. Sheep Experiment Station in Dubois, Idaho, has 
improved the knowledge and understanding of how the interaction between 
domestic and bighorn sheep may impact wild sheep herds, which has 
resulted in improved health for both domestic and wild sheep. Last 
year, USDA attempted to reprogram funds and would've shuttered the 
program if Congress didn't intervene.
    Can you commit to not attempting to reprogram funds from the USSES 
or make other efforts to close the station?
    Answer. ARS' ability to conduct innovative grazing research at the 
U.S. Sheep Experiment Station (USSES) continues to be negatively 
impacted by changes in domestic sheep access to grazing lands. This 
reduction in access is the result of changes in the areas permitted for 
grazing by domestic sheep to minimize contacts with expanding bighorn 
sheep populations and conflicts within the grizzly bear habitat in the 
Greater Yellowstone area. A variety of other factors, including a 
continued lack of resources, both human and financial, and inadequate 
infrastructure have contributed to the unsustainability of the ongoing 
research program at the USSES. USSES will remain open and operational 
during fiscal year 2015 to allow further input to be provided by 
stakeholders. However, given the ongoing, serious challenges to 
operating USSES, the fiscal year 2016 Budget for ARS does include a 
proposal to close the USSES and reprogram the associated funding to 
high priority research at other ARS locations in Idaho as the program 
is not sustainable.
    The proposed closure of the USSES will not, however, negatively 
impact our research, knowledge, or understanding of sheep health, as 
sheep research will continue elsewhere.
                                 ______
                                 
              Questions Submitted by Senator Jeff Merkley
               healthy foods financing initiative (hffi)
    Question. Mr. Secretary, will you please discuss progress and 
successes to date of the Administration's Healthy Foods Financing 
Initiative (HFFI)?
    In the absence of funding so far for this program, USDA has 
developed background information and scoped out a path forward. USDA 
has discussed this program with other Federal agencies (Treasury and 
HHS) that deal with healthy foods to ensure coordination and to avoid/
minimize duplication and with stakeholders. USDA has engaged with 
stakeholders and dialogue on best practices, models, ongoing policy 
efforts, areas where partners and agencies can collaborate, and other 
topics that would help inform the strategy for how the mission area can 
effectively deliver the HFFI program. Key areas discussed to date 
include:
  --Process and selection of the National Fund Manager
  --The role and duties of the National Fund Manager
  --Process for soliciting and reviewing applications
  --Contents of a regulation
    What has USDA been able to do to support the HFFI under USDA's 
current authorities?
    Answer. Without funding explicitly provided, USDA's ability to 
implement the Healthy Food Financing Initiative and to begin to finance 
retail food providers in areas with limited food access through a 
national fund manager has been severely restricted. The USDA and Rural 
Development have used existing programs and authorities to support 
efforts to increase access to healthy food. For example, in fiscal year 
2014, USDA Rural Development through the Business and Industry 
Guaranteed Loan Program, Rural Business Enterprise Grant Program, Rural 
Business Opportunity Grant Program, Value Added Producer Grant Program, 
Rural Cooperative Development Grant Program, Small Socially 
Disadvantaged Producer Grant Program, and Rural Energy for America 
Grant Program was able to fund 231 projects totaling over $77.4 million 
which assisted rural businesses in providing healthy food.
    Question. This budget requests $12.8 million for Rural 
Development's participation in the initiative. Please explain how these 
funds would be used and what you expect to accomplish.
    Answer. The funds requested for the Healthy Food Financing 
Initiative would enable Rural Development to seed a fund that through a 
third-party fund-manager would provide loans, grants and technical 
assistance to low-income and moderate-income communities for 
investments that would increase access to healthy food. Rural 
development would write the rules and regulations for the program, but 
a third-party, the fund-manager would then run the program.
    Ultimately, the awards made will support market planning and 
promotion efforts as well as infrastructure and operational 
improvements designed to stimulate consumer demand, enhance marketing, 
expand demand and retail outlets for farm products, and increase 
availability of locally and regionally produced foods.
    Funding would be made available to the following entities with 
sound strategies for addressing the healthy food needs of communities: 
businesses, non-profits, public entities, and community development 
financial institutions.
    The funds will be targeted to severely underserved low- and 
moderate-income communities. Most often low-income communities are less 
attractive, under the conventional financing, to retailers of healthy 
food. However, effective programs have shown that well-targeted 
financing and technical assistance can create viable business outcomes 
and access to healthier foods and create new markets for farmers, but 
also create jobs and support broader development efforts to revitalize 
distressed communities.
    Organizations will use grants, below-market rate loans, loan 
guarantees and tax credits to attract private sector capital for an 
even greater investment in projects that increase access to fresh 
produce and other healthy foods. The goal is to support efforts to 
provide access to healthy foods in underserved areas, to create and 
preserve quality jobs, and to revitalize low-income communities.
    USDA Rural Development will work in close coordination with USDA's 
Food and Nutrition Service and Agricultural Marketing Service in 
crafting and administering the program to ensure the goal of expanding 
healthy food access is achieved.
                    aphis overall budget priorities
    Question. Mr. Secretary, APHIS is charged with protecting the U.S. 
from invasive animal and plant pests and diseases. This budget reflects 
priority funding for: antimicrobial resistance activities in the 
Zoonotic Disease Management program; Agricultural Quarantine 
Inspections; ``citrus greening'' (huanglongbing); and expanded 
implementation of Lacey Act enforcement. These are laudatory 
priorities, but I have several questions.
    In this era of severe resource limitations, please explain your 
review process through which these priorities rose to the top.
    Answer. Our Blueprint for Stronger Service has saved American 
taxpayers a total of $1.368 billion over the last several years while 
ensuring that the American people receive the best service possible. 
While developing the fiscal year 2016 Budget, USDA focused on areas 
that would have a broad, national or international impact and improve 
our nation's economy and agricultural health, assisting rural 
communities and ensuring access to safe nutritious food for all 
consumers. USDA is supporting a government-wide initiative to deal with 
antimicrobial resistance, which affects both animal and human health. 
The Animal and Plant Health Inspection Service (APHIS) will play an 
important role in this effort by monitoring for antimicrobial resistant 
bacteria among livestock. The other increases support APHIS' mission of 
protecting the health and value of U.S. agriculture and natural 
resources. These increases will allow APHIS to meet critical needs 
related to its mission, and they also fit into USDA's goals of 
supporting rural economies and ensuring access to safe and nutritious 
foods.
    Question. Within the Specialty Crops Pests program, for citrus 
greening, you are requesting $3 million in new funding plus $4.5 
million in redirected funding. However, total Specialty Crops Pests 
support would be reduced by $10.8 million. Such a reduction would 
severely curtail control and eradication efforts on a variety of 
devastating pests including: European Grapevine Moths; Light Brown 
Apple Moths; Medflies; glassy-winged sharpshooters; and the spotted 
wing drosophila. According to your budget, in fiscal year 12 this 
program protected $27 billion worth of specialty crop production in 
this country.
    As you know, Oregon is a major producer of specialty crops. What 
assurances can you provide that this funding reduction will not impact 
our fruit, vegetable, nuts, horticulture and nursery crops production?
    Answer. USDA is proposing decreases to three areas of the Specialty 
Crop Pests program: the Citrus Health Response Program, the glassy-
winged sharpshooter program, and the light brown apple moth program. 
These proposed decreases are designed to allow for more equitable 
sharing of costs between the Federal government and those who benefit 
from these important programs. If cooperators are able to increase 
their contributions to the programs, they will continue to operate at 
their current levels. If contributions to the programs do not increase, 
APHIS would focus available resources on preventing the spread of the 
pests and diseases to new areas.
                            avian influenza
    Question. Recently new cases of highly pathogenic avian influenza 
have been detected in Michigan, Missouri, and Arkansas. This disease 
can be transmitted by wild birds and has impacted both commercial and 
backyard flocks. Selective trade restrictions have been imposed by 
numerous countries affecting U.S. poultry exports. However, this budget 
requests only a $55,000 increase for the Avian Health program.
    In the face of these newly detected cases of bird flu do you still 
believe this funding level is adequate to protect the U.S. poultry 
industry and maintain poultry exports?
    Answer. We developed our fiscal year 2016 budget request before the 
bird flu outbreak escalated to the extent that is has today. We are 
monitoring this situation closely, and are keeping our trading partners 
fully informed. To address this issue, we are using appropriated and 
emergency funding carried over from previous years as well as funds 
appropriated in fiscal year 2015 to carry out response actions. These 
actions include indemnifying producers and conducting surveillance 
activities in areas near detections. If we find that we cannot 
adequately address the situation through these funding sources, we will 
pursue emergency funding sources.
    Question. What access do you have to Commodity Credit Corporation 
funds to address emergencies of this sort?
    Answer. I am authorized to quickly access and transfer funds from 
the Commodity Credit Corporation to any USDA agency in the event of an 
agricultural emergency. As part of the process, the Office of 
Management and Budget reviews the emergency funding request to ensure 
consistency with Administration priorities and apportions the funding 
accordingly.
     implementation of new methods of poultry slaughter inspection
    Question. Mr. Secretary, the Food Safety and Inspection Service is 
responsible for the safety and accurate labeling of domestic and 
imported meat, poultry and processed egg products. This is generally 
accomplished through in-plant inspections carried out by a cadre of 
FSIS inspectors. Your budget proposes to cut overall agency funding by 
$4.9 million, chiefly relying on $10 million in savings to be achieved 
by implementation of new methods of poultry slaughter inspection.
    Mr. Secretary, you have been working toward implementing these new 
methods of inspection for several years. Have you made sufficient 
progress to achieve these savings in fiscal year 16?
    Answer. With the publication of the final rule in August 2014, we 
plan on being able begin implementation and anticipate the first plants 
converting by the end of fiscal year 2015. Our fiscal year 2016 
estimate is based on the timeline in the final rule which estimated 
implementation going from fiscal year 2015 through fiscal year 2019.
    Question. We continue to hear concerns that these new inspection 
methods will sacrifice food safety for expediency. What assurances can 
you provide that the safety of our food supply will not be compromised 
by this new process?
    Answer. As a result of the new rule, the bacterial testing 
requirements for all plants, including those who elect to participate 
in the new system, as well as those who retain their existing system, 
will be required to perform both pre-chill and post-chill bacterial 
testing, effectively doubling the testing requirements for pathogens 
such as Salmonella and Campylobacter. The FSIS Risk Assessment based on 
the best science available, presents estimates that industry-wide 
adoption of NPIS would reduce the number of human illness, attributed 
to young chicken and turkey products by an average of about 3,980 
Salmonella illnesses and about 840 Campylobacter illnesses annually. 
Our data has shown that the HIMP model plants, on which the New Poultry 
Inspection System is based, have food safety records that are as good 
as, or better than, that of the traditional slaughter plants.
    Question. We also hear concerns that the accelerated carcass line 
speeds will jeopardize worker safety. I understand that those plants 
participating in the pilot program will continue to be allowed to move 
poultry carcasses at 175 birds per minute. That is an astounding speed-
equal to three carcasses a second. What type of inspection can 
conceivably take place in 1/3 of a second? What studies have you 
undertaken and what information can you provide that these line speeds 
will not threaten worker safety?
    Answer. In response to public comment, the maximum line speeds for 
plants that adopt the NPIS are capped at 140 birds per minute, 
consistent with the maximum speed under existing inspection programs. 
Plants that participated in the pilot program will be allowed to 
maintain line speeds of 175 birds per minute. USDA received numerous 
comments on the proposed rule related to work safety and has partnered 
with Federal agencies responsible for worker safety to address those 
concerns.
                  merging food safety responsibilities
    Question. Mr. Secretary, there is a very brief write-up in the 
budget appendix indicating the President is asking for reorganization 
authority to merge all food safety responsibilities into one agency, to 
be housed in the Department of Health and Human Services (DHHS).
    Will you please describe, in more detail than provided in the 
budget, what this proposal entails?
    Answer. The Budget highlights several opportunities for 
reorganizing and reforming government, including the new proposal to 
consolidate USDA's Food Safety and Inspection Service and the food 
safety components at FDA into a single new agency responsible for food 
safety inspection and enforcement, and foodborne illness outbreak 
prevention and response. The Administration believes that this is an 
opportunity to drive efficiency and accountability, prevent 
duplication, and make government work better and smarter for the 
American people.
    Question. Is a legislative proposal forthcoming on this 
reorganization?
    Answer. The Budget demonstrated examples of what the President 
would do if Congress reenacted broad reorganization authority. The 
Administration believes that this is an opportunity to drive efficiency 
and accountability, prevent duplication, and make government work 
better and smarter for the American people.
    Question. Can you provide assurances that the food safety expertise 
developed in the Food Safety and Inspection Service will not be eroded 
through this reorganization?
    Answer. USDA and FDA have strong collaborative ties that have 
improved Federal coordination of the nation's food safety system. The 
new agency would be charged with pursuing a modern, science-based food 
safety regulatory regime drawing on best practices of both agencies, 
with strong enforcement and recall mechanisms, expertise in risk 
assessment, and enforcement and research efforts across all food types 
based on scientifically supportable assessments of threats to public 
health.
                           rental assistance
    Question. Mr. Secretary, the Department's Rental Assistance program 
subsidizes certain tenants of affordable rural housing to pay no more 
than 30 percent of their adjusted household incomes on rent and 
utilities. Recipients of Rental Assistance are, generally, the elderly, 
disabled, or female-headed households, with average annual household 
incomes around $10,000. This budget seeks an $83.4 million increase in 
rental assistance.
    In addition, the budget requests four program ``reforms'' that 
would appear to severely disadvantage very low income program 
participants. The Committee rejected three of these reforms in fiscal 
year 15 while accepting the fourth. However, now program advocates are 
voicing strong opposition to all four.
    Please explain the four Rental Assistance program reforms and how 
their implementation would not jeopardize the security of very low 
income tenants.
    Answer. The legislative changes the Administration has requested 
help ensure that the Rental Assistance (RA) program will continue to 
provide a safety net for the neediest rural residents and ensure the 
program's long-term sustainability. Prudent program management demands 
that Rural Development (RD) ask for adequate funding and seek authority 
to control program costs in times of budgetary constraints. On balance, 
the legislative proposals further concentrate the benefit of RA for the 
most disadvantaged rural households and extend the available funding to 
as many properties, and tenants, as possible.
No automatic renewals
    Current statutory language requires that funding on an RA Agreement 
be automatically replenished when funds are exhausted. RD's estimating 
methodology on funding amounts ensures that all RA agreements have 
enough funding for the full 12-month period. However, the Department 
has experienced the need for a second obligation in the same 12-month 
period in 3--5 percent of the renewals in a fiscal year. These 
automatic renewals will need to be funded for 12 months again.
    Having to fund these second renewals means some properties receive 
a disproportionate share of RA funds, to the detriment of other 
properties, during a fiscal year. Having this authority will allow the 
Department to more efficiently utilize RA resources; these actions will 
also eliminate same uncertainty of future program costs and provide 
budget greater predictability for the RA Program.
Selective renewals
    Selective renewals and partial year agreements are two proposals 
designed to stretch available RA funding during periods of short-term 
continuing resolutions or sequesters. During such uncertain funding 
periods, every RA Agreement that requires full 12-months' funding 
cannot be accommodated. RD seeks the selective renewals authority to 
eliminate the current practice of renewing agreements on a first-come-
first-serve basis, without regard to need. Selected renewals will 
provide to the Department the ability to prioritize or determine 
renewals for properties where the need may surpass that of other 
properties.
Partial year agreements
    Current appropriation language and statutory authority requires RD 
to obligate the entire 12-month estimated amount of RA funding at the 
time the agreement is renewed. In times when the budget is uncertain, 
such as during a short-term Continuing Resolution, providing RD with 
the ability to obligate less than a full-year of funds will provide RD 
with an important management tool that will help ensure RA is available 
for those who need it most. The result will be that the agency is 
better able to continue to meet its mission of providing affordable 
housing to residents even in times of funding uncertainty.
Minimum rent
    RD's proposal is to institute a minimum rent of up to $50 per 
month, but plans to start with a minimum rent of $25 per month. This 
authority is similar to rental assistance programs at Department of 
Housing and Urban Development (HUD). RD intends to provide hardship 
exemptions for applicants and tenants who cannot pay the minimum, and 
eviction of tenants is prohibited if they cannot pay the minimum rent. 
The Department believes this change will encourage a sense of ownership 
within the rental community by tenants, as well as contribute to the 
long-term availability of RA. The hardship exemption will ensure that 
the minimum rent requirement does not jeopardize the security of very 
low income tenants.
    Question. The $50 per month minimum rent reform appears focused on 
the very lowest income program participants. The budget states that 
waivers would be granted in cases of extreme hardship. The budget also 
contends this reform will save $5 million per year. Please explain the 
situation in which $5 million could be raised without imposing 
substantial hardship on tenants.
    Answer. The 2016 Budget requests the authority to require a minimum 
rent payment of $50 per month regardless of tenant income level. The 
proposal includes hardship exemptions for tenants that can demonstrate 
they are unable to pay the minimum. These hardships may include the 
loss of family income due to the termination of employment, termination 
of benefits from other programs, or the death of an income earner. The 
proposal also prohibits the eviction of tenants if they are financially 
unable to pay the minimum rent.
    There are currently about 42,000 households that pay between $0 and 
$50 per month as their tenant contribution toward the rent payment. The 
actual number that would see their tenant contribution increase to $50 
per month would depend on the number of exemptions approved.
    Ensuring the long term viability of the RA program is in the best 
interest of the tenants, who have come to rely on the program to help 
support their ability to live in affordable housing and allow us to 
stretch this much needed resource. The hardship exemption will ensure 
that the minimum rent requirement does not jeopardize the security of 
very low-income tenants.
    Question. Is the agency working to develop other cost containment 
strategies that would not endanger the security of very low income 
rural residents?
    Answer. The well-being of low and very-low income rural Americans 
is a top priority for this Administration and the Department of 
Agriculture. The cost containment strategies included in the 
President's 2016 budget request are intended to provide USDA with the 
tools for managing a program that provides essential support to rural 
Residents during a time of reduced budgets. The legislative proposals 
presented as cost containment strategies are a response to both budget 
reductions due to sequestration and legislatively-mandated changes--
such as reducing the duration of RA agreements--that have forced USDA 
to manage the portfolio and growing need amidst an overall reduction in 
funds.
                multi-family housing preservation pilot
    Question. Mr. Secretary, over 16,000 affordable multi-family 
housing projects in rural America have been financed using USDA loans. 
These projects include over 475,000 housing units for low and very low 
income rural households. However, the average age of these projects 
exceeds 25 years.
    With projects this old, what is the Department doing to maintain 
their physical condition and to mitigate issues of deferred 
maintenance?
    Answer. USDA has long recognized the need to revitalize its 
existing Section 515 housing. The primary means of revitalization has 
been through the Multi-Family Preservation and Revitalization (MPR) 
program, which provides flexible financing tools that can be tailored 
to provide the best financing solution to each property's needs and 
ability to repay. To stretch the Department's dollars further, MPR 
revitalization is typically done through a public/private partnership 
that includes Low Income Housing Tax Credits and third party financing, 
along with MPR funds. The Department also works with Section 515 
property owners to transfer aging properties to new owners ready and 
able to invest in the modernization of the property. USDA works to 
mitigate the risk of deferred maintenance by closely monitoring each 
property through onsite physical inspections and review of property 
financial conditions. This oversight ensures that properties are in 
safe and decent condition, and financial resources are set aside to 
address maintenance needs as they arise.
    Question. Some years ago the Committee created a pilot program to 
address property rehabilitation needs and to protect tenants if 
projects prepay and leave the program. This budget indicates the 
Department will submit legislation to make that pilot a permanent 
program. What is the status of that proposed legislation?
    Answer. The fiscal year 2016 budget request included the proposal 
to make permanent the Multi-Family Preservation and Revitalization 
(MPR) program. The 2016 budget follows similar requests to make the MPR 
program permanent in the fiscal years 2014 and 2015 budget. USDA 
believes the MPR program fills a critical need for flexible financing 
that can revitalize our rental housing without the need for significant 
increases in tenant rents to pay for it. The Department has delivered 
the legislative proposal to OMB for their consideration and 
transmission.
    Question. What changes will the proposed legislation include 
compared to the existing pilot?
    Answer. The proposal to make the MPR program permanent will provide 
the same financing tools Rural Development has been using in the pilot 
program. These tools include providing zero percent loans, soft second 
loans, grants for health and safety repairs, and modification of 
existing loans. These tools have been very successful in meeting the 
needs of properties that have participated in the MPR program.
    Question. Have you worked with housing advocates, owners, and other 
interested parties in the drafting of this proposal?
    Answer. USDA has met frequently with housing advocates, owners, and 
other interested parties over the years in relation to the MPR and 
other Multi-family housing programs. I believe the proposal that has 
been drafted meets the needs of our Multi-family stakeholders.
    Question. One concern we frequently hear is that the Department is 
unable to expedite the transfer of a property from the current owner to 
a non-profit purchaser. These transactions typically take 18 months or 
more, which places incredible burdens on the buyers in terms of holding 
together financial packages. What is the Department doing to streamline 
and accelerate this process?
    Answer. RD has consulted with its customers and they have 
identified the process for transferring properties as one of the most 
in need of streamlining. RD has been working with stakeholders in a 
Lean Six Sigma improvement process to identify barriers to making the 
transfer process more efficient. Stakeholders have also recommended 
process improvements that will reduce processing times, provide 
transparency into the transfer process, create a consistent set of 
transfer requirements, and create predictability. Currently, Rural 
Development is working to implement several of these process 
improvements. These include: 1) providing buyers, sellers and other 
parties with a preliminary assessment tool they can use to test the 
terms of their transfer prior to submission to Rural Development; 2) 
developing a simpler, easier to use underwriting tool that incorporates 
more industry standards in transfer underwriting; and, 3) revising 
Multi-family handbooks to formalize these changes in underwriting 
policy.
    Question. Tenants currently residing in two Section 515 financed 
properties located in Merrill and Myrtle Creek, Oregon are in danger 
losing their Rental Assistance subsidized housing this summer due to 
the underlying mortgages reaching maturation. Will you commit to using 
your authority to extend these mortgages for a short period of time to 
give the willing and qualified sellers and buyer's sufficient time to 
preserve these two properties?
    Answer. Rural Development is preparing to issue guidance to Multi-
family Housing staff, outlining steps to take on maturing mortgages, 
including the ability to offer short-term or long-term mortgage re-
amortization to keep properties in the MFH portfolio and continue to 
provide affordable housing to residents. Owners will also be encouraged 
to participate in the MPR program, which would enable them to take 
advantage of a long-term debt deferral. If owners decline both of those 
offers, we strongly suggest they request prepayment, which would enable 
the property's tenants to receive offers of an RD Voucher.
    Question. Is there anything this Subcommittee can do to assist you 
with these issues?
    Answer. The Department currently offers portable housing vouchers 
to tenants of affordable housing projects that were financed with USDA 
loans, and whose owners pre-pay and leave the program. The 
Administration has proposed to expand eligibility to tenants of 
projects whose mortgages have matured and been paid off in the 2016 
budget.
    We would appreciate the support of the Subcommittee for this 
proposal. In addition, constituent stakeholders interested in 
purchasing a maturing project, should contact the RD State Office and 
submit a transfer application. Once the State Office receives a 
complete application, it can prioritize the processing. If the 
potential purchaser is not familiar with RD's transfer process, our 
State Office stands ready to help.
                            housing vouchers
    Question. Mr. Secretary, the Department currently offers portable 
housing vouchers to tenants of affordable housing projects that were 
financed with USDA loans, and whose owners pre-pay and leave the 
program. The Administration proposes to expand eligibility to tenants 
of projects whose mortgages have matured and been paid off.
    This budget requests $15 million in fiscal year 16. Is that 
sufficient both to renew all expiring vouchers and to fund new vouchers 
stemming from pre-payments and maturing mortgages?
    Answer. RHS believes that the $15 million level will be sufficient 
to renew all expiring vouchers and allow for funding prioritization for 
new vouchers as demand warrants, including the proposed expansion of 
the Voucher program to tenants in properties with maturing mortgages. 
With the Department's initiative to retain as many maturing mortgage 
properties as possible, we believe the proposed funding level will 
accommodate the need for new vouchers for these tenants.
    Question. Do you expect the demand for vouchers to grow 
significantly due to including tenants in maturing mortgage properties?
    Answer. There will be a small increase in demand, which we have 
accounted for in our estimates. In 2015, we have focused our efforts on 
outreach to owners of properties with maturing mortgages, working with 
them to find ways to keep them in the program if they are willing. So 
we believe going forward we will be more successful retaining our 
Section 515 properties in the program.
    RD's initial efforts have succeeded in 2014, where 10 of the 14 
properties expected to leave have remained in RD's portfolio. As the 
initiative gains momentum and visibility, we believe more owners will 
take advantage of the incentives we offer.
                       self-help housing program
    Question. The Department's self-help housing program provides 
grants to non-profit organizations that coordinate small groups of 
families aspiring to achieve homeownership through the self-help 
method. These families jointly work on their houses, contributing sweat 
equity that ultimately lowers their purchase prices.
    Mr. Secretary, this is one of the most popular programs in this 
bill. Please explain why this budget slashes the program by 64 percent?
    Answer. The Mutual and Self-Help Housing Program has played an 
important role in providing opportunities for affordable housing for 
low and very low-income families in rural America for 50 years. The 
requested 2016 funding level for Mutual and Self-Help housing grants 
would, paired with balances from prior years, address the reduction 
proposed in this program. However, because of budget constraints, 
funding for this program in 2016 it would not support the anticipated 
demand associated with the increased program level in Section 502 
Single Family Direct.
    Question. It is our understanding that these families are the stars 
of your housing programs, in terms of making timely payments and 
achieving successful homeownership. Do you know of any other Federal 
program more effective than this in accomplishing these objectives?
    Answer. The Mutual and Self-Help Housing program is unique among 
Federal housing programs, serving the lowest income families who would 
otherwise be unable to attain homeownership. The Mutual and Self-Help 
Housing Program has played an important role in providing opportunities 
for affordable housing for low and very low-income families in rural 
America for 50 years. There is no other Federal program.
                           broadband program
    Question. Mr. Secretary, USDA has had the responsibility for some 
years of expanding access to high speed broadband services across rural 
America.
    Please discuss your view of the success the Department has achieved 
to date in this effort.
    Answer. The most significant success the USDA has achieved was the 
delivery of the Broadband Initiatives Program (BIP), a Recovery Act 
program. There are 255 active infrastructure projects and approximately 
$2.7 billion has been advanced for construction. As a result of 
Recovery Act funding, more than 213,000 households, 15,000 businesses, 
570 public safety facilities, 460 healthcare providers and more than 
700 schools and libraries are receiving new or improved broadband 
service.
    The Department also runs two other successful programs to deploy 
broadband. The Rural Telecomm Program and the Community Connect 
Program. In our infrastructure program this year, we have approved $190 
million in financing that will enhance broadband service to over 65,000 
customers. Community Connect provided $20.3 million to fund broadband 
in unserved communities in fiscal year 2014. The rules for the 2014 
Farm Bill Broadband Program are in progress and the program will start 
once the new regulation is published later this year.
    Question. The fiscal year 14 Farm Bill required changes to the USDA 
loan program. Please let us know the status of those regulation 
changes, and when you expect that revised program to be in operation.
    Answer. USDA, specifically the Rural Utilities Service (RUS), 
continue to work closely with OMB to finalize the regulations for the 
broadband loan program. USDA anticipates this process to be finalized 
in the summer of 2015 and will begin to immediately start accepting 
applications once the NOSA is posted on the Federal Register.
    Question. What can this Subcommittee do to help you promote high 
speed broadband access in rural America?
    Answer. The Subcommittee could provide funding for the Farm Bill 
broadband program in line with the President's fiscal year 16 budget 
request to help fund broadband in unserved and underserved rural areas.
                  rural child poverty pilot initiative
    Question. Mr. Secretary, this budget seeks $20 million for a pilot 
initiative to address severe rural youth poverty.
    Please describe how this initiative will work.
    Answer. The Administration's fiscal year 2016 Budget proposes $20 
million for a new program to support innovative strategies that combat 
rural child poverty by focusing on both children and the parents with a 
bundled services approach. This approach incorporates three elements:
  --Pilot program to create better coordination of current Federal 
        programs designed to help poor kids and families, with a focus 
        on helping the parents obtain employment and increase their 
        income;
  --Human resources to perform critical coordination and outreach work; 
        and
  --Rigorous evaluation to determine the efficacy of the approach for 
        broader implementation.
    Eligible uses would include educational or job training instruction 
for parents coupled with child-focused programming and support relating 
to health and early learning. The pilot will educate families on 
resources available, build local capacity for assisting families in 
rural areas through Americorps or VISTA programs. Additionally, the 
pilot will support development and maintenance of an integrated client 
and services tracking system to instantly determine client eligibility 
across Federal programs and better meet the array of client needs. The 
resources in this pilot would complement other dollars in the budget 
that assist communities and nonprofit organizations to finance the 
physical infrastructure needed to deliver services, particularly 
through the Community Facilities grants and the Distance learning 
programs. Applicants could include local governments (but not States), 
educational institutions (including community colleges as well as 
historically black, tribal, or Hispanic institutions), and community 
action agencies. Pilot program funds would be provided exclusively to 
projects that are located in areas of high poverty and that have 
embraced a bundled service, ``two-generation'' approach that focus on 
both the children and parents of low-income rural families. The maximum 
amount of the grant would be $500,000. The grants would encourage or 
require collaboration and partnerships of key entities at the local 
level. For example, the applicant may be a community action agency that 
traditionally delivers temporary assistance to needy families (TANF) 
resources and Early Head Start, and a Women, Infants, and Children 
enrollment center and in its application includes the local community 
college to deliver workforce development programs.
    Question. What empirical metrics have you identified to evaluate 
the success of the pilot?
    Answer. An outside evaluator group will be contracted to:
  --develop (in conjunction with Rural Development) appropriate 
        measures to allow an evaluation of the pilot program, and
  --implement experimental and quasi-experimental impact evaluations to 
        evaluate the program's effectiveness.
    The evaluation work will identify best practices and provide 
information and recommendations on potential expansion of Federal 
investment around the ``bundled'' service delivery approach.
    Question. Will you have enough time to demonstrate that these 
activities can be successful?
    Answer. If the funding requested is provided in fiscal year 2016, 
USDA plans to announce, select and fund ``bundled'' service projects in 
2016. Projects will provide services in 2016 and 2017. Pilot project 
evaluation will take place in 2018.
                      community facilities grants
    Question. Community facilities loans and grants can be used for 
almost any essential community facility, including; schools; hospitals; 
clinics; libraries; public buildings; child and elderly day care 
facilities; health and safety vehicles and equipment; etc. This budget 
requests a 285 percent increase in the regular community facilities 
grant program.
    What is the purpose of this huge increase in these grants this 
year?
    Answer. Additional Community Facilities (CF) grant funds will 
enable RD to support investments in critical community infrastructure 
in high need, high poverty areas such as Promise Zones, the Coal 
Community Revitalization initiative and Strike Force among others, 
where there is limited ability to carry a loan. The increase in the 
grant program is comparable to the increase the CF direct loan program 
has experienced in the recent years. These additional CF grant 
investments will be targeted to those communities that need help the 
most.
    The USDA Community Facilities program has proven a particularly 
effective tool for fostering partnerships and leveraging other sources 
of funding. Additional grant dollars will only increase RD's ability to 
do this while ensuring that these investments are made in places where 
they are needed most.
    Question. Do you plan to pair these grants with the large ($2.2 
billion) loan program to achieve a more effective combination loan/
grants Community Facilities program?
    Answer. CF grant funds will be targeted to those communities that 
need the help the most, i.e. Strike Force, Promise Zones, and other 
high poverty areas. Applicants with the financial capacity to repay a 
direct loan at reasonable rates and terms may leverage loans funds with 
competitive grant funds to help reduce total project cost and 
strengthen the financial viability and project sustainability. Some of 
these grant funds may be paired with loan funds, but it is expected 
that communities in high poverty areas will be unable to afford much 
debt, so most of these additional grant funds may not be paired with 
loan funds.
                     local and regional procurement
    Question. According to a 2013 Cornell study of three countries, 
food aid recipients were unconditionally more satisfied with LRP 
compared to US shipped commodities. This sentiment was most pronounced 
among the poorest ``less-well-off'' recipients.
    What steps are being taken to ensure that commodity foods shipped 
are compatible with local tastes and dietary needs?
    Answer. The McGovern--Dole International Food for Education and 
Child Nutrition Program is USDA's primary international feeding 
program. The school meals and take home rations provided under 
McGovern-Dole address dietary deficiencies. McGovern-Dole projects are 
conducted by non-profit charitable organizations, cooperatives, the 
United Nations World Food Program and other international 
organizations. These implementing partners that USDA works with on the 
ground are instrumental in determining the proper foods to ship. All 
proposals submitted must provide a justification for the commodities 
being recommended as well as a full explanation of how the commodities 
meet the dietary needs of the beneficiaries.
    Additionally, USDA's implementing partners and their sub-recipients 
often go to the recipient country to develop and test recipes that are 
suitable to the local tastes and dietary needs. USDA's implementing 
partners also work with local communities and farmer grounds who 
provide local commodities to add to the school meals, thereby helping 
to tailor the meals to local preferences. Many schools have gardens, 
with the produce used to complement the U.S. commodities in the school 
meals.
    Question. If U.S. shipped commodities are not found to be 
compatible with local tastes and dietary needs, what steps are taken to 
address this problem and ensure beneficiaries are actually utilizing 
U.S. commodities?
    Answer. USDA's implementing partners and their sub-recipients often 
go to the recipient country to develop and test recipes that are 
suitable to the local tastes and dietary needs. USDA's implementing 
partners also work with local communities and farmer groups who provide 
local commodities to add to the school meals, thereby helping to tailor 
the meals to local preferences. Many schools have gardens, with the 
produce used to complement the U.S. commodities in the school meals.
    Question. When coupled with existing programs that strengthen local 
community systems and infrastructure, LRP can be adopted by 
knowledgeable beneficiaries with consideration given to impacting local 
markets. Given that most food assistance programs include a local 
capacity building component (McGovern/Dole FFE, Title II non-emergency 
programming) has there been any consideration for use of LRP to help 
transition to locally available products in these programs?
    Answer. USDA's food aid programs, particularly McGovern-Dole, are 
intended to ultimately be transitioned to host country governments. As 
such, there is every hope and intention that the LRP will help in 
assisting this transition by using locally available products as a 
source for food aid programs that will ultimately spur economic 
development in countries where these programs are implemented.
    Question. If appropriated, how would the $20 million for LRP be 
utilized?
    Answer. The $20 million for LRP requested in the President's budget 
is expected to support three to four development programs, similar to 
those in Bangladesh, Nicaragua and Mozambique supported by the LRP 
pilot program, and completed in 2012. The program will serve as a 
complementary tool to existing food aid programs, especially the 
McGovern-Dole international School Feeding Program. Under the LRP 
program, grants will be provided to eligible organizations including 
private voluntary organizations, cooperatives, and the World Food 
Program to implement projects involving local farmers, farmer 
organizations, parent groups and local governments.
    Question. Besides working with McGovern-Dole programs, do you see 
an opportunity to pair the new LRP program with Title II non-emergency 
programs?
    Answer. USDA and USAID communicate regularly on programming 
decisions to avoid duplication and understand areas for potential 
collaboration. For USDA's LRP funding, the two agencies will continue 
to explore opportunities to leverage our respective programs. For 
example, one possible area of collaboration would be if McGovern-Dole 
school feeding programs bought a portion of the commodities for school 
meals from associations supported by Title II non-emergency or Bureau 
of Food Security programs. Such opportunities would need to be 
evaluated on a country by country basis.
                           food for progress
    Question. Please provide the subcommittee with the average time it 
takes to put out a solicitation for a Food for Progress grant, review 
bids and award a grant to an implementing partner.
    Answer. Grants under the Food for Progress program fund non-
emergency, agricultural capacity building projects. Food for Progress 
projects, which are usually multi-year, have trained farmers in animal 
and plant health, improved farming methods, developed road and utility 
systems, established producer cooperatives, provided microcredit, and 
developed agricultural value chains. Program participants have included 
private voluntary organizations, foreign governments, universities, and 
intergovernmental organizations.
    The average duration between publishing the Food for Progress 
(FFPr) grant solicitation to signing the agreement is approximately 190 
days, including 90 days for interested organizations to submit 
proposals, and 100 days for USDA to review proposals and negotiate 
agreements.
    Question. How does the length of time between solicitation and 
award for Food for Progress differ from Food for Peace?
    Answer. USAID's average award time for non-emergency programs under 
Food for Peace is 228 days, while the average Food for Progress (FFPr) 
award time is 190 days.
    Question. If there are delays of over 6 months between bids and 
awards, what are the major constraints that contribute to these delays?
    Answer. The typical time between proposal receipt and award is 100 
days. In fiscal year 2014, FAS negotiated the proposals within that 
timeframe. Complexities of projects and negotiations with implementing 
partners can impact the time to complete the agreement.
    Question. Does Food for Progress have a policy that grants must be 
turned around in 120 days, similar to Food for Peace?
    Answer. FAS is committed to ensuring that grants are turned around 
as quickly as possible, but does not have a policy that grants must be 
turned around in 120 days. Since these are development, not emergency, 
programs, and since the requests for Food for Progress greatly exceeds 
the limited resources, FAS has put in place an extensive review process 
to ensure that the awards are made to the best proposals that reach the 
greatest number of beneficiaries and have the highest degree of 
success.
    Question. How many staff work on Food for Progress programs?
    Answer. There are nine full-time equivalent employees working on 
Food for Progress programs. They are responsible for all aspects of 
Food for Progress projects, including planning, programming, 
monitoring, and grants management activities.
    Question. Is there a staff shortage at Food for Progress that 
causes delays in processing of grants?
    Answer. In late 2014, USDA initiated a human capital assessment of 
the Food Assistance Division that aimed to provide an independent 
assessment of workforce requirements for Food for Progress programs. 
The Foreign Agricultural Service is implementing the results of this 
independent assessment to ensure efficient and effective food aid 
programming.
    Question. How does the number of staff at Food for Progress compare 
to other grant making offices in USDA? Or USAID?
    Answer. There are nine full-time equivalent employees dedicated to 
planning and implementing the Food for Progress program. There are nine 
full-time equivalent employees who program the McGovern-Dole Food for 
Education and Child Nutrition program. And 64 full-time equivalent 
employees working in USAID's Office of Food for Peace.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein
                     usda assistance to california
    Question. California is going into another year of drought. Ground 
water, snow pack, and reservoir levels are dangerously low. Communities 
like East Porterville are running out of drinking water, and both 
farmers and farm workers are suffering.
    Are the funds requested in your fiscal year 2016 Budget sufficient 
to address California's worsening drought disaster?
    Answer. The challenges facing drought-stricken areas are so severe 
that we will undoubtedly need to leverage Federal dollars and find 
innovative partners to help us provide as much relief as possible. 
Across USDA, we are actively working to address the needs of 
communities facing this historic drought. The Department is committed 
to assisting rural communities and we also know our partners are being 
innovative about what resources they can bring to the table.
    Specific to the fiscal year 2016 request, the President's budget 
requested $10 million in additional appropriated funding for Emergency 
Community Water Assistance Grants. While this increase may seem small 
given the magnitude of the problem, it is being coupled with 
application process improvements and the granting of priority to 
drought impacted communities. Collectively, these efforts should go a 
long way in providing safe, reliable drinking water in drought-stricken 
communities.
    In addition to the increase within Rural Development, the fiscal 
year 2016 President's Budget includes a continuation of many other USDA 
programs that will assist producers in drought-stricken areas. For 
example, the permanent livestock disaster programs provided by the 2014 
Farm Bill will be continued. Targeted conservation assistance for 
drought-stricken areas is another example of a successful program the 
Department plans to continue.
    Question. What additional steps can your Department take to address 
this disaster across California?
    Answer. Last year, President Obama and I travelled to Fresno, 
California to outline a drought relief action plan aimed at mitigating 
the impacts of this natural disaster for farmers, ranchers and 
residents alike. I'm proud to say that USDA met or exceeded the 
commitments we made over a year ago to these communities and I'm proud 
of the progress we've made. Unfortunately, the relentlessness of the 
drought has made the challenge confronting the Western U.S. 
increasingly serious. We continue to collaboratively deploy the 
resources made available to us and believe our budget request will 
position us to do even more in the year ahead. That said, the 
challenges facing these drought-stricken areas are so severe that we 
will undoubtedly need to leverage these Federal dollars and find 
innovative partners to help us provide as much relief as possible. 
Across USDA, we are actively working to address the needs of 
communities facing this historic drought.
                           pathogen standards
    Question. I am pleased your Department proposed new pathogen 
standards for poultry products in January. I believe these standards 
will improve food safety.
    Can you tell me what date these will be finalized and implemented?
    Answer. On January 26, 2015 FSIS issued a notice and request for 
comments on performance standards for chicken parts and the new 
standards for comminuted chicken and turkey. While I cannot provide a 
precise date when the new standards will be finalized and implemented, 
let me assure you that these standards are an Agency priority, and we 
will move as quickly as possible.
    Question. Secretary Vilsack, I remain deeply concerned about the 
persistent rates of foodborne illness. While the Department has moved 
to update pathogen standards for poultry products, standards for beef 
and pork products are either non-existent or outdated.
    Can you commit to me that your Department will update beef and pork 
pathogen standards?
    Answer. The Food Safety and Inspection Service (FSIS) has taken 
steps to collect the type of data necessary to conduct a risk 
assessment to ascertain whether the establishment of one or more 
pathogen reduction performance standards for beef and pork is likely to 
result in public health protection. As with the recently proposed 
standards for poultry products, any new proposed performance standards 
will be designed to achieve the Healthy People 2020 (HP2020) illness 
reduction goals, public health goals that FSIS and the Department of 
Health and Human Services worked together to create. We continuously 
strive to eliminate foodborne illness, and we will continue working 
toward that goal by utilizing a stepwise approach grounded in a shared 
national objective.
    USDA continues to review information on how inspection and 
inclusion of different lymph nodes in ground beef affects Salmonella 
contamination in the product, including our agencies partnering with 
each other (FSIS and ARS) to explore the potential public health 
impacts of Salmonella in lymph nodes. Findings will be incorporated 
into future revised slaughter guidance materials.
    By May, FSIS will begin exploratory sampling of a variety of pork 
products, including finished products packaged and ready to be sold to 
the consumer, to determine which products (for example, intact parts or 
ground) might harbor Salmonella contamination. The results of this 
sampling will inform plans to collect more extensive data with which to 
develop public health benefit-based performance standards in alignment 
with HP2020 goals.
                        wildfires in california
    Question. Secretary Vilsack, California is primed for a wildfire 
disaster given the ongoing drought across the state. What is the Forest 
Service doing to be prepared to respond quickly to wildfires in 
California?
    Answer. The Forest Service maintains a robust response (personnel 
and equipment) capability in California at levels that ensure an 
appropriate, risk informed and effective response to all wildland 
fires. The Forest Service also works extensively with our partners at 
CALFIRE and other local firefighting organizations, to support wildland 
fire management operations and meet operational objectives. Significant 
planning occurs throughout the year to establish response expectations 
for when wildfires do occur, as well as establishing roles and 
responsibilities for the Forest Service and our cooperators. The Forest 
Service works with CALFIRE throughout the fire season to pre-position 
assets where the risk of fire is highest. We also coordinate 
responsibilities for asset availability and training to be sure our 
response minimizes the risk to people, communities, and other high 
valued resources.
                              air tankers
    Question. Secretary Vilsack, the National Defense Authorization Act 
of 2014 transferred seven C-130H tankers from the U.S. Coast Guard to 
the U.S. Forest Service for use in firefighting operations. Can you 
provide me an update on the transfer and retrofitting of these 
aircraft, and when they will be operational for fire suppression?
    Answer. One HC-130H is expected to be in limited operation for the 
2015 fire season. The aircraft will be equipped with a Modular Airborne 
Fire Fighting System (MAFFS). A second HC-130H may be available later 
in 2015, depending on Air Force maintenance schedules. This aircraft 
will be used for flight testing and evaluation only and will not be 
equipped with a MAFFS unit. Ownership for both aircraft will be 
retained by the Coast Guard until all required maintenance is completed 
and a retardant delivery system is installed. Once that is completed 
ownership will be transferred to the Forest Service.
    The first aircraft with the new gravity retardant delivery system 
installed is expected in 2017 and the second in late 2017. Three more 
are expected in fiscal year 2018 and the final two in fiscal year 2019.
                         antimicrobial research
    Question. Secretary Vilsack, I am pleased to see that your 
Department has requested increased funding to collect data on 
antibiotic use patterns and antibiotic resistance. This data will be 
critical for monitoring public and animal health.
    What type of studies and surveys does your Department have planned?
    Answer. If funding is provided as requested in the 2016 President's 
Budget, NASS proposes to develop annual surveys for Cattle on Feed, 
Hogs and Pigs, and Poultry. This new data can be used to established a 
baseline for these livestock and help track this growing problem. The 
baseline survey will do several things to respond to Antimicrobial 
Research or Combating Antibiotic Resistant Bacteria (CARB) problem:
  --Establish data to measure the extent of the problem (broad 
        approach);
  --Strengthen the knowledge and evidence base to allow for other 
        agencies (that do more in-depth research work) to use NASS 
        collected data as a starting point and go forward with more 
        probing type questions;
  --Develop trend analysis;
  --Check the status of CARB with annual data collection surveillance 
        to show whether the problem is growing worse, unchanged, or 
        improving.
    NASS is working with Economic Research Service (ERS) and Animal and 
Plant Health Inspection Service (APHIS)--to institute an annual, 
national antibiotic use survey and to enhance the APHIS National Animal 
Health Monitoring System (NAHMS) surveys. Questions could be added to 
provide national, population-based estimates on antibiotic-use 
practices from the voluntary NAHMS survey. In addition, a sufficient 
number of operations could be sampled and tested for the presence of 
zoonotic pathogens (e.g., Salmonella, Campylobacter) and commensals 
(e.g., Enterococcus, E. coli) to provide national, population-based 
estimates on prevalence and antimicrobial resistance in these 
organisms.
    ERS is collaborating with other USDA science and program agencies 
through the USDA Antimicrobial Resistance Action Plan Committee to 
examine the economic implications of efforts to combat antimicrobial 
resistance. ERS research draws on data from the Agricultural Resource 
Management Survey (ARMS) to examine how antibiotics are used in 
livestock production; to estimate the effects of antibiotics used for 
disease prevention and growth promotion on farm-level costs and 
productivity; and to identify alternative production practices used on 
operations that eschew the use of antibiotics for those purposes. In 
fiscal year 2016 analysis from the farm-level ARMS will explore the 
extent of use by livestock species, stage of production, and purpose, 
as well as the impact of use on growth and recent policy issues.
    Question. Do you have the cooperation from livestock producers 
necessary to make these surveys and studies successful?
    Answer. NASS has contacted the industry for broilers, cattle on 
feed, and hogs & pigs. NASS needs to do more outreach to get more 
cooperation from the industry, however, those contacted realize the 
importance of collecting this information. NASS realizes that without 
industry cooperation these surveys will not be a success.
    Question. Secretary Vilsack, the Food and Drug Administration (FDA) 
is implementing new policies to eliminate non-therapeutic antibiotic 
use in agriculture and to move antibiotics under veterinary oversight.
    What additional steps can your Department take to educate 
veterinarians on these new FDA policies and to improve antibiotic 
stewardship in agriculture.
    Answer. USDA will continue to conduct outreach as appropriate, in 
coordination with FDA, to ensure veterinarians are aware of FDA's 
policies.
                      specialty crop pest program
    Question. Secretary Vilsack, I am deeply concerned that your 
Department proposed to cut the Specialty Crop Pest Program. California 
continues to battle many agricultural pests and diseases, and there is 
increasing risk that new pests and diseases will be introduced to the 
state via international commerce. In fact, the Glassy Winged 
Sharpshooter, a devastating pest to grapes, was found in Marin County 
this month.
    What additional steps can your Department take to combat 
agricultural pests and diseases like the Glassy Winged Sharpshooter?
    Answer. I certainly recognize your concern about the risks posed by 
invasive pests and diseases to California agriculture. I can assure you 
that preventing the entry of pests and diseases into the United States 
and detecting any new introductions early remains one of USDA's highest 
priorities.
    In addition to using appropriated funding, APHIS is using funding 
provided under Section 10007 of the 2014 Farm Bill to enhance early 
detection and emergency response efforts for plant pest and disease 
management and disaster prevention programs. In developing the spending 
plan each year, APHIS seeks suggestions from States and U.S. 
territories, universities, other Federal agencies, nongovernmental 
organizations, private companies and tribal organizations for projects 
that would provide a direct and meaningful impact in managing pests and 
diseases, as well as disaster prevention.
    In fiscal year 2014, APHIS funded 382 suggested projects across the 
United States, as well as in Guam and Puerto Rico, with 30 projects in 
California. The projects in California included surveys for exotic 
pests that attack citrus, tomatoes, nursery stock, and a variety of 
other specialty crops, training for detector dogs to find exotic pests 
in mail and cargo, as well as projects focused on best practices for 
nurseries in preventing the introduction and spread of diseases like 
Phytophthora ramorum and other invasive pests. These efforts allow 
APHIS and State partners to continue strengthening protections against 
agricultural threats. APHIS will release the fiscal year 2015 spending 
plan in spring 2015.
    In regard to the recent detection of a live glassy-winged 
sharpshooter (GWSS) on a nursery shipment that was being unloaded in 
Marin County, county inspectors ordered all of the plants to be 
reloaded and then sealed the trucks. The trucks returned to Ventura 
County the next morning. The California Department of Food and 
Agriculture (CDFA) and Marin County officials placed additional traps 
at the location where the insect was found and will continue to monitor 
the area for a month. Through this program, APHIS, CDFA, and the grape 
industry work to prevent the spread of GWSS into the major grape-
producing counties of California. The program will continue using 
proven regulatory protocols and inspections to prevent GWSS from 
expanding its range. The Agency's fiscal year 2016 budget proposes a 
decrease for the GWSS program to encourage cooperators to put 
additional resources into this program that benefits them. If 
cooperators are able to devote additional resources, programs will 
continue to operate at the same level as in fiscal year 2015. If 
cooperators cannot increase contributions, APHIS and CDFA will 
prioritize the remaining funds to address the highest risk threats.
                           animal welfare act
    Question. Secretary Vilsack, the Inspector General (IG) published 
an audit in December that found troubling inconsistencies in 
enforcement of the Animal Welfare Act. This follows a 2010 IG audit 
that identified similar problems. I am also concerned that your 
Department is not fully utilizing the existing enforcement authorities 
provided in the Animal Welfare Act, such as seeking a temporary 
restraining order or injunction against violators who place animals in 
extreme danger.
    What additional steps can your Department take to improve 
enforcement of the Animal Welfare Act?
    Answer. USDA uses all available enforcement options to ensure 
licensees and registrants are appropriately penalized for their 
violations of the Animal Welfare Act (AWA). USDA places special 
emphasis on the investigation and enforcement of cases where alleged 
animal suffering has occurred or when the lack of proper handling 
causes concern for the safety of the animal.
    Cases warranting formal prosecution may be resolved by license 
suspensions, license revocations, issuing cease-and-desist orders, 
imposing civil penalties, or combinations of these penalties. 
Concurrently, APHIS continues to exercise its authority to confiscate 
animals that are suffering when a licensee or registrant fails to 
comply with the AWA regulations and standards. Since 2010, the Agency 
has confiscated 218 animals using this authority. When appropriate, 
USDA may also work with licensees to move their animals to another 
facility when a licensee is unable to meet the animal welfare standards 
or can no longer provide appropriate animal care. In doing so, a 
licensee may agree to the suspension or revocation of their license or 
permanent disqualification from engaging in AWA-regulated activities. 
For example, in fiscal year 2013, APHIS issued 22 settlement agreements 
that resulted in the placement of more than 2,900 animals as well as 
sanctions involving AWA licensing. USDA undergoes a review process 
prior to issuing a license or registration. USDA will deny or terminate 
a license if the applicant or licensee is determined to be unfit and 
attempting to conduct business contrary to the purposes describe in the 
AWA.
    Where circumstances warrant, USDA has issued penalties at or near 
the $10,000 maximum authorized, particularly in cases involving 
research facilities and carriers (neither of which are subject to 
license suspension or revocation). Beyond seeking higher monetary 
penalties, we have pursued administrative litigation against 
chronically non-compliant entities, allowing us to seek strong 
sanctions.
    In November 2014, the Department of Justice revised the United 
States Attorneys' Manual to designate a central coordinating division 
to support USDA cases related to the welfare of animals regulated under 
both the AWA and the Horse Protection Act. As a result of this new 
collaborative relationship, USDA is better positioned to use 
enforcement authorities such as temporary restraining orders or 
injunctions to protect the lives of animals facing immediate danger 
while other administrative or legal actions are proceeding against a 
violator.
                   adequacy of the thrifty food plan
    Question. At a time when more than one in six Americans struggle to 
put food on the table, it is imperative that our nutrition assistance 
programs provide access to an adequate diet. According to the Institute 
of Medicine (IOM), however, current Supplemental Nutrition Assistance 
Program (SNAP) benefit levels based on the thrifty eating plan are 
insufficient in most circumstances and leave many households hungry by 
the end of the month. Research also demonstrates that, while it is 
possible for many households to shop for healthy foods using this 
budget, it require an additional 6 hours per week, which is especially 
challenging for low-income families.
    How does USDA's 2016 budget aim to address the insufficiency of 
current SNAP benefit levels based on the thrifty eating plan to provide 
access to adequate nutrition?
    Answer. FNS is currently addressing the sufficiency of SNAP benefit 
levels through our annual research budget by initiating the research 
that was recommended by the Institute of Medicine expert panel that 
looked at SNAP benefit adequacy.
    Last fall, FNS awarded a contract to an external organization to 
conduct a study that will assess the individual, household, and the 
environmental factors that limit adequacy of the SNAP allotment. This 
study is developing a new data collection to survey SNAP participants 
to determine these factors. The survey includes questions about cooking 
skills, shopping patterns, nutritional literacy, financial literacy, 
time available for preparing food, and other constraints. The final 
report is expected in 2017.
    In addition, before the end of fiscal year 2015, FNS anticipates 
awarding another contract to an external organization to determine 
whether the current parameters of the SNAP eligibility determination 
and benefit level calculations adequately match the real costs that 
low-income households have in regards to household budgets and food 
expenditures. This study will use existing data to examine spending 
patterns among low-income households to assess whether current SNAP 
parameters are based on realistic assumptions regarding household 
expenditures for food, shelter, medical care and dependent care. The 
final report is expected in 2016.
        assistance to drought impacted communities in california
    Question. What additional steps can your Department take to 
accommodate drought impacted communities in California, where families 
are reporting spending as much as 7 percent of their SNAP benefits on 
water because fresh drinking water is no longer available in their 
home?
    Answer. Feeding low-income families across the United States is at 
the heart of USDA's mission. The USDA nutrition assistance programs, 
such as the Supplemental Nutrition Assistance Program (SNAP) and The 
Emergency Food Assistance Program (TEFAP), are designed to respond to 
needs such as those resulting from the drought.
    SNAP is USDA's primary nutrition assistance program to address the 
needs of those experiencing economic difficulties. SNAP is designed to 
respond to deteriorations in local economic conditions, as more people 
lose jobs they become eligible for the program.
    For example, in March 2015, FNS awarded an Employment and Training 
Grant in the amount of $12 million to Fresno County Department of 
Social Services to offer multiple career-driven services, including 
education, job training, support services, subsidized and unsubsidized 
employment, retention services, ongoing case management, and financial 
incentives for clients for milestone achievements. The grant will 
provide SNAP recipients with new or better skills to improve their 
employment opportunities. This would also help residents receiving SNAP 
who have been displaced because of the drought.
    TEFAP is also designed to meet emergency food needs for those 
experiencing hard economic times. Through TEFAP, food and 
administrative funds are made available by USDA to States. States 
provide the food to local agencies that they have selected, usually 
food banks, which in turn, distribute the food to soup kitchens and 
food pantries that directly serve the public. Each TEFAP State has the 
discretion to allocate TEFAP resources to participating recipient 
agencies within the State as it sees fit. Such TEFAP resources 
allocated within the State are used to help individuals in need, 
including individuals impacted by emergency situations, such as a 
drought.
    Additional information on steps the Department is taking to 
accommodate drought impacted communities in California is provided for 
the record.
    USDA made $76.7 million available through TEFAP to food banks in 
the State of California to help families, including those that may have 
been economically impacted by the drought. In fiscal year 2014, 
California was offered $35.2 million in food and $6.6 million in 
administrative funds through TEFAP, based on a Federal funding formula 
which accounts for the State's share of national poverty and 
unemployment. Additionally in fiscal year 2014, California received 
$34.9 million of USDA bonus (i.e., market support) purchases of USDA 
Foods. In fiscal year 2015, USDA offered California $42.8 million in 
foods and $6.5 million in administrative funds through TEFAP, based on 
the above referenced funding formula. Additionally in fiscal year 2015, 
$14.2 million worth in bonus purchases made by USDA have been received 
in California year-to-date.
    In 2014, USDA worked with the California Department of Education to 
target efforts to expand the number of Summer Food Service Program meal 
sites. Over 3,600 summer meal sites operated in California in 2014. 
Also in fiscal year 2014, USDA, in collaboration with the California 
Department of Education, created a goal to establish 600 summer meal 
sites in drought stricken areas. The agency exceeded this target and by 
summer's end had 725 sites in the region. In 2015, FNS will continue to 
work with the California Department of Education and other states to 
ensure summer meals are available in areas affected by the drought.
    In 2014, USDA participated on the California Drought Task Force as 
an advisor on USDA nutrition assistance resources available and will 
continue to participate on the Task Force in 2015, as needed.
    USDA continues to work with the California Departments of Social 
Services, Education and Public Health as well as California's food 
banks to provide referrals and information on FNS programs such as 
eligibility, how and where to apply, and meal sites and hours of 
operation for the Summer Food Service Program, so that children up to 
the age of 18 can get a free meal.
               military families receiving snap benefits
    Question. The national food bank network Feeding America estimates 
in their 2014 Hunger Study that 20 percent of the 15.5 million 
households receiving food assistance from them nationally include 
someone who has previously served in the military, and roughly 4 
percent of households include someone currently serving in the 
military. In San Diego, roughly 10 percent of households seeking food 
assistance from the Feeding America Network contain an active duty 
military member.
    There are also food pantries on military bases across the country. 
The 2015 Military Compensation and Retirement Modernization Commission 
(MCRMC) report cites estimates from USDA that in fiscal year 12, 
between 2,000 and 22,000 military service members received SNAP 
benefits. Estimates of SNAP usage by military members vary widely 
because states that administer these benefits are not required to 
collect data on the actual number of active-duty service members in 
households receiving SNAP.
    Clearly there is a need for food assistance among military 
families, but these numbers indicate that military families who need 
Federal food assistance may not be fully served by the program. The 
same MCRMC report recommends ending the military's Family Subsistence 
Sustenance Allowance (FSSA) program and favors the enrollment of needy 
military families in SNAP, but these families continue to face barriers 
accessing SNAP. Namely, military families who live off base are 
reviewed differently than military families who live on base in terms 
of how their military-provided housing is recorded when determining 
SNAP eligibility and benefits. In addition, military families could 
face additional barriers to accessing SNAP depending on their station 
location under recent proposals to convert SNAP into a block grant 
program.
    In order to adequately plan for the SNAP program, how does USDA's 
fiscal year 16 budget assess the number of military households 
currently enrolled in SNAP and the number of military households who 
are potentially eligible for SNAP?
    Answer. While military families not stationed overseas are eligible 
to receive SNAP, few do, because their incomes at most ranks make them 
ineligible for benefits. While data is limited, the best estimates 
suggest only about one or 2 percent of individuals currently on active 
duty receive SNAP. Our SNAP budget projections are based on total 
expected caseload and benefit levels, which includes any military 
families that are eligible to receive SNAP and choose to participate in 
the program. FNS expects to have sufficient funds to serve any military 
households that are eligible and wish to receive SNAP benefits.
                 food insecurity in military households
    Question. How does USDA's fiscal year 16 budget make an effort to 
address food insecurity in military households and increase their 
access to SNAP?
    Answer. SNAP continues to be a vital nutrition assistance support 
program for low-income households, including those with eligible 
military service men and women, and veterans. In addition, SNAP 
provides employment and training (E&T) services to participating 
unemployed or under-employed individuals, including veterans, that 
enhance or supplement existing services. USDA provides $90 million to 
States for the cost of administering and operating a SNAP E&T program 
each year and reimburses States for 50 percent of additional 
administrative costs and participant expenses associated with these 
programs. States can design their E&T programs to meet the unique needs 
of targeted populations, such as veterans and those experiencing 
homelessness.
    Under SNAP rules, able-bodied adults without dependents (ABAWDs) 
are required to work or participate in a work program at least 20 hours 
a week in order to receive SNAP for more than 3 months within a 36-
month period. The ABAWD population invariably includes some of the most 
at-risk veterans. In order to serve this group, USDA allocates a 
portion of an additional $20 million to each State that pledges to 
provide qualifying E&T services to all at-risk ABAWDs so that they may 
continue to receive SNAP benefits while searching for work, 
participating in training, or gaining work experience.
    Lastly, USDA's fiscal year 2016 budget request includes $25 million 
in additional SNAP E&T grants to help States to offer targeted 
employment and training services to ABAWDs. This additional funding 
will ensure that ABAWDs continue to receive nutrition assistance while 
improving their skills and preparing to enter the labor market.
    summer electronic benefit transfer (ebt) demonstration projects
    Question. More than one in five American children is in a household 
struggling with hunger, an astonishing number. Child hunger is often 
most prevalent in the summer when school is out of session.
    Despite the impressive progress that USDA continues to make in 
expanding access to the Summer Food Service Program (SFSP), only 2.1 
million children were served in July 2003, which is only about 14 
percent of those who received free or reduced-price school meals during 
the previous school year.
    One of the most promising programs to supplement the SFSP--
especially for rural areas like the drought-affected Central Valley, 
where access to summer sites is especially difficult--is the Summer 
Electronic Benefit Transfer (EBT) demonstration projects piloted by 
USDA. The evaluations of this program to provide nutrition assistance 
in the form of EBT cards has proven to dramatically reduce summer 
hunger, including reducing the most severe forms of child hunger by 
approximately one third. Moreover, this program has very low 
administrative costs, and it benefits local jobs and economies through 
grocery spending.
    Given the existing pilot data proving the strength of summer EBT, 
as well as new academic research about the lifelong impact of even one 
incidence of hunger, how does USDA propose to scale up the summer EBT 
program so that it is part of our national response to the summer child 
hunger crisis?
    Answer. While the school meal programs serve about 21 million low-
income children each school day, summer meal programs, including the 
Summer Food Service Program and the National School Lunch Program 
Seamless Summer Option, reach only about 3.7 million (or about 16 
percent) of these children in the summer--a time of increased food 
insecurity for children.
    Summer Electronic Benefit Transfer for Children (SEBTC), funded by 
Congress in 2010 as a demonstration project, has shown clear results in 
reducing very low food security among children, the most severe form of 
food insecurity. The SEBTC evaluation showed it reduced the most severe 
form of childhood hunger by a third. It also showed that SEBTC can 
reach a significant proportion of children eligible for free and 
reduced-price school meals. Across the 14 pilot sites, SEBTC reached 
between 30--75 percent of children eligible for free and reduced-price 
meals in the summer. Furthermore, SEBTC children ate more healthfully. 
They ate about 13 percent more fruits and vegetables, 30 percent more 
whole grains, and 10 percent more dairy.
    Congress provided $16 million to continue these demonstration 
projects during the summer of 2015. FNS offered the 10 grantees that 
previously administered the SEBTC pilots the opportunity to continue 
providing benefits to children previously served and to expand the 
program in rural areas. Eight grantees continued their participation in 
SEBTC for summer 2015: Cherokee Nation, Chickasaw Nation, Connecticut, 
Delaware, Michigan, Missouri, Nevada, and Oregon. Two grantees from 
previous years, Texas and Washington, declined participation due to 
prohibitive logistical constraints or implementation barriers based on 
the late notice of funding. Because of uncertainties in receiving a 
final 2015 budget, FNS could not inform sites until late spring that 
they would receive summer funding. Combined with funds remaining from 
previous years, FNS was able to provide nearly $23 million to these 
eight grantees to continue and expand the program for the summer of 
2015.
    USDA is requesting an additional $50.9 million in fiscal year 2016, 
for a total of $66.9 million to continue SEBTC demonstration projects. 
Funding in fiscal year 2016 will allow FNS to continue the program in 
several States, benefitting as many as 200,000 families.
    Question. How, if at all, are any of these additional investments 
targeted toward California, home to more poor children and homeless 
children than any other state?
    Answer. California was not one of the original 10 grantees selected 
to participate in the SEBTC demonstration project. Due to limited 
additional funding, FNS has been unable to solicit additional requests 
for proposals allowing new States to participate.
    However, FNS has provided targeted technical assistance to 
California for the past two summers in order to increase participation 
in the USDA summer meal programs. We saw increases in meals served in 
both summer 2013 and 2014, with almost 825,000 more meals in 2014 than 
the summer before (5.75 percent increase). California continues to 
build on this success and aims to increase the number of meals served 
by 5 percent in summer 2015. And, as noted in our response on the 
question related to drought, we are also focusing additional attention 
on drought impacted areas of the state.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
                         budget reconciliation
    Question. Do you share my concerns that a reopening of the Farm 
Bill as part of budget reconciliation would be devastating to the work 
your Department has been doing to implement the new Farm Bill 
authorities and provide certainty to program participants, crop 
insurance recipients, SNAP recipients, and agricultural producers who 
are just now going into the 2015 crop year and making sign up 
decisions?
    Answer. The new Farm Bill builds on historic economic gains in 
rural America over the past 5 years, while achieving meaningful reform 
and billions of dollars in savings for the taxpayer. It has allowed 
USDA to achieve record accomplishments on behalf of the American 
people, while providing new opportunity and creating jobs across rural 
America. It has enabled USDA to further expand markets for agricultural 
products at home and abroad, strengthen conservation efforts, create 
new opportunities for local and regional food systems and grow the 
biobased economy. It has provided a dependable safety net for America's 
farmers, ranchers and growers and maintained important agricultural 
research, and ensure access to safe and nutritious food for all 
Americans.
    The Administration strongly supports the Supplemental Nutrition 
Assistance Program (SNAP) and other critical programs that reduce 
hunger and help families meet their nutritional needs. To ensure these 
needs are met, the budget includes mandatory funds to fully support 
estimated participation levels for the Supplemental Nutrition 
Assistance Program (SNAP). SNAP is the cornerstone of the Nation's 
nutrition assistance safety net, touching the lives of millions of low-
income Americans, the majority of whom are children, the elderly, or 
people with disabilities. SNAP kept over 5 million people, including 
nearly 2.2 million children, out of poverty in 2013.
    Although the Farm Bill included several reforms to the Federal crop 
insurance program; there remain further opportunities for improvements 
and efficiencies. The President's 2016 budget includes two proposals to 
reform crop insurance, which are expected to save $16 billion over 10 
years. This includes reducing subsidies for revenue insurance that 
insure the price at the time of harvest by 10 percentage points and 
reforming prevented planting coverage, including adjustments to payment 
rates. These reforms will make the program less costly to the taxpayer 
while still maintaining a quality safety net for farmers.
                     agricultural research service
    Question. I understand that the Agricultural Research Service has 
financial needs relating to the upkeep of its facilities. While I want 
the Service to have the resources it needs to maintain its facilities I 
am concerned about ARS potentially shifting funds from existing 
programming lines to address this need. Can you provide the Committee 
with more details about the needs of its facilities and provide 
reassurance that ARS is not pulling back resources from partnership 
programs to fund this work?
    Answer. ARS annually requests funding specifically for the repair 
and maintenance (R&M) of often dilapidated facilities to ensure that no 
funds are pulled back from research in order to fund R&M work. In 
fiscal year 2015, ARS requested and allocated $20 million of a $1.13 
billion appropriation to carry out the research mission of the agency 
for repair and maintenance. This is less than 2 percent of its 
appropriated budget.
    The fiscal year 2016 budget request includes an increase of $20 
million to help address the backlog and extend the life span of ARS 
research laboratories and facilities, provide opportunities for longer 
term savings, and ensure the capacity to conduct safe, quality 
research. These funds will be distributed on a priority basis across 
the agency's entire facility inventory. The cost for most of these 
repair and maintenance projects ranges from $50,000 to $500,000.
    The ARS facility infrastructure is valued at more than $3.7 
billion, with many of these facilities established in the 1950s and 
1960s. The backlog of repair and maintenance (R&M) needs exceeds $320 
million for work such as the repair or replacement of: HVAC, 
electrical, plumbing, roof, building envelope, site utility system, 
fire protection system, and other safety systems. Many of these systems 
and items have reached the end of their service life and no longer meet 
compliance or safety requirements.
                             rural housing
    Question. In many rural communities, the only available source of 
affordable rental housing is funded through the Section 515 Rural 
Rental Housing Loan Program. Today, nearly 400,000 of America's most 
vulnerable families live in housing financed under Section 515 and 
nearly 94 percent of Section 515 tenants earn very low incomes.
    However, after years of significant budget cuts for the program, in 
2012, the Department halted financing the construction of new rental 
housing. Current funding for the Section 515 Rural Rental Housing 
Direct Loan Program is used only for the much needed rehabilitation and 
maintenance of the existing portfolio.
    How does the Department's proposed budget assist the rural 
Americans who are not looking to become homeowners, but are in need of 
an affordable place to live with their families?
    Answer. The 2016 budget seeks to assist rural Americans in need of 
rental housing in a number of ways. First, it provides rental 
assistance to support more than 250,000 rural residents in need of 
safe, decent and affordable housing. Second, it increases funding in 
the Section 515 and MPR program to help preserve and revitalize Rural 
Development's existing rental housing portfolio. Third, it proposes to 
increase funding in the Section 515, Section 538 Guaranteed, and Rental 
Assistance programs for the construction of additional affordable 
housing, particularly in persistent poverty areas such as Strike Force 
and Promise Zones that are most in need of that housing. And fourth, 
the 2016 budget proposes to extend housing vouchers to residents of 
Section 515 properties with maturing mortgages, to the extent possible, 
so eligible tenants in those properties will be given the same 
protection from potentially significant rent increases that is 
currently provided to tenants in Section 515 properties prepaying their 
mortgage.
    Question. Unfortunately, funding for new construction of rental 
housing in rural America is not included in this budget. For rural 
communities facing housing shortages and shrinking state budgets, what 
role do you see the Department having in addressing the need for 
additional units of affordable rental housing in rural America, if not 
through funding?
    Answer. The 2016 budget includes funding for new construction in 
the Section 515 program, as well as in the Section 538 and Farm Labor 
Housing programs. In recent years, the Department has focused on using 
its Section 515 program to help meet the need to revitalize its 
existing housing portfolio, due to the age of the 515 portfolio and the 
expected preservation needs. However, the fiscal year 2016 budget 
includes some funding that would help provide additional affordable 
rental housing in persistent poverty areas where the housing needs are 
greatest.
    Rental Assistance would also be available to support tenants in 
that new housing. The Section 538 guaranteed program provides another 
avenue for new construction of affordable housing; nearly all of the 
program's housing includes Low Income Housing Tax Credits, which 
ensures that only low income residents qualify for the housing.
                     food safety modernization act
    Question. I am very worried about the potential impact the new FDA 
food safety regulations could have on our small farms in Vermont. That 
is why I pushed for the authorization of the new Food Safety Outreach 
Program in FSMA, because your USDA staff and extension agents are best 
suited to help small and mid-size farms and small local food processing 
facilities comply with the new food safety regulations. I believe that 
if we do not educate before we regulate, we are just setting the FDA up 
for failure.
    Can you tell me how USDA will use the $2.5 million in fiscal year 
15 funds to help farmers comply with this onslaught and burden of 
potential fees, paper work, and confusing rules? And do you think there 
are enough resources being allocated to help our produce farmers and 
those involved with any value-added or on-farm processing to understand 
these complex new rules?
    Answer. The U.S. Food and Drug Administration (FDA) and the U.S. 
Department of Agriculture's National Institute of Food and Agriculture 
(NIFA) have joined in a collaborative partnership to administer a 
competitive grant program designed to develop a comprehensive food 
safety training, education and technical assistance program for those 
affected by the Food Safety Modernization Act (FSMA). Specifically, the 
program will address the needs of owners and operators of small and 
medium-sized farms, beginning farmers, socially disadvantaged farmers, 
small processors, or small fresh fruit and vegetable merchant 
wholesalers. Although these entities will be directly impacted by new 
FSMA guidelines, many lack access to the resources needed to implement 
those guidelines. Both FDA and USDA recognize that food safety 
training, education, and technical assistance for these entities are 
critical to ensuring awareness and compliance with new produce safety 
standards and preventive controls for human and animal food proposed 
under FSMA future appropriation.
    The joint program will award grant funds that enable awardees to 
establish a National Coordination Center for Food Safety Outreach and 
four Regional Food Safety Training Centers (Regional Centers). The 
National Coordination Center will provide overall leadership for 
support and coordination of the Regional Centers, while ensuring that 
food safety training, education, outreach, and technical assistance 
across the entire program are consistent with FSMA guidelines. Each 
Regional Center will lead, manage, and coordinate the regional 
development and implementation of food safety training, education, 
outreach and technical assistance programs for the intended audiences. 
Both FDA and NIFA will work with Regional Centers and the National 
Coordination Center to help establish and maintain an effective and 
sustainable program that will meet the ongoing needs of intended 
audiences affected by new FSMA guidelines.
    While the $2.5 million appropriated in fiscal year 15 will enable 
NIFA, in coordination with FDA to begin building an infrastructure that 
will support a national food safety training, education, extension, 
outreach, and technical assistance system and provide significant 
opportunities for partnerships with stakeholder groups that include 
produce farmers and those involved with value-added or on-farm 
processing, additional funds, such as the $2.5 million increase 
requested in the President's 2016 budget, will strengthen and further 
expand the infrastructure in ways that will benefit multiple 
stakeholder groups.
            national organic standards board recommendations
    Question. This year marks 25 years since the first Organic Farm 
Bill was signed in to law. At the time, many in the Senate dismissed it 
as a niche activity that was never going to amount to much.
    Organic product sales in the United States are now valued at $35 
billion a year and have posted double-digit growth year after year 
after year. The only way this growth can continue and our farmers can 
benefit, is if we can assure consumers that the USDA Organic logo 
stands for something strong. There is a lot of confusion among 
consumers today and one area of particular interest to me is 
surrounding regulations on how animals are raised and their access to 
pasture. This is a basic tenet of organic production. Livestock must 
have access to fresh air and sunshine whenever possible.
    In 2011 the National Organic Standards Board put forward a 
recommendation that the Department move forward with a rulemaking 
process laying out the standards for livestock healthcare and living 
conditions, including access to the outdoors.
    What assurances can you give me that the Department is moving 
forward to finally respond to the recommendations put forth by the 
National Organic Standards Board?
    Answer. The National Organic Standards Board (NOSB) has provided 
over 200 recommendations regarding the National List of Allowed and 
Prohibited Substances as well as over 150 recommendations concerning 
other aspects of the USDA organic standards. The Department has 
implemented 222 of the National List recommendations and 127 of the 
general organic standards recommendations and incorporated them into 
the USDA organic regulations. USDA plans to respond to the outstanding 
National List recommendations from October 2014 and NOSB 
recommendations regarding the prohibition of sodium nitrate in organic 
production within the next 2 years. An additional 13 recommendations 
will be addressed through current initiatives, which include rulemaking 
on origin of livestock, aquaculture, pet food, apiculture, and animal 
welfare. USDA is also establishing a Hydroponics/Aquaponics Task Force 
that will report to the NOSB regarding their Greenhouse recommendation.
                         usda wildlife services
    Question. The USDA Animal Plant Health Inspection Service (APHIS) 
is the charged with, among other things, protecting agriculture and 
fisheries from nuisance and invasive species. For many years APHIS was 
the lead agency in controlling the double crested cormorant 
(cormorants) populations on Lake Champlain in Vermont and New York as 
well as across the region including the upper Saint Lawrence River, the 
Finger Lakes of New York, Lake George and other large water bodies. 
Cormorants are considered a nuisance species in this region and peer 
reviewed scientific studies have shown that in some cases cormorant 
predation can have a negative impact on commercial and sportfish 
stocks. The birds also have an easily observed devastating impact on 
public and private property where they roost and nest.
    In recent years, however, APHIS cormorant control activity on Lake 
Champlain has been greatly reduced and this correlates with an increase 
in cormorant numbers. I am hearing from concerned Vermonters that in 
the time since the USDA Wildlife Services has cut back on resources 
being directed to reduce cormorant numbers on Lake Champlain we have 
seen a dramatic spike in this migratory birds population, which has an 
easily observed negative impact on terrestrial habitat and many feel is 
also having a severely detrimental effect on game fish populations.
    What amount of funds does the USDA propose to allocate to cormorant 
control activities on Lake Champlain in New York and Vermont in fiscal 
year 16?
    Answer. USDA plans to spend $15,000 in fiscal year 2016 to reduce 
the impact of the cormorant population in the Lake Champlain region.
    Question. Will this funding be sufficient to enable APHIS to 
control cormorant populations on Lake Champlain at a level that 
mitigates the worst damage to private and public property and to 
commercial and sportfish stocks of Lake Champlain?
    Answer. If USDA funding is not sufficient to fully address the 
issue, APHIS could provide additional cormorant control on a requested 
basis if cooperative funding were made available through other Federal 
or State sources, grants, or agreements with non-government entities.
                         tree and forest pests
    Question. When I look at the request in your budget for the Animal 
Plant Health Inspection Service (APHIS) Tree & Wood Pests work and 
another massive cut in its funding I am shocked. While they may not get 
the sort of news coverage that the forest fires out west often do, the 
invasive pests in our forests are a critical threat to our forests and 
our economy.
    Despite the increasing risk and impacts, funding for the ``Tree and 
Wood Pest'' account has been reduced by nearly 30 percent since fiscal 
year 11. The President's budget now proposes cutting the program 
further, from $54 million to $46 million. Even at current funding 
levels for this budget account, APHIS cannot maintain efforts to 
curtail spread of insects that are already established, much less 
respond to new threats every year.
    With the funding level requested in your budget will the Department 
continue to focus on the eradication of the Asian longhorned beetle 
that threatens Vermont's forest industry and our sugarmakers? And with 
this proposed $8 million reduction in spending what work is the 
Department proposing to cease related to tree and wood pests?
    Answer. The Asian long-horned beetle (ALB) is a serious, invasive 
tree pest that threatens roughly 30 percent of U.S. trees that are 
potential hosts. APHIS continues to focus on the eradication of ALB. 
Since APHIS began the ALB eradication program in 1996, the Agency has 
successfully eradicated infestations from Jersey City, Middlesex 
County, and Union County, New Jersey; Islip, Staten Island and 
Manhattan, New York; and Boston, Massachusetts. In addition to these 
northeast States, APHIS has also successfully eradicated ALB from an 
infestation in Chicago, Illinois. The Agency is currently conducting 
ALB eradication activities in northeast forests in New York and 
Massachusetts, as well as in Ohio.
    APHIS is proposing decreases to two areas of the Tree and Wood 
Pests program: the ALB eradication program and emerald ash borer 
program. These proposed decreases are to allow for more equitable 
sharing of costs between the Federal government and those who benefit 
from these important programs. If cooperators are able to increase 
their contributions to the programs, they will continue to operate at 
their current levels. If contributions to the programs do not increase, 
APHIS would focus available resources on preventing the spread of pests 
and diseases to new areas.
                                 ______
                                 
              Questions Submitted by Senator Tammy Baldwin
                  margin protection program for dairy
    Question. As we look back at the first round of signups for the new 
Dairy Margin Protection Program, we saw just over half of the dairy 
farmers in the country sign up, and about 55 percent of those bought up 
to higher levels of coverage beyond the base, catastrophic level. 
Wisconsin's sign up percentages were only slightly better than the 
national average. What is USDA planning to do to make it easier for 
farmers to sign up for 2016?
    Answer. The Margin Protection Program for Dairy (MPP-Dairy) is a 
significant change for dairy producers that were accustomed to the Milk 
Income Loss Contract (MILC) program, since MILC did not require fees or 
premiums to be paid. The first year enrollment for MPP-Dairy compares 
very favorably to the initial enrollments for other risk protection 
programs such as initial crop insurance offerings.
    USDA will build on our successful outreach efforts including 
partnering with Extension Services to ensure all dairy producers are 
informed about the coverage options provided under MPP-Dairy. Current 
participants also will receive a reminder letter providing them with 
their previous coverage options and applicable forms that can be mailed 
back to the Farm Service Agency (FSA) county office, along with their 
applicable fees, for continuous coverage into 2016 without requiring 
another trip to the local FSA office.
    Question. One of the things that I am hearing from back in 
Wisconsin is that it would be very helpful for USDA to allow dairy 
cooperatives to deduct the premiums for the MPP program from their 
producers' monthly milk checks, and submit the payments to USDA on 
their behalf. Currently, farmers' options are to pay their MPP premiums 
in one lump-sum annual payment or two annual payments. That can result 
in some big payments and cash flow challenges that might deter some 
farmers from participating fully in the program. This may be 
particularly true for next year, because prices are much lower than 
during the last sign up, so farmers have less cash on hand. Will USDA 
be modifying the rules for the 2016 sign up to allow for monthly 
payments of MPP premiums through their cooperatives?
    Answer. USDA supports providing additional MPP-Dairy premium 
payment options to provide more flexibility to producers. Even in the 
first year, FSA provided an initial option that allowed producers to 
pay premiums later in the year after coverage had begun and back loaded 
the premiums so that only 25 percent was due initially. Even with this 
additional producer friendly option, 60 percent of producers paid the 
premium in full in 2014. With respect to cooperatives, there is no 
prohibition on another party paying the fees on behalf of a producer. A 
private arrangement between a cooperative and a producer would be 
possible now as long as the cooperative met the same deadlines for 
premiums being paid.
    We understand that cooperatives may not be interested in assuming 
the role of aggregating premiums and potentially prepaying for their 
members. We are therefore exploring the possibility of allowing monthly 
payments of premiums either directly or through cooperatives. We 
believe this would be a favored enhancement to the program that would 
increase participation. While this option will not likely be available 
during enrollment, we are exploring the option in some form for the 
2016 premiums later this year.
    Question. As we think about the next sign up, one thing that would 
be very helpful is to have data about what decisions farmers made for 
2015. Currently, we know what percentage of farmers in every state 
signed up, and what percentage bought up to higher levels of coverage. 
What we don't know is a breakdown of what buy up coverage levels they 
purchased. A farmer that buys up has an option of purchasing protection 
for a $4.50 margin protection level, all the way up to an $8 coverage 
level. This information would be extremely helpful information to have. 
Is that something you could provide to us in the near future?
    Answer. The coverage level breakdown for 2015 MPP-Dairy is 
available at http://www.fsa.usda.gov/Internet/FSA_File/
ta_2_mpp_ct_ops_by_cvge_lev.pdf. The information is provided below for 
the record.
    [The information follows:]

                                                              TABLE 2--COUNT OF DAIRY OPERATIONS BY COVERAGE LEVEL FOR 2015 MARGIN
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                             State                                 $4.00        $4.50        $5.00        $5.50        $6.00        $6.50        $7.00        $7.50        $8.00        Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama.......................................................           14  ...........            1  ...........            1  ...........  ...........  ...........  ...........           16
Alaska........................................................            2  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........            2
Arizona.......................................................           46  ...........  ...........  ...........           33            1  ...........            1  ...........           81
Arkansas......................................................           24  ...........            4            1           13           19            2            3  ...........           66
California....................................................          794            5           70           14          168           42            1           18  ...........        1,112
Colorado......................................................           59  ...........            4            1           15            9  ...........            1            4           93
Connecticut...................................................           17  ...........            1  ...........           10           48            3           11  ...........           90
Delaware......................................................           15  ...........  ...........  ...........            1            4  ...........  ...........  ...........           20
Florida.......................................................           57  ...........            2            3           19            5  ...........            1  ...........           87
Georgia.......................................................           99  ...........            1            3           36           21            6           17            3          186
Hawaii........................................................            1  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........            1
Idaho.........................................................          255            2            7            5           34           41            5           10            1          360
Illinois......................................................          225            3           11            4           79          143           17           46            6          534
Indiana.......................................................          273            7            8            3           57           78            4           16            8          454
Iowa..........................................................          325            4           14           14          144          315           36          100           12          964
Kansas........................................................           96            2            2            5           28           45            1           14            3          196
Kentucky......................................................          165            1            7            4           80           86            7           41            3          394
Louisiana.....................................................           41  ...........            2            1           10           14            3            7            1           79
Maine.........................................................           99            3            2            3           10           62            4            6  ...........          189
Maryland......................................................          113            1            6            3           36           42  ...........           14            1          216
Massachusetts.................................................           19  ...........            1            3            9           34           12           33            1          112
Michigan......................................................          563            9           42           38          175          173           22           42           19        1,083
Minnesota.....................................................          704           12           54           40          360        1,232           73          174           35        2,684
Mississippi...................................................           37  ...........            1            3            7           13            1            2            1           65
Missouri......................................................          123            3           16           10           98          228           31          103           13          625
Montana.......................................................           28  ...........            6  ...........            8            8  ...........            1  ...........           51
Nebraska......................................................           72  ...........            4            4           30           38            3            3            2          156
Nevada........................................................           16  ...........  ...........  ...........            1            2  ...........  ...........  ...........           19
New Hampshire.................................................           13  ...........  ...........  ...........           12           24            5           15  ...........           69
New Jersey....................................................           17  ...........            1  ...........            6           15            3            1            2           45
New Mexico....................................................           73  ...........            6            1           51            3  ...........  ...........            1          135
New York......................................................        1,037           16           75           69          371          692           39          107           28        2,434
North Carolina................................................           87            1            3            4           27           39  ...........           13            4          178
North Dakota..................................................           30  ...........            1            1            6           22  ...........            4            1           65
Ohio..........................................................          607            2           31           22          131          170           15           54            4        1,036
Oklahoma......................................................           67  ...........  ...........  ...........           10           17            1            4            1          100
Oregon........................................................          111            1            5            3           10           20            1            8  ...........          159
Pennsylvania..................................................          902           12           84           53          380          570           33          111           20        2,165
Puerto Rico...................................................           32            2            3  ...........            4            1  ...........  ...........  ...........           42
Rhode Island..................................................            2  ...........  ...........            1            1            5  ...........            1  ...........           10
South Carolina................................................           16  ...........  ...........            1            3            3  ...........            4  ...........           27
South Dakota..................................................           89  ...........            4            2           30           71            6            6            1          209
Tennessee.....................................................          148  ...........            4            1           22           64            3           18            2          262
Texas.........................................................          148  ...........           15           13          101           58            7           22            7          371
Utah..........................................................          114  ...........            5            4           19           23            2            1            1          169
Vermont.......................................................          207            1           15            7           83          203           18           54  ...........          588
Virginia......................................................          129  ...........           15            2           60          124           12           32            6          380
Washington....................................................          129            2            8           12           58           83            7           12            1          312
West Virginia.................................................           11  ...........            1  ...........            8            3            1            4  ...........           28
Wisconsin.....................................................        2,635           47          198          147          973        1,544          118          294           69        6,025
Wyoming.......................................................            2  ...........            1  ...........  ...........  ...........  ...........            1  ...........            4
Total.........................................................       10,888          136          741          505        3,828        6,457          502        1,430          261       24,748
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                            organic research
    Question. The double-digit growth in annual demand for organic 
products in this country is very exciting. But that demand is far 
outpacing growth in domestic production, requiring us to import greater 
amounts of organic product to meet consumer needs. I believe, and I 
think you would agree, that these are jobs that we can and should keep 
in this country.
    Organic research funding has also not kept pace with the growth in 
the organic sector. One of the great things about organic research is 
that much of it is useful to conventional farmers as well. For 
instance, research into ways to manage livestock herd health without 
the use of antibiotics may be an organic priority, but is has great 
utility for conventional livestock farmers too.
    Last year, USDA's National Organic Standards Board put out a list 
of unmet organic research priorities, many of them to tackle issues 
that have either hindered domestic organic production, or would help 
increase domestic production of organic products.
    I believe this makes the case for us to increase USDA funding for 
organic research, either by increasing overall funding for programs 
such as the Organic Transitions Program (within NIFA), or to do more 
organic research within the larger AFRI program. Without adequate 
research into the challenges facing U.S. organic farmers, it will be 
very difficult for us to keep pace with the exploding demand.
    Wisconsin is the number 2 state in the nation for organic 
production and in terms of number of producers. (California is number 
1). I believe there is great potential for growth in organic farms in 
Wisconsin, but research is key to that goal.
    Could you provide for the record an accounting of how much organic 
research has been conducted through the AFRI program over the last 5 
years, with the trend lines?
    Answer. The information is provided for the record.
    [The information follows:]

                            AGRICULTURE AND FOOD RESEARCH INITIATIVE ORGANIC RESEARCH
----------------------------------------------------------------------------------------------------------------
                      Fiscal Year                                 NRI/AFRI Funding Amount (in dollars)
----------------------------------------------------------------------------------------------------------------
2009..................................................                                                  $425,000
2010..................................................                                                  $189,000
2011..................................................                                                  $258,000
2012..................................................                                                  $271,000
2013..................................................                                                  $200,000
2014 \a\..............................................                                                  $566,000
2015 \b\..............................................                                                  $600,000
2016 \b\..............................................                                                  $600,000
Total, AFRI Organic Research..........................                                                $3,109,000
----------------------------------------------------------------------------------------------------------------
\a\The amount for fiscal year (FY) 2014 is the current program estimate.
\b\The amounts for fiscal years 2015 and 2016 are straight lined based on the fiscal year 2014 current program
  estimate.

                            trend line table



    Awards are based on applications received and highly meritorious 
projects recommended for award. Therefore, fluctuations will occur.
    The variation represents a decline of one grant between 2009 and 
2010 followed by static funding through 2013. Due to the small sample 
size (i.e., one to two grants funded per year), this is a normal 
variation in funding for any topic.
    Question. Can you also speak about the importance of organic 
agricultural research to meeting USDA's own stated goals for growing 
the organic sector?
    Answer. There has been double-digit growth in annual demand for 
organic products. Domestic production has not been able to satisfy this 
demand and imports have filled this void. While it might make sense to 
import products that are typically not grown domestically like olive 
oil, coffee, coconut, banana etc., large quantities of other products 
like organic livestock feed and organic soybean, for instance, continue 
to be imported although they could be produced domestically.
    In part through research, USDA is committed to assisting the 
organic sector. The recent 2014-2018 USDA strategic plan stresses the 
need for USDA to ``support research and education that enables organic 
production.'' (Goal 1) This emphasis in the USDA Strategic Plan is 
reflected in the 2014 Research, Education, and Economics (REE) Action 
plan (Goal 1A) as it calls for action to ``Develop more sustainable 
production systems for conventional, organic and low input crops ...'' 
Goal 7 calls for the need to ``Develop and share knowledge to help 
stakeholders implement successful organic production and marketing 
systems in response to growing consumer demand.''
    USDA, in particular NIFA and ARS, has invested in research to 
achieve these goals. The two major competitive programs that support 
organic agriculture research within NIFA are: ORG-Organic Transitions 
and OREI--Organic Agriculture Research and Extension Initiative. Since 
2001, both programs have received 1,026 proposals of which only 186 
were funded within available resources. Organic agriculture research 
has been encouraged in many programs within the Agriculture and Food 
Research Initiative (AFRI).
    ARS scientists conduct organic agriculture research focused on 
understanding the scientific basis of biological and physical processes 
innate to plants, soils, invertebrates, and microbes that naturally 
regulate pest problems and soil fertility to improve product quality, 
economic competitiveness, and supply to meet increasing demand for 
organic products. Since 2008, ARS organic research activities have been 
conducted as part of the Agricultural System Competitiveness and 
Sustainability National Program. ARS organic research activities are 
coordinated with other agencies through the USDA Organic Working Group.
    There is a clear need for research in organic agriculture. This 
work is critical to address the challenges facing producers and 
processors who have already adopted organic standards as well as those 
who are adopting organic practices. This is widely recognized by the 
organic community as a major constraint to domestic production. They 
maintain a long list of research priorities that are essential to meet 
producers' needs, including, but not limited to, developing cultural 
practices and other allowable alternatives to substances recommended 
for removal from National Organic Programs' National List of Allowed 
and Prohibited Substances; conducting advanced on-farm crop, livestock, 
or integrated livestock-crop research; and strengthening of organic 
crop seed systems, including seed and transplant production and 
protection, and plant breeding for organic production, with an emphasis 
on publically available releases.
             national organic program sunset policy change
    Question. One of the unique things about the organic sector is that 
the Organic Foods Production Act (OFPA) lays out a very rigorous 
process for considering what synthetic materials can be used in organic 
production and handling, to make sure they meet a stringent list of 
scientific, environmental and compatibility criteria. The National 
Organic Standards Board (NOSB) is in charge of this process, which has 
helped to build trust in the USDA organic seal.
    For a synthetic material to be used in organic production, USDA's 
long-standing interpretation of the law has been that at least 2/3rds 
of the NOSB members must vote in favor of adding that material to the 
``National List'' of allowed materials. Once on the List, the USDA 
policy required that the material be reviewed every 5 years and 
relisted again by a vote of at least 2/3rds of the NOSB. Most materials 
have garnered the necessary votes in order to remain approved. However, 
the sunset review process changed dramatically in September of 2013, 
when USDA's National Organic Program announced a major shift in this 
policy, without undertaking a full notice and comment process.
    I am hearing a lot of concern from the organic community about both 
the process and substance of this policy change for such a critical and 
unique aspect of the USDA organic program, which is tied to the 
integrity of the organic label.
    Until USDA's policy change, the same high hurdle of scientific 
scrutiny used to consider a material's usage in organic when it was 
first allowed was also used to review it after 5 years. The policy 
required a 2/3rds vote of the NOSB for the initial placement of a 
material on the ``National List'' to allow its usage in organic, and 
also required a 2/3rd vote of the NOSB after 5 years to allow the 
material to be renewed and remain on the List for another 5 years. Now, 
under the new policy, once a material is on the List, it stays on the 
List unless 2/3rds of the Board members vote to remove it from the List 
of allowed materials. This is a reversal of the previous policy and 
procedure.
    Can you explain why USDA would make such a big policy change in 
this process, and reinterpretation of the law, without any notice and 
comment process?
    Answer. USDA strongly supports organic agriculture, and is 
committed to establishing a level playing field that protects all 
organic farms and businesses. Public participation is vital to USDA's 
work in organics, and we always encourage all members of the public to 
take part in opportunities to do so.
    On September 16, 2013, the National Organic Program announced a 
revised sunset review and renewal process that would help protect 
organic farmers and consumers. We also increased public engagement and 
transparency, allowing more opportunity for public comment by providing 
two public comment periods for each substance undergoing sunset review.
     This matter is currently under pending litigation and we are not 
able to comment further.
                           forest management
    Question. In the budget request, the Forest Service talked a lot 
about ecological resiliency. This is important to Wisconsin 
stakeholders, given that their livelihoods and way of life depends on a 
healthy forest. But economic resiliency is also fundamentally important 
in Wisconsin. In contrast to other states, in Wisconsin we are 
fortunate to have a forest products industry that can partner with the 
Forest Service to accomplish Federal goals for timber management, 
forest restoration, ecosystem services, and infrastructure repair.
    The Forest Service is not doing enough to address the economic 
resiliency of our communities which are dependent on the forest. Our 
industry partners, and many conservation partners, are frustrated with 
the agency. They would like to see more transparent communication from 
the forest and region about timber sale goals. They would like to 
dialog with the agency about the content and timing of upcoming sales, 
so that industry can plan other work on non-Federal land, and ensure 
our hardwood and pulpwood mills have a steady supply of material. They 
would like to see more work done.
    What tools in the budget are most important to accelerating active 
forest management in Wisconsin? What tools does the agency need to 
achieve this goal?
    Answer. Forest Products, Vegetation Management, and Roads budget 
line items are critical in supporting all activities for the timber 
program and to increase the pace and scale of restoration. Resources to 
support the road system, including replacement/repair of bridges, are 
critical to achieving the forest management goals. These budget line 
items have been negatively impacted by increased fire suppression costs 
over the years. The primary tool that the agency needs to address 
accelerated forest management in Wisconsin, as elsewhere, is the fire 
cap adjustment. Funding extraordinary fires outside the agency cap will 
free up resource dollars under the Interior bill's currently tight 
discretionary funding caps. This will help fund key restoration, fire 
preparedness, and infrastructure programs, including Integrated 
Resource Restoration, CFLRP, Suppression, Landscape Scale Restoration, 
and it allows high levels of investment in Hazardous Fuels to be 
maintained from prior years. These restoration programs help create 
healthier, more resilient, and more fire-adapted landscapes where fire 
can visit a site with less than devastating consequences and 
communities are better able to live with fire and other disturbances.

                          SUBCOMMITTEE RECESS

    Senator Moran. I thank everyone again for attending today's 
hearing, and we are adjourned.
    [Whereupon, at 11:11 a.m., Tuesday, March 17, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]



   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016

                              ----------                              


                     WEDNESDAY, SEPTEMBER 16, 2015

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:06 p.m. in room SD-192, Dirksen 
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
    Present: Senators Moran, Daines, Merkley, and Feinstein.

                     FDA Food Supply Safety Efforts

STATEMENT OF HON. DR. STEPHEN OSTROFF, ACTING 
            COMMISSIONER, FOOD AND DRUG ADMINISTRATION, 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES
ACCOMPANIED BY:
        MICHAEL TAYLOR, DEPUTY COMMISSIONER FOR FOODS AND
            VETERINARY MEDICINE; FOOD AND DRUG ADMINISTRATION
        WILLIAM TOOTLE, DIRECTOR, OFFICE OF BUDGET, FOOD AND DRUG ADMIN

                OPENING STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. Good afternoon to the witnesses, as well as 
those in the audience. This hearing will come to order.
    Today's hearing will focus on the Food and Drug 
Administration's (FDA's) effort to improve and maintain safety 
of our food supply. And I thank you, Commissioner Ostroff, for 
your presence here today, Mr. Taylor and Mr. Tootle for 
participating in this hearing. We are delighted for that. And, 
Dr. Ostroff, I appreciate the warm working relationship that we 
are developing, and I appreciate the conversations and dialogue 
that we have had on a number of FDA issues over the last 
several months. So thank you personally and professionally for 
the way that you are treating me as the new chairman of this 
subcommittee.

                                  FSMA

    You note in your testimony, Commissioner, that nearly one 
in six Americans fall victim to foodborne illness each year. 
Americans expect that the food they purchase at a grocery store 
or restaurant will be safe. And the FDA is largely tasked with 
maintaining that confidence. Passage of the Food Safety 
Modernization Act (FSMA) in 2010 gave your agency significant 
new responsibilities in implementing a very sweeping set of 
changes to the food safety laws, certainly the largest change 
in the last 70 years. Our hearing today is timely as it follows 
last week's publishing of the first two final rules for 
preventive controls on human and animal foods.
    In delivering these new regulatory responsibilities, your 
private sector partners expect transparency and certainty from 
the FDA. And when I speak to small businesses and agricultural 
producers in my home State, their major concern is a Government 
that limits job creation and stifles innovation through 
burdensome regulations. I am pleased that the agency took many 
of the suggestions and comments from the agricultural community 
into account by re-proposing portions of the FSMA rules because 
they were unworkable for farmers. And I thank you for that.
    Modernizing the FDA's regulatory controls and educating 
industry and consumers are at the heart of FSMA implementation, 
and the issuance of the preventive control rules starts the 
compliance process. It is vital that FDA continue its 
collaboration with the industry and other Federal and State 
agencies and issue proper regulatory guidance throughout this 
process.

                              FSMA FUNDING

    I also recognize that successful implementation--this is 
the part that you want me to say, Mr. Commissioner. I also 
recognize that successful implementation does not come without 
a cost. And this subcommittee remains committed to investing in 
FSMA's implementation within the resources that are at our 
disposal and has done so since FSMA's enactment in 2011. I 
think spending in the last 5 years has increased 8 percent, 
something that cannot be said for many other Federal agencies. 
But we know that you face additional challenges and additional 
tasks, and we are interested in exploring how we can be more 
helpful. And as the process continues for appropriations this 
year, FSMA funding will undoubtedly play a significant role in 
our deliberations and in establishing priorities.

                           PREPARED STATEMENT

    I look forward to discussing FSMA and other food safety 
topics with our witnesses today.
    [The statement follows:]
               Prepared Statement of Senator Jerry Moran
    This hearing will come to order. Good morning. Today's hearing will 
focus on Rural Development at the Department of Agriculture and its 
strategic investments in rural America. Thank you Under Secretary 
Mensah, Administrator Hernandez, Administrator Rikkers, and 
Administrator McBride for being here today. Under Secretary Mensah, I 
enjoyed visiting with you recently in Kansas and hope you will return 
soon and often.
    Agriculture remains one of the bright spots in our nation's 
economy, supporting more than 16 million jobs nationwide and forming 
the backbone of our rural communities. For those of us who grew up in 
rural areas, it is a lifestyle we cherish and hope to preserve for our 
children and future generations to come. Rural Development is largely 
tasked with maintaining and improving that quality of life. Whether 
it's providing loans for low-income families to own their first home, 
spurring economic development with grants to small businesses, or 
providing communities with financing to allow customers affordable 
utility rates, Rural Development continues to serve a significant role 
in the nexus between need and opportunity.
    In my home state of Kansas, we determine economic development by 
whether or not your town has a grocery store. Many issues facing rural 
communities are unique to those areas in an ever-increasing urbanized 
and technologically- advanced world. I look forward to discussing the 
Rural Development mission and other relevant topics with our witnesses 
today. We have a lot to cover this morning, so I will turn it over to 
Senator Merkley for any remarks he may wish to give.

    SenatorMoran. We have a lot to cover this afternoon, and I 
turn now to my colleague, Senator Merkley, for any remarks that 
he may wish to give.

                   STATEMENT OF SENATOR JEFF MERKLEY

    Senator Merkley. Thank you very much, Mr. Chairman and 
thank you for holding this hearing.
    I thank you, Dr. Ostroff, Mr. Taylor, Mr. Tootle, for 
attending.

                              FOOD SAFETY

    The safety of our food supply is something that most 
Americans take for granted. For parents that enter the grocery 
store, for the most part, they do not have to give a second 
thought to whether or not the food that they are picking up for 
their family will make their family sick. America has and 
continues to have the safest food supply in the world.
    But that, of course, does not mean that it is perfect, as 
anyone who has ever had a foodborne illness will testify to. 
And we need to continually work to make sure we stay ahead of a 
changing global marketplace. We do not think anything about 
eating strawberries or melons out of season because we have 
access to food from all over the globe. To stay ahead of this 
is a monumental task, and there are multiple Federal agencies 
involved, including the U.S. Department of Agriculture (USDA) 
which regulates about 20 percent of our food supply, and FDA 
which regulates 80 percent. Outside of the Federal Government, 
State agencies, private businesses, and farmers are working 
continually to make sure that the processes and procedures in 
place will make sure a domestic onion is always safe to eat, as 
well as an imported strawberry.
    The Food Safety Modernization Act, which was signed into 
law in 2011, was the most sweeping update of our food safety 
laws in nearly 70 years. The law changed the way we look at the 
issue of food safety. Prior to FSMA, an outbreak would take 
place, and we would spend our time and resources tracking it 
down. Now we are working to make sure that we prevent that 
outbreak from occurring in the first place and giving FDA the 
tools and the teeth it needs to do just that. It is a better 
way to do business.
    The law had about 50 specific deliverables, no small task 
for any agency. And although it took longer than many would 
like, FDA published two of the seven major final rules last 
week, and the rest will be out, as I understand, by next 
spring. We are at the point where the rubber meets the road, 
and it is going to require a new way of thinking for food 
inspectors who have been trained to look for an existing 
problem instead of working with industry to make sure those 
problems never materialize in the first place.
    It is not always smooth sailing, and I know the folks at 
FDA have learned a lot about production agriculture and food 
processing along the way. I think most people would agree that 
you have done a good job working with industry to make sure 
that these new rules are effective while minimizing the 
disruption.
    So, again, thank you, Mr. Chairman, for holding this 
hearing. It is timely and I am very interested to hear from our 
witnesses.
    Senator Moran. Dr. Ostroff, again, welcome and you may 
commence your testimony. It is a significant number of pages, 
and I have extended the deadline from the normal 5 minutes to 
10. So please proceed.

                SUMMARY STATEMENT OF DR. STEPHEN OSTROFF

    Dr. Ostroff. Thank you, Senator Moran and other members of 
the committee.
    And I share your enthusiasm for the very warm working 
relationship that we have been able to develop in the last 
several months, and we look forward to continuing to work with 
you not only on food safety issues but all the other issues 
that FDA deals with.
    So I am Steve Ostroff, the acting Commissioner of Food and 
Drugs, and I really very deeply appreciate the opportunity for 
Mike Taylor, who is sitting to my left, and me to be here to 
talk about the Food Safety Modernization Act, also known as 
FSMA.
    I would also like to thank you for holding this hearing and 
for the committee members and their ongoing interest in this 
particular topic and for the strong and growing working 
relationship that has developed between the committee and the 
FDA to achieve our mutual goals of assuring the safest food 
supply in the world for American consumers.

                              FOOD SAFETY

    I hope that everybody in this room knows that this is Food 
Safety Month, and I cannot think of a better way to celebrate 
than by starting the process of bringing FSMA's important new 
rules online as we did last week and by discussing with you 
today the critical next steps that must be taken to realize the 
goals of FSMA.
    So although I have only been working at FDA for 2 years, I 
actually began my public health career considerably before that 
30 years ago when I was working at the CDC on food safety and 
foodborne diseases, particularly at that time the newly 
recognized and deadly pathogen, E. coli O157. While working in 
Washington State close to Oregon, over a 2-year period, I 
personally interviewed every person or a member of their family 
in the State diagnosed with that particular infection and 
visited a number of them in their homes. I subsequently did the 
same with people with other illnesses from foodborne pathogens. 
So I can say, without question, that I have a very deep 
appreciation for the suffering and consequences of foodborne 
illness and have carried that perspective throughout my career 
as a public health practitioner and as a physician. In fact, 
food safety was the reason that I joined FDA in 2013 at the 
urging of the person sitting to my left.
    Despite today having much improved technical methods to 
detect and investigate foodborne illness from when I started my 
career 30 years ago, along with some notable successes in 
reducing the incidence of certain pathogens, there simply 
remains too much foodborne illness. As you mentioned, nearly 
one in six Americans fall victim to foodborne illness each 
year. That is 48 million people. Of these, 128,000 are 
hospitalized and 3,000 die. This burden of foodborne illness is 
shared by each and every one of us, consumers and food 
producers alike. The economic costs are also quite sizable. 
Since we know that the illnesses, hospitalizations, and deaths 
can be prevented, we must also, quite frankly, acknowledge that 
it is simply time to start preventing them.
    So over here on this side, the Centers for Disease Control 
and Prevention's (CDC's) FoodNet data has shown that for many, 
many years now, the burden of illness due to the major 
foodborne pathogens remains essentially unchanged. As you can 
see, the illness burden from some pathogens goes up while for 
others it goes down. But looking at the poster over here on the 
other side of the room, in total the line remains distressingly 
flat. So I say to you that it is time to make that line start 
bending in the right direction. We believe that we now have the 
tool to be able to do that, and that tool is called the Food 
Safety Modernization Act.

                                  FSMA

    During my time at FDA, I have been thrilled to be able to 
participate in the process of modernizing our food safety 
system. This agency has stepped up to solve problems by 
identifying the best science and risk-based solutions that can 
benefit both consumers and industry. That is what we do at FDA 
when we are confronted by such problems. I know that Mike and 
his team have embedded this concept in their work to modernize 
the Nation's food safety system through FSMA so that it can 
meet the challenges of a new global era.
    The enactment of FSMA was unquestionably the product of 
foresight and the recognition of common interests. Members of 
Congress on both sides of the aisle came together with 
consumers and with food industry leaders to enhance this 
ability to protect the food supply in a modern, diverse world 
of free-flowing commerce. FSMA stands for the proposition that 
the standard across the food system should be to have processes 
in place that we have learned work to prevent food safety 
problems, practices that many food safety producers are already 
implementing. This means having prevention-oriented standards 
in place that are equally applied to domestic and foreign 
producers, reasonable verification of compliance with those 
standards, and accountability for those who are unable or 
unwilling to comply. FSMA directs FDA to build a modern food 
safety system based on these central ideas.
    FDA has fully embraced a dynamic, collaborative approach to 
implementing FSMA and is working very hard to build the new 
partnerships and to strengthen existing ones. This effort 
includes the food industry, from farmers and manufacturers to 
transporters and importers whose capacity and responsibility 
under FSMA for producing safe food is the absolute foundation 
of the new system. It also includes the FDA's food safety 
partners in other government agencies at the Federal, State, 
tribal, and local levels, and it also includes foreign 
governments, which can play an important role to help assure 
that the foreign supplies to the U.S. market are being produced 
in safe fashion. And it includes consumers and patient 
advocates who have been victims of foodborne illness because 
after all, ultimately, they are the ones that we are doing this 
for.

                        PREVENTIVE CONTROL RULES

    The two final preventive control rules we issued last week 
are critical linchpins for building our new food safety system. 
They focus on implementing modern food manufacturing processes 
for both human and animal foods, thus ensuring the food 
companies are taking a 24/7 365-day a year approach and working 
with the FDA to prevent problems on the front end rather than 
waiting until a problem is recognized through identifying 
people with foodborne illness as you know happened in your 
State of Kansas earlier this year.
    These rules are important in their own right, but they are 
only the first in a number of steps towards building a 
comprehensive food safety system. Three more rules will be 
finalized by the end of this year, those being the produce 
rule, foreign supplier verification process, and accredited 
third-party certification. Then the final tools will be issued 
this spring, sanitary transport and intentional adulteration. 
Together, these rules form the integrated holistic network for 
food safety called for by FSMA, all based on the principle of 
prevention.
    Writing the rules is clearly a big step, but it is only the 
first step. Right now, they exist on paper. The bigger 
challenge ahead is implementing those rules and making them 
exist on the ground. We strongly believe that if we do not 
implement the new FSMA-mandated food safety system in the 
comprehensive way that Congress envisioned right from the 
start, that we will fail to achieve the FSMA goals of food 
safety, strengthen consumer confidence and a level playing 
field for U.S. producers. The line mentioned earlier will not 
bend as it should and it must go.

                           PREPARED STATEMENT

    So I am very proud of this work and I am proud of our team. 
Mike Taylor alone has been a force of nature when it comes to 
FSMA. So please continue to work with us to achieve the level 
of funding that we need to accomplish on the ground what is set 
in statute and in rule. American consumers are depending on us 
and they expect this of us.
    So I will just end by thanking you again for your support 
of FDA and for the opportunity to be here to discuss FSMA with 
you.
    [The statement follows:]
               Prepared Statement of Dr. Stephen Ostroff
                              introduction
    Good morning, Chairman Moran and Members of the Subcommittee, I am 
Dr. Stephen Ostroff, Acting Commissioner of Food and Drugs. I am 
accompanied today by Michael Taylor, FDA's Deputy Commissioner for 
Foods and Veterinary Medicine. Thank you for the opportunity to appear 
before you today to discuss the Food and Drug Administration's (FDA) 
implementation of the FDA Food Safety Modernization Act (FSMA) and our 
role in ensuring food safety. I would like to thank the Subcommittee 
for its past investments in FDA, which have helped us meet the demands 
of our broad and increasingly complex mission.
    I would also like to acknowledge that it was Congress' vision of a 
safer America that fueled the enactment of FSMA in 2011. You shared, 
and responded to, a widespread concern among consumers, industry, and 
your fellow legislators about the deadly foodborne illnesses 
thatendanger the public health.
    today's food safety challenge and fda's changing role under fsma
    FDA is a science-based public health regulatory Agency with 
mandates from Congress that span the human and animal food supply, 
human and animal drugs, medical devices, vaccines and other biological 
products, cosmetics and tobacco--products that all have profound 
implications for the health of consumers and the nation's economy. Like 
other areas of FDA's responsibility, our mandate to ensure the safety 
of the nation's food supply is of fundamental importance to the welfare 
of consumers and the industries we regulate.
    FDA's responsibility for food safety dates back to 1906, when 
Congress first established prohibitions on the sale of adulterated food 
and gave FDA authority to enforce those prohibitions. FDA has used 
those authorities, which were largely unchanged until Congress passed 
FSMA, to conduct inspections and take enforcement action in response to 
specific cases of insanitation in food facilities, dangerous 
contamination of food products, and outbreaks of foodborne illness. 
Through these efforts and the commitment of the great majority of food 
producers who want to produce safe food, we have long had one of the 
safest food supplies in the world. And with the implementation of FSMA, 
our food supply will become safer.
    According to estimates by the Centers for Disease Control and 
Prevention (CDC), every year nearly one in six Americans falls victim 
to foodborne illness. That's 48 million people. Of these, 128,000 are 
hospitalized, and 3,000 die. This burden of foodborne illness is 
damaging to consumers and food producers alike. And the tragedy 
underlying the numbers is magnified by the fact that most of these 
illnesses and deaths are preventable.
    In the years leading up to the enactment of FSMA, a series of major 
illness outbreaks, contamination incidents, and product recalls--
involving both domestic and imported food--focused the food industry 
and government on how the food safety system could work more 
effectively to prevent food safety problems, rather than relying so 
much on response after the fact. The food industry developed best 
practices, involving such measures as the implementation of preventive 
controls in food facilities, and government took incremental steps to 
require such controls for FDA-regulated seafood and juice processors 
and in meat and poultry facilities regulated by the U.S. Department of 
Agriculture (USDA).
    Other than those incremental changes affecting a few food 
categories, FDA's reactive approach to food safety had changed little 
over the years, despite radical change in the food system. Compared to 
1906, we now have a vast, complex and global food system in which 
changing technology, changing consumer preferences and behavior, and 
supply chains that extend around the world make food safety a bigger 
challenge than ever before. We also have seen rapid expansion in the 
local food movement, with many small-scale growers and processors 
coming into the market in response to consumer demand for locally and 
sustainably grown food.
    All of this change and diversity in the food system is good for 
consumers, and creates great opportunity for American business. But it 
also places added pressure on our food safety system because consumers 
and industry alike agree: we all want food to be as safe as we can make 
it, and we all want to have confidence in the safety of our food, 
whether it comes from around the corner or from the other side of the 
world.
    That alignment of interests is what led to the enactment of FSMA. 
FSMA stands for the proposition that what we have learned works to 
prevent food safety problems--practices that many food producers are 
already implementing--should be the norm across the food system. This 
means having prevention-oriented standards that apply equally to 
domestic and foreign producers, reasonable verification of compliance 
with those standards, and accountability for those who are unable or 
unwilling to comply.
    FSMA directs FDA to build a modern food safety system based on 
these central ideas. As outlined below, this has involved developing 
new regulations requiring modern preventive controls in facilities 
producing all types of food commodities, not just a few, and 
establishing requirements where they haven't existed before, most 
notably for produce growers, food importers, and food transporters.
    FSMA also directs FDA to do its food safety work in new ways, with 
a heavy emphasis on collaboration and partnership. This collaboration 
includes the food industry--from farmers and manufacturers to 
transporters and importers--whose capacity and responsibility under 
FSMA for producing safe food is the foundation of the new system. It 
also includes FDA's food safety partners in other government agencies 
at the Federal, state, tribal, and local levels, with which Congress 
directed FDA to build upon our history of collaboration to ensure 
effective and efficient implementation of FSMA. And it includes foreign 
governments, which can play an important role in helping to ensure that 
foreign suppliers to the U.S. market are producing safe food. FDA 
strongly embraces this collaborative approach and is working hard to 
build new partnerships and strengthen existing ones.
    FDA recognizes, however, that part of the change that has to happen 
for FSMA to succeed must happen within FDA and in how FDA conducts its 
food safety oversight program. To that end, and as discussed below, FDA 
has developed a strategy for implementing the new FSMA rules that is a 
fundamental departure from the past.
    We believe that we will achieve high rates of compliance more 
quickly and efficiently by tapping into the fact that the great 
majority of firms we regulate want to produce safe food and want to 
comply. That's why our strategy takes an ``educate before and while we 
regulate'' approach, especially in the produce area, so that, through 
FDA guidance, outreach, and technical assistance, we can help food 
producers understand and accomplish what is required. It entails an 
approach to inspection that is aimed first at fostering and 
facilitating compliance, rather than at finding and penalizing 
regulatory violations. We will of course take swift regulatory action 
when needed to protect consumers when we find dangerous practices, but 
our focus is on prevention.
    FDA is firmly committed to implementing FSMA the right way from the 
start. This means investing in the food safety culture change that is 
happening within FDA, but it also means being faithful to the 
comprehensive, holistic vision of food safety modernization laid out in 
FSMA. Congress directed FDA to build a modern food safety system, 
addressing food safety challenges across the spectrum of farms, 
manufacturers, and transporters of food, both domestic and foreign. The 
pieces of this system are closely interconnected. We cannot credibly 
hold domestic producers to the new standards if we are not doing the 
same for importers and their foreign suppliers. Nor can we do the 
reverse, holding importers and foreign suppliers, but not domestic 
producers, to new requirements. We believe that if we do not have the 
resources necessary to implement the new FSMA-mandated food safety 
system in the comprehensive way Congress envisioned, from the start, we 
will fail to achieve the FSMA goals of food safety, strengthened 
consumer confidence, and a level playing field for U.S. producers.
    In the remainder of this testimony, I will outline our achievements 
to date in developing the FSMA rules and planning for their 
implementation, and I will explain why the President's fiscal year 2016 
budget request is so essential to the success of FSMA.
                  seven foundational fsma rulemakings
    As a first major step toward making the promise of FSMA a reality, 
FDA has proposed seven foundational rules, starting in January 2013. 
Together, they will provide a modern food safety foundation that brings 
to bear the most recent science, that is risk- based and focuses effort 
where the hazards are reasonably likely to occur, and that is flexible 
and practical given our current knowledge of food safety practices. We 
have designed the rules to be both effective for food safety and 
workable across the great diversity of our food system.
    Last week, FDA issued the first two of the final rules listed below 
and is on target for finalizing the remaining five in the coming 
months.
    1. Preventive Controls for Human Food. This rule will improve the 
safety of manufacturing, processing, packing, and holding human food in 
two key ways. First, it modernizes FDA's longstanding Current Good 
Manufacturing Practice (CGMP) regulations. Second, it requires 
facilities to have written plans that identify hazards, specify the 
steps that will be put in place to minimize or prevent those hazards, 
and specify actions to correct problems that arise. The rule is 
designed to be flexible, practical, public health protective, and 
consistent with industry best practices.
    2. Preventive Controls for Animal Food. This rule will improve the 
safety of animal food, including pet food, livestock food, and raw 
materials and ingredients used in food for animals, by establishing 
general CGMPs for the first time, tailored to animal food, and 
establishing the same, flexible requirements for risk-based hazard 
analysis and preventive controls as the Preventive Controls for Human 
Food rule.
    3. Produce Safety Standards. This rule will improve the safety of 
produce--fruits and vegetables that are typically consumed raw--by 
establishing science-based standards for growing, harvesting, packing, 
and holding produce on farms. The rule addresses identified routes of 
microbial contamination, including agricultural water, biological soil 
amendments of animal origin, health and hygiene of farm personnel, 
animals in the growing area, and equipment, tools, and buildings.
    4. Foreign Supplier Verification Programs. This rule will 
strengthen the oversight of foods imported for U.S. consumers by 
requiring importers to perform risk-based activities to verify that 
food imported into the United States has been produced in a manner that 
provides the same level of public health protection as that required of 
domestic food producers. This rule is the foundation for the multi-
faceted new import safety system that Congress mandated to protect food 
safety, strengthen consumer confidence, and maintain a level playing 
field for U.S. food producers.
    5. Accredited Third Party Certification. This rule will improve the 
safety of imported food and allow more efficient use of FDA resources 
by providing an opportunity for foreign food producers to voluntarily 
become certified by third-party certification bodies accredited under 
FDA's oversight. FDA may in turn use that certification to determine 
whether an importer is eligible to participate in FSMA's voluntary 
qualified importer program, or whether to admit certain imported food 
into the United States that FDA has determined poses a food safety 
risk. Both accreditation bodies and auditors must meet standards for 
legal authority, competency and capacity, impartiality/objectivity, 
quality assurance, and records procedures.
    6. Sanitary Transportation. This rule will help ensure the safety 
of human and animal food during transportation by establishing 
requirements for shippers, carriers, and receivers of food in the U.S. 
Those requirements include ensuring that the design and maintenance of 
vehicles and equipment does not leave foods vulnerable to 
contamination, and taking measures during transportation to ensure that 
food is not handled improperly or contaminated, including using 
adequate temperature controls and separating food from non-food items 
in the same load.
    7. Intentional Adulteration. This rule will help to ensure the 
safety and security of the food supply by requiring facilities to 
address vulnerable processes in their operations in order to prevent 
acts on food intended to cause large-scale public harm (e.g., acts of 
terrorism).
               fda's commitment to stakeholder engagement
    Throughout the rulemaking process, outreach and stakeholder 
engagement have been central to developing rules that are both 
practical and protect the public health. FDA has worked intensively 
with industry stakeholders, consumers, and regulatory partners to be 
sure we get the rules right and to set the stage for successful 
implementation of the rules once they are final.
    Since FSMA was enacted in 2011, FDA has been involved in 
approximately 600 engagements with stakeholders on FSMA and the 
proposed rules, including public meetings, webinars, listening 
sessions, farm tours, and extensive presentations and meetings with 
various stakeholder groups. Even before publishing the proposed rules, 
FDA held public meetings to gather input on the rules' content. Since 
the release of the proposed rules beginning in early 2013, we have 
continued our commitment to outreach, engaging various industry, 
consumer, and other interested groups across the country and 
internationally.
    We have heard the concerns raised by stakeholders and have adjusted 
the rules to include solutions to those concerns. As part of this 
stakeholder dialogue, FDA took the unusual step of issuing four 
supplemental notices of proposed rulemaking to share our current 
thinking on key issues and get additional stakeholder input on revised 
language. Again, after the supplemental notices were issued, we engaged 
stakeholders to make sure our final rules would be where they needed to 
be. As a result of this extensive public engagement, along with our 
consideration of tens of thousands of formal written comments submitted 
to the public dockets on the rules, we are confident the rules that 
have been finalized and the five remaining final rules in development 
are flexible, practical, and consistent with industry best practices, 
while also being public health protective and consistent with our 
statutory mandate.
    As we move forward into the next phase of FSMA implementation, we 
intend to continue this dialogue and collaboration with our 
stakeholders through guidance, education, training, and technical 
assistance, to ensure that everyone understands and successfully plays 
their role in food safety. FDA believes that these seven foundational 
final rules, when implemented, will fulfill the paradigm shift toward 
prevention that was envisioned in FSMA and will be a major step forward 
for food safety that will protect consumers into the future.
                ensuring successful fsma implementation
    The success of building a modernized food safety system depends on 
FDA and industry working together, as well as working with State and 
other regulatory and public health partners, after the final FSMA rules 
are issued. In May 2014, FDA released a FSMA Operational Strategy 
Document (attached as an appendix to this testimony) that focuses on 
how FDA intends to implement FSMA, by prioritizing prevention, 
voluntary compliance, risk-based oversight, and expanded collaboration 
across the food safety community. Effective FSMA implementation will 
require a sea change in how FDA, as an agency, approaches regulatory 
oversight of the food industry.
    Inspection and compliance will be specialized, strategic, and risk-
based. FDA isreshaping itself to oversee industry compliance in a 
manner that is strategic and based on risk. We are developing a new 
inspection paradigm focused on whether firms are implementing systems 
that effectively prevent food contamination, requiring fundamentally 
different approaches to food safety inspection and compliance. To 
effectively leverage our resources, we will use more targeted, risk-
based inspection models to screen firms for food safety performance and 
to guide inspection priority, frequency, depth, and approach. 
Inspections will be systems-based, with noncompliance viewed in the 
context of the performance of the firm's overall food safety system and 
the risk to public health. In addition, FDA's inspection and compliance 
staffs will be trained to be specialists in food oversight, rather than 
covering the broad spectrum of FDA-regulated products. Members of these 
staffs will be teamed with FDA subject matter experts to facilitate the 
timely correction of problems and consistent, informed enforcement of 
the new FSMA regulations. Finally, FDA intends to continuously improve 
its inspection strategy through targeted data collection, timely 
analysis, and regular program evaluation.
    FDA will educate before and while we regulate. Stakeholder 
engagement hasbeen a cornerstone of the FSMA rulemaking process, and 
FDA will continue to work closely with industry and other stakeholders 
to achieve widespread compliance with the rules through education and 
technical assistance. We are currently drafting general guidance on 
each rule, guidance for small entities, guidance for specific 
commodities and sectors, and guidance on key provisions, to help 
industry understand their new regulatory obligations under FSMA. We are 
also developing a comprehensive training strategy to give food 
producers, focusing on small and mid-size operators, the tools they 
need tomeet the FSMA requirements that apply to them.
    For example, FDA created three alliances, or public-private 
partnerships, to develop training materials and create an education and 
technical assistance network. The Food Safety Preventive Controls 
Alliance and the Sprouts Safety Alliance are being coordinated by the 
Illinois Institute of Technology, and the Produce Safety Alliance is 
being coordinated by Cornell University. All three alliances bring 
together FDA, local and state food protection agencies, the food 
industry, and academia to determine what will work best to help prepare 
food facilities and farms to implement FSMA.
    FDA has also joined with USDA's National Institute of Food and 
Agriculture to manage a competitive grant program that will provide 
food safety training, education, extension, outreach, and technical 
assistance to farm owners and operator, small food processors, and 
small fruit and vegetable merchant wholesalers. FDA plans to fund 
additional training programs through cooperative agreements.
    Finally, FDA is building a technical assistance network to provide 
rapid support to food producers, providing answers to any questions 
they have about how to comply with the new regulations.
    FDA will work closely with governmental and other stakeholder 
partners. A key element of our stakeholder outreach during the 
development of the FSMA rules has been outreach to our regulatory 
partners. As we transition to implementation, our partnerships with 
Federal, state, tribal, territorial, local, and international 
regulatory and public health agencies will be even more vital. We are 
continuing to build a National Integrated Food Safety System to ensure 
the quality, consistency, and effectiveness of local, state, and 
Federal efforts to protect the food supply. In addition, FDA will be 
relying heavily on state agriculture and health departments and other 
state and tribal agencies with food safety responsibilities, especially 
for the new and unique challenges of implementing the forthcoming 
produce safety rule on farms. We recognize the importance of harnessing 
the food safety commitment, knowledge of local conditions and 
practices, and local presence of these other regulatory entities to 
provide training, technical assistance, and compliance oversight in an 
effective manner.
    Successful FSMA implementation is dependent on FDA's continued 
engagement with states, industry, consumer groups, and foreign partners 
throughout the process, to ensure that we continue to do our job in a 
practical, effective, and risk-based way.
                    how fsma will make a difference
    The prevention model for food safety adopted by Congress in FSMA is 
widely recognized in the food industry and among government and 
academic food safety experts as the optimal approach to minimizing food 
safety hazards and managing problems when they do occur. FSMA also 
transforms FDA's oversight by focusing us on prevention and giving us 
new tools to verify and ensure that prevention is happening. Two recent 
incidents from just this year illustrate why we need the preventive 
system envisioned by FSMA.
Preventive Controls in Food Facilities: Blue Bell Creamery
    This case involved the presence of the unusually dangerous 
bacterium Listeria monocytogenes (Lm) in the manufacturing plants of an 
ice cream company. The resulting contamination of products was 
associated with the deaths of three people in Kansas and caused 
numerous illnesses in at least three other states. Under current 
industry best practices, manufacturers of ready-to-eat products like 
ice cream should have a sanitation plan and standard operating 
procedures that are adequate to ensure that Lm does not become 
entrenched in the facility, and they should conduct sampling and 
testing under an appropriate environmental monitoring program to verify 
that the presence of Lm and the potential for product contamination 
have been minimized.
    Under the pre-FSMA food safety system, however, no such plans, 
procedures or monitoring were specifically required. The burden rested 
on FDA to find the problem, through inspection or, as in this case, via 
reports of product contamination and illness. Moreover, during pre-FSMA 
inspections, FDA could not require access to the company's production 
and food safety records to look for evidence of problems or for 
documentation that the firm was doing its food safety job 
appropriately. FDA could only observe what the company was doing on the 
days of the inspection. FDA was basically in a reactive mode, with the 
burden on FDA to find problems, often investigating problems after the 
harm was done, and being limited largely to finding evidence of legal 
violations suitable for taking cumbersome and time consuming court 
enforcement action.
    Under FSMA and the preventive control rules FDA issued last week, 
we now have requirements for sanitation controls, environmental 
monitoring, and corrective actions that will apply to facilities making 
ready-to-eat foods such as ice cream. The preventive controls rules 
define the framework within which companies must put in place a food 
safety program that is appropriate for the hazards in their products 
and facilities. Companies will now be legally accountable to FDA for 
doing the right thing to minimize hazards like Lm, and FDA will be able 
not only to inspect the operations and conditions in the facility, but 
also to examine, on an ongoing basis, the company's records documenting 
the design and proper implementation of its food safety plan. With 
these new requirements, enhanced records access, and FSMA's 
administrative enforcement tools, there will be real accountability for 
prevention in food manufacturing facilities.
Produce Safety and Imports: Cilantro from Mexico
    Mexico is a major source of a wide range of produce commodities, 
from staple fruits and vegetables to peppers and herbs, on which 
Americans depend for year-round access. FDA and our Mexican 
counterparts have long recognized the challenge of adequately ensuring 
and verifying the safety of produce in general, and the large volume of 
produce crossing the U.S.-Mexico border, a challenge exemplified by a 
series of outbreaks of illness in 2012, 2013, 2014 and 2015 caused by 
the parasite Cyclospora associated with fresh cilantro from the Puebla 
region of Mexico. This year's outbreak has resulted in approximately 
500 confirmed cases of illness in 30 states. Like most produce safety 
problems, we have learned that the risk of contamination can be reduced 
by following recognized practices related to water quality, employee 
hygiene, biological soil amendments, animals in growing areas, and 
harvesting and packing of produce.
    Before FSMA, there were no regulatory standards for such preventive 
practices, only voluntary guidelines. Moreover, to oversee the safety 
of imported produce, prior to FSMA FDA has had to rely on computer 
screening and on inspectors at the border physically checking a small 
percentage of import shipments, looking for problems. If FDA can find 
the problem, it can keep the problem out, but this reactive approach is 
widely recognized to be inadequate for the huge volume of produce and 
other commodities flowing into the United States from scores of 
countries. In the case of cilantro from Mexico, the contamination has 
to be prevented at its source.
    Under FSMA, we will soon have prevention-oriented produce safety 
requirements that apply to both domestic and imported produce, 
including cilantro. Moreover, the Foreign Supplier Verification 
Programs (FSVP) requirement under FSMA will, for the first time, make 
importers an accountable part of the food safety system. Instead of 
relying primarily on FDA and its inspectors to detect and correct 
problems at the border, we will also be able to hold importers, and in 
turn their foreign suppliers, accountable for preventing the problems. 
This will make a big difference for food safety.
    Recognizing the challenge of produce safety and the importance of 
FSMA's success, in 2014 we launched with our Mexican regulatory 
counterparts a Produce Safety Partnership. This partnership is grounded 
in our common interest in ensuring the safety of Mexican produce, our 
shared commitment to FSMA's prevention strategy, and the directive in 
FSMA for FDA to collaborate on food safety with foreign governments. 
The partnership with Mexico includes collaboration with the U.S. and 
Mexican produce industry so that we can coordinate with and take 
advantage of industry's own efforts to improve the safety of imported 
produce.
    Such partnerships are resource intensive for FDA, but can pay big 
dividends when, as in the case of Mexico, we can leverage the efforts 
of regulatory partners who are also real food safety partners. In the 
current cilantro case, we are implementing jointly with Mexican 
authorities a program that includes continued FDA oversight at the 
border, but that also requires future shipments entering the U.S. from 
Puebla to come only from farms that have been inspected and certified 
by the Mexican authorities to be operating in accordance with sound 
food safety practices.
   fda's fiscal year 2016 president's budget request for food safety
    The fiscal year 2016 President's Budget includes a $109.5 million 
increase in budget authority, a total of $1.3 billion, for FSMA 
implementation, and a total of $1.5 billion when accounting for all 
resources requested in fiscal year 2016. Full funding of the 
President's budget authority request is essential to maintaining 
momentum toward the timely implementation of FSMA in the most effective 
way possible. This goal could be undermined if FDA, the states and the 
industry are not adequately prepared to get implementation right. The 
three major program areas where successful implementation hinges 
crucially on the fiscal year 2016 budget authority request are 
preventive controls in food facilities, produce safety, and imports.
    For preventive controls, the essential investments are for 
inspector training and modernization of the inspection process, as 
conducted both by FDA and the states, and essential guidance and 
technical assistance for industry so firms can know what is expected 
and can be supported in complying with the new requirements. This is 
especially crucial for small and mid-size firms. These investments are 
time sensitive because the preventive controls rules are the first to 
go into effect, and FDA is mandated by FSMA to conduct inspections in 
the covered food facilities at a certain frequency. If these 
investments are not made, industry could experience inconsistency, 
inefficiency, and potential disruption stemming from FDA staff who are 
not adequately prepared for the new system.
    Produce safety is one of our most important public health 
priorities: we want people to consume more fresh produce, yet we 
continue to experience an unacceptable number of illness outbreaks from 
both domestic and imported produce. The top domestic produce safety 
investment priority in fiscal year 2016 is for states to have the 
capacity to be FDA's on-the-ground partner in implementing the FSMA 
produce safety rule that will be issued later this fall. As Congress 
envisioned in FSMA, our implementation strategy for produce is based on 
the states playing a key role in working with growers to provide 
education and technical assistance, and they will also be the primary 
provider of inspections to verify compliance. In support of this 
strategy, FDA and the National Association of State Departments of 
Agriculture (NASDA) have entered into a five-year cooperative agreement 
through which we are jointly planning implementation of the produce 
safety rule from the ground up.
    The states' role is essential to success, but they cannot perform 
the role without resources. Investment is essential in 2016. We will 
have a produce safety rule on the books by this November, but, because 
this is a new area of regulation, we are having to build an 
implementation system from the ground up. Growers, especially small and 
mid-size operators, are already seeking education, training and 
technical assistance, which states simply lack the capacity to provide. 
States also need resources now to build the capacity they will need to 
carry out meaningful on-farm compliance assessments and inspections in 
2016 and 2017.
    Finally, for imports, FDA must have new resources to adequately 
implement FSMA's groundbreaking new FSVP requirement. There is no more 
essential element of FSMA and its successful implementation than 
this.FSVP is the crucial tool that FSMA provides FDA to hold importers 
accountable for the safety of the food they bring into the United 
States. They must meet this responsibility by verifying the adequacy of 
the food safety controls being implemented by their foreign suppliers, 
which means that FSVP is also the primary means of holding foreign 
suppliers to the same food safety standards as domestic producers, as 
FSMA intends. For the FSVP requirement to fulfill its purpose, FDA must 
have funding in fiscal year 2016 to retrain existing staff, to hire new 
staff with the skills needed to evaluate complex global supply chain 
management systems, and to deliver education, training and technical 
assistance to the importers we estimate are subject to the FSVP rule.
    This funding will also provide the foundation for building the 
multi-faceted new import safety system called for by FSMA, including 
more foreign inspections by FDA, expanded collaboration with foreign 
food safety authorities, and capacity building in countries where that 
will help protect food safety in the U.S. Receiving this funding is 
essential in fiscal year 2016 in order to align implementation of FSVP 
with the preventive controls and produce safety rules.
    In sum, FSMA directs FDA to build a comprehensive new food safety 
system, based on what we know works to prevent problems--a system that 
is effective regardless of where food comes from. In order for the 
system to function properly, no key elements can be missing or lag 
behind. And FSMA won't achieve its purpose if the program is so 
inadequately funded that the system as a whole falters and fails. We 
want to be very clear that we cannot successfully build the new food 
safety system that Congress has called for without the new resources 
requested in the President's Budget. That is what's at stake in the 
fiscal year 2016 FSMA funding request.
                               conclusion
    We appreciate your strong interest in food safety, Chairman Moran, 
and this committee's support to date for FSMA and its effective 
implementation. We look forward to continue working with you to make 
FSMA a success. We would be happy to answer your questions.

    Senator Moran. Commissioner, thank you very much.
    Let me begin just by asking. You outlined the scenario by 
which these rules will be announced. What was the basis for 
their prioritization? Is there something about these two rules 
that make them more difficult, easier, more significant to 
pursue? What do we expect in the future?
    Dr. Ostroff. Well, I will just say that they are all 
important. The preventive control rules are probably amongst 
the most important of all of these rules, and they are the ones 
that are expected to be implemented first. And so these had the 
priority to be issued. And the other ones will come shortly 
after that.
    Senator Moran. And the process you have been through will 
be the same process for the next promulgation?
    Dr. Ostroff. I will let Mike answer that. The essential 
answer is yes, we will issue these. The deadlines for these are 
set by court.
    Senator Moran. Court order.
    Dr. Ostroff. We are obligated to be able to meet all of 
them, and we will meet all of them. I can assure you of that.
    Mr. Taylor. I will just add that as the Commissioner 
indicated, these rules are from a holistic package of standards 
that Congress mandated to frame this comprehensive preventive 
system, and so we have been through a dialogue with our 
stakeholders that has really addressed all of these rules 
because they have to fit together. And so we have to have a 
coherent package of regulations. So we are at the end of the 
process for all seven rules in terms of having gone through the 
notice and comment, public meetings, dialogues, and so now we 
are able to actually issue the rules in final. So the 
sequencing has something to do as well with just the capacity 
to get rules out the door and give a little breathing room 
between rules. So we are on track to get these rules out on 
that timeline, just as the Commissioner indicated.
    Senator Moran. Thank you very much, Mr. Taylor.
    Dr. Ostroff. So, Mr. Chairman, if I might.
    Senator Moran. You may.
    Dr. Ostroff. Mike just can make a couple comments about the 
implementation plan, and that may help to put some of this in 
context.

                        FSMA IMPLEMENTATION PLAN

    Mr. Taylor. Well, again, this is a large topic, and I am 
sure your questions will draw it out in detail. But we are 
embarking on implementation and deeply cognizant of the 
challenges, the hundreds of thousands of facilities, and the 
complexity of supply chains. But we know that we can meet this 
challenge because we have got the alignment of stakeholders, we 
have done the homework, we have had the dialogue. And I think 
the thing that I would just provide at the Commissioner's 
suggestion is an overview. Some of the themes that we are 
pursuing undergirding the implementation that we think is 
crucial to success--and I think it is just crucial that we 
stick with these themes.

                               COMPLIANCE

    First is this commitment, as we implement, to provide 
clarity through outreach and guidance about the new rules, what 
they require, and to be supporting of the industry in achieving 
what is expected through education, through technical 
assistance. We have said on any number of occasions that we 
will educate before and while we regulate, and we absolutely 
mean that. So that is the first theme, clarity and support for 
compliance.

                               INSPECTION

    The second theme we need to do thematically, as you have 
indicated and the Commissioner indicated, is just fundamentally 
revamp how we conduct our inspections, how we conduct our 
oversight and compliance activities so that we are targeting 
our efforts based on risk and actively fostering and supporting 
voluntary compliance through frontline oversight that 
historically has been enforcement and reaction-oriented. Now it 
needs to be prevention-oriented and supporting compliance.
    I always need to add the caveat. As much as we want to work 
with industry, if we encounter conditions where consumers are 
being put at risk, FSMA expects and has given us new rules to 
take swift action to protect consumers. But the goal has to be 
compliance in food safety not just enforcement as an end in 
itself.

                              PARTNERSHIPS

    The third theme that I will emphasize, again picking up on 
what the Commissioner has said, is strengthening and expanding 
our partnerships with State agriculture and health departments. 
This is absolutely essential. We have a mandate from Congress 
to establish a national integrated food safety system. And we 
fundamentally understand that FDA cannot possibly implement 
this law successfully by itself. It has to work with our State 
and local partners.
    And finally, I just reemphasize--and I think this is 
crucial--the commitment that I think we all need to have to 
this integrated, comprehensive implementation of FSMA. This 
system is a system. It does not work if we tease out parts or 
delay parts or do not integrate this in a holistic way. I think 
the import safety provisions are particularly a crucial part of 
this overall system of prevention. This is how we will get a 
level playing field for U.S. producers. We will meet the 
expectations of consumers that the food that is imported into 
this country is as safe as food that is produced here.
    So these are themes that we hope to come back to, and we 
want our feet held to the fire with respect to pursuing this in 
this way. And I think if we do this, as daunting as it may seem 
with the hundreds of thousands of folks we are seeking to bring 
into a new system, we think we can do it sticking with these 
themes.
    Thank you, Mr. Chairman.
    Senator Moran. Mr. Taylor, thank you.
    Commissioner, your charts, particularly this one--what is 
the explanation? What is the cycle that occurs here. You said 
there were ups and downs. We have had reductions and increases 
both. Is there a cause and effect that you could describe to me 
why that is with one particular pathogen?
    Dr. Ostroff. Yes. Well, it is a good question. I think if 
you look over here, one of the other things that I think is 
quite notable from this particular graph is that for many of 
these pathogens, that many of the reductions, the reductions 
being the ones that you see that are lower than one, occurred 
during the very early years of implementation of some new food 
safety activities in the late 1990s. And really if you follow 
that along into the 2000s, for many of these it has really been 
incredibly flat.
    Now, I think it is important to recognize that food safety 
and foodborne illness is an incredibly dynamic area. We have 
new challenges. We have an incredibly diverse food supply. I 
would venture to say it is much, more diverse than what we had 
back in the 1990s when we started keeping some of these 
statistics. Increasingly the proportion that comes from 
overseas has grown. Sort of the locally grown phenomenon has 
increased over that time period. And so there are a lot of 
things that are challenging the food safety system and 
influencing the occurrence of foodborne disease. But I think 
the bottom line is that as these trends have changed over time, 
we have basically been treading water, and it is time that we 
no longer tread water, that we actually do things that we know 
will work to make these numbers look different as we go 
forward.
    Senator Moran. And you believe FSMA will bend that curve?
    Dr. Ostroff. I believe FSMA will bend that curve. I mean, 
if you look at several of the major food safety problems that 
we have experienced this year, including the most recent one 
that we have seen with the cucumbers that were imported from 
Mexico, the various provisions that are in FSMA are 
specifically designed to address the challenges that we have 
seen in all of those outbreaks. And so we should be able to 
influence not only the outbreaks that are occurring but more 
importantly I think the day in and day out sporadic foodborne 
illness which forms the bulk of this particular data.
    I do also think it is important to say that while we 
certainly believe that all of the activities encompassed under 
FSMA will work to drive these numbers down, it does not absolve 
consumers of doing the right thing once this food gets into 
their kitchens because a lot can happen even if the food as it 
comes into the kitchens is safe. And so it is a comprehensive 
approach that must be taken to assure that foodborne illness 
does not occur.
    Senator Moran. Let me turn now to Senator Merkley.
    Senator Merkley. Thank you, Mr. Chairman.
    Dr. Ostroff, in your testimony, you note that FDA's 
strategy is taking an ``educate before and while you regulate'' 
approach. I note that you are currently working on guidance 
documents. This is very important considering the first two 
final rules are about 1,500 pages, so a substantial amount. And 
these guidance documents will be critical for businesses to 
understand and comply with the new law and they need to be 
timely. So folks in Oregon are asking when these documents will 
become available, and I will just give you a chance to answer 
their question.
    Dr. Ostroff. To best answer that question, I am going to 
turn to the person who is actually writing them.

                                GUIDANCE

    Mr. Taylor. I have a large and able team back home writing 
them as we speak. Guidance is absolutely essential to the 
success of implementing these rules, and we are investing a lot 
of resources in that now. We have been doing that even as we 
have been preparing the rules themselves.
    One thing I would note in the 1,500 or so pages, this is 8 
and a half by 11, double spaced, but the vast majority of those 
pages are a preamble, are themselves guidance and explanation 
of what the rules actually mean and how we expect them to be 
applied. And so that is the first place folks should go to 
really get an understanding of what the codified rule language 
itself actually is intended to mean in practice. But that is 
just the first step in guidance.
    So as you know, we are developing a number of guidance 
documents, some of which are the key foundational ones. So 
there will be a comprehensive guidance on the human preventive 
controls rule that will be almost kind of an operator's manual 
for those who are not yet implementing modern preventive 
controls like many in industry already are. For those who are 
not there yet, this is going to be a very helpful operating 
guide essentially for implementing the rules.
    They will be doing a similar guidance for animal food, at 
least a similar guidance for both the animal food preventive 
controls--
    Senator Merkley. I am just going to cut to the chase and 
say I am glad it is going to have this guidance. When will 
folks see that?
    Mr. Taylor. These major guidances will be coming out early 
to mid next year, well ahead of folks' obligation to comply.
    Senator Merkley. Great.
    Mr. Taylor. And they will be open for comment. It will be 
an ongoing process of dialogue, but our best thinking will be 
out there in a timely way for implementation.
    Senator Merkley. Okay, great.

                       FSMA AND FOREIGN SUPPLIERS

    I have heard from constituents and that there are concerns 
that foreign businesses may not be as closely monitored as U.S. 
businesses, and consequently there might be greater risks from 
foreign products than from U.S. products. And additionally, it 
could put U.S. businesses at an economic disadvantage because 
of the clients' costs for FSMA.
    In your testimony, you state that FDA cannot credibly hold 
domestic producers to the new standards if we are not doing the 
same for importers and their foreign suppliers and vice versa. 
So I know you are aware of these concerns. And this all may get 
further discussed when the foreign supplier verification rule 
is finalized next month. But to the degree you can tell us now, 
how will the FDA adequately ensure the safety of foreign food 
products, and will that oversight be as rigorous as the 
oversight for U.S. businesses?
    Dr. Ostroff. Well, I am going to allow Mike to give you 
some of the details. But all I can say is that one of the 
fundamental tenets of FSMA is that we assure that the safety of 
foreign-sourced food is equivalent to domestically produced 
food. I think that we have that obligation to create that 
equity. We know that to certain degrees our tools available to 
us to be able to deal with imported food have been limited, but 
this rule, this law will not successfully work unless we can 
assure total equity between food that is produced overseas with 
food that is produced domestically. And one of the critical 
elements of that is that the importers that are bringing this 
food into the United States assure that the procedures that 
were in place to produce that food are equivalent to the 
procedures that are in place for food that is produced 
domestically.
    Let me let Mike give you some more detail.
    Mr. Taylor. So Congress did provide really a multifaceted 
toolkit for strengthening import oversight, and the 
Commissioner has referred to the central, really the 
foundational part of that which is this foreign supplier 
verification and requirements so that importers will now, for 
the very first time, have a food safety responsibility to be 
accountable to us for knowing their source of supply and 
verifying that those foreign suppliers are producing under our 
standards. That is a paradigm shift if we can implement it 
well. It is combined, though, in the design of Congress with 
much more overseas presence by FDA, so more foreign 
inspections, more partnership with foreign governments, more 
investment in foreign food safety capacity where that will 
contribute to food safety here. We think this toolkit, if 
implemented properly, will work to provide that equal rigor. 
The question is implementation. Can we make the investments 
needed to carry this out as intended?

                          FOREIGN INSPECTIONS

    Senator Merkley. So, Mr. Taylor, you mentioned the foreign 
inspections, and FSMA mandated 600 inspections in 2011, with a 
doubling of the previous year's inspection level for the 
subsequent 5 years, which would mean that in fiscal year 2015, 
we would have about 19,000 foreign inspections. And in fact, I 
believe that the Department plans to only conduct about 1,200. 
So 19,000 under FSMA versus 1,200. This lack of foreign 
inspections is adding to the concern that really different 
standards are going to be, if you will, practiced in foreign 
countries because there are not enough inspections to hold them 
accountable. Your thoughts on that?
    Mr. Taylor. You put your finger on a huge challenge, and 
that is how do we target our resources with the resources we 
get to implement this law effectively for food safety. So we 
have increased our foreign inspections from less than 300 
before enactment to in the 1,200 to 1,400 range currently. And 
those have been very important. But they are part of the larger 
system. And so the inspections are not inherently preventive in 
the sense that the foreign supplier verification program 
requirement is. So in terms of priorities for implementing the 
import system, we have got to get 88,000 importers up to speed 
in terms of doing their prevention-oriented verification. And 
so that will be a priority for funding.
    We would like to do more foreign inspections, but we also 
think that we can leverage the inspection activity of foreign 
governments through mechanisms like a systems recognition tool 
that we have developed where for countries who have advanced 
food safety systems, we want to recognize that and be able to 
rely, engage in a mutual reliance sort of relationship where we 
can rely on their inspections and not duplicate their efforts. 
So there are multiple elements of this.
    One of the major investments we have made over the last few 
years with increased funding from Congress is to strengthen our 
foreign offices overseas, which again are going to play a vital 
role in us building the relationships with foreign governments, 
outreach to foreign industry, all those things that we can 
leverage our limited resources to maximize prevention activity 
overseas. So we would love to continue the dialogue about how 
we increase the inspection numbers, along with these other 
activities.
    Dr. Ostroff. The one thing that I do have to emphasize, 
though, is that part of the request that we made in fiscal year 
2016 for the full amount of funding, which was $109 million, 
was to be able to assure that we could carry out the 
requirements, especially for foreign-produced food. You know, 
with a number that is significantly lower than that, we will be 
challenged--I think that there is little question--of being 
able to implement the various rules that will be coming out 
over the coming months in the way that we envision that they 
need to be rolled out.
    Senator Merkley. And I think one of those areas that the 
funding is impacting the United States is in filling those 
foreign offices. You mentioned an increase, but I believe the 
vacancy rate right now is 40 percent of foreign offices are 
vacant. Is that primarily a funding issue or a prioritization 
issue?
    Dr. Ostroff I will say that it is expensive for us to be 
able to place people overseas. However, actually placing people 
full-time in these offices is only one of the strategies that 
we have been using to carry out those responsibilities. So we 
do cycle in people for short-term assignments to be able to 
assure that we can carry out the things that we need to do in 
those locations.
    Senator Merkley. Thank you.
    Senator Moran. The Senator from California, Senator 
Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman. I 
really appreciate the opportunity to talk with you, 
Commissioner, for a few moments.
    I have long been interested in this, actually before my 
colleagues came on, and have tried to be helpful in getting 
more ag inspectors at our border. But that is a long time ago.
    California, as you know, is a huge--it is the number one 
agricultural production State. Can you give me any percent or 
any measurement of Salmonella and Campylobacter in California-
produced produce?

                           CALIFORNIA PRODUCE

    Dr. Ostroff. That probably is not a number that I would 
have off the top of my head. Given my extensive time at the 
CDC, I am pretty familiar with the systems that they use to 
collect the data, including the data that went into the FoodNet 
report, in which California is one of the participants in that 
system. And so there are data that are broken out by State for 
the various FoodNet sites in terms of the incidence of some of 
the pathogens that you see on these lists. I cannot tell you 
whether or not it is done on a commodity-specific basis.
    Senator Feinstein. Okay.

                      CUCUMBER SALMONELLA OUTBREAK

    Now, the latest Salmonella outbreak for us is the cucumbers 
imported from Mexico. And I gather that is 418 illnesses across 
30 States, and we have seen the most illnesses of any State, 89 
illnesses, 17 hospitalizations, and one death. I am concerned 
that year after year, the Centers for Disease Control reports 
that the United States has not made progress in reducing the 
number of foodborne Salmonella infections that occur.
    I was listening and also reading your comments how these 
new food safety regulations, FSMA, that you are finalizing will 
prevent outbreaks from happening with specific products. Take 
the cucumber as an example. How will you work it both at the 
border and in a foreign country with the farm operation in 
Mexico that is producing these crops?
    Dr. Ostroff. Well, I will preface my statement by saying 
that that particular outbreak is still under investigation, and 
so we do not know all of the specific details that may have led 
to it happening.
    But having said that, I think that if you think of two of 
the major outbreaks that we have experienced this year, one of 
them being the Salmonella associated with the cucumbers and a 
few months earlier a parasitic pathogen, Cyclospora, that was 
associated with cilantro that also was imported from Mexico, 
you know, there are some themes about the quality and 
implementation of measures to prevent problems from occurring 
in the first place and that is at the heart of what it is that 
we are trying to accomplish under the produce rule. And so that 
produce rule establishes a number of standards that producers 
overseas that and producers domestically need to adhere to.
    Senator Feinstein. Could you give us an example of the 
standards?
    Dr. Ostroff. Well, you know, some of them are the water 
that is being used to irrigate the crops. One of them has to do 
with the access of animals to various locations. There is 
another aspect that deals with the hygiene of the workers that 
are working on these particular farms. And so it is a whole 
variety of requirements that will be in place under the produce 
rule that any producer who is importing food into the United 
States will be expected to meet.
    Mr. Taylor. If I just may add. The difference FSMA will 
make is that we have known for years what these practices are, 
and FDA has provided guidance, voluntary guidance, but there 
have been no enforceable standards, whether for domestic or 
foreign producers, and thus no accountability for doing the 
right thing. And so what FSMA does is create enforceable 
standards and then also verification that those standards are 
being met. I mean, it is that simple, but it is a profound 
difference from where we have been before where it was 
incumbent upon FDA to find and react to the problem in the 
absence of clear standards for prevention. It is a real game 
change that for cucumbers, that kind of example, will make a 
huge practical difference.
    Senator Feinstein. Right.

                      FSMA COORDINATION WITH USDA

    Now, I gather produce is about 46 percent of foodborne 
illnesses, and that is under your jurisdiction, and the rest of 
it, meat, chicken, pork, is under USDA, if I understand that 
correctly. Do you coordinate in standards between the two of 
you or are the standards different?
    Dr. Ostroff. One of the critical requirements of being 
successful with FSMA is to be able to work closely with a whole 
variety of partners, and it is not only partners that are at 
the Federal level, but it is also down at the State and local 
level where a lot of the day in and day out work with farmers 
occur. And so, yes, it is very important that we work quite 
closely with USDA to ensure the success of what we do.
    Senator Feinstein. With produce--for example, I have had 
Campylobacter, and I know how serious it can be. And it was 
from eating not thoroughly cooked chicken. And so I asked my 
staff to look into it. Now, this is not your jurisdiction, but 
it is interesting to me that up to 40 percent of the ground 
chicken in markets may have Salmonella. And I talked to a large 
chicken grower in my State, and I said, what about this? And he 
said, well, everybody knows you have to cook chicken to 165 
degrees until you eat it. I said, well, I did not know. And I 
do not think everybody knows.
    So it raises the question of how these two agencies 
interact. I really think you have a good thing going in what I 
have read on FSMA, and I like very much how you are going about 
it. I worry very much about particularly chicken because 
chicken has become such a high item for people in terms of 
eating. And it does not seem to me that we make much progress 
year over year, year after year.
    But with respect to this, what you mentioned, cilantro, 
cucumbers, ice cream, tuna, caramel apples, and these five 
outbreaks alone are almost 1,000 cases of illness and 12 
deaths. Do you think that there is anything that USDA can begin 
to learn from FSMA? Do you think it is relevant?
    Dr. Ostroff. Again, we work very closely with USDA without 
question. Far be it for me to provide advice to them related to 
things that we ourselves do not regulate. All I can say is that 
they too are working quite arduously in putting in place 
additional strategies to be able to address those products that 
are under their jurisdiction. And there are a lot of 
similarities to things that we are doing in FSMA to things that 
USDA is doing, you know, because again, from the consumers' 
perspective, if they end up with Salmonella, they end up with 
Salmonella and they are not so much interested----
    Senator Feinstein. That is exactly the point.
    Dr. Ostroff. [continuing] In what the source is as to what 
we do keep it from happening.
    Senator Feinstein. Right. And we have two big agencies. One 
handles the meat products and one handles the fresh produce 
products. And I have often wondered is that the best way to do 
it. I think you are taking action, and I am very pleased to see 
that.

                        ANTIBIOTICS IN PRODUCTS

    I am also concerned about antibiotics in products and what 
has been happening in that human stream of consuming products 
that have antibiotics. Could you talk a little bit about that 
and what your agency is doing?
    Dr. Ostroff. Sure. As you know, this is also a very 
important aspect of food safety. We have had a multi-agency 
activity in place called NARMS (National Antimicrobial 
Resistance Monitoring System) that monitors not only the 
occurrence of various pathogens in a variety of food products, 
particularly meat that is sold at the retail level, but also 
monitors the patterns of antimicrobial resistance. We look at 
isolates that come from products that we regulate. USDA looks 
at isolates that come from products that they regulate, and CDC 
also incorporates information from human isolates of the same 
pathogens so that we can compare those patterns and look at 
those patterns over time.
    As you know, we also have been working quite hard to be 
able to address the issue of antimicrobial resistance from 
foodborne pathogens. That is a whole other large component to 
their activities, especially by reducing the use of medically 
important antibiotics used in food-producing animals, 
particularly when used for growth promotion purposes. And so we 
have put out a number of guidances and rules specifically 
designed to address reductions in the use of antibiotics for 
those purposes. This has been a multi-year process to put those 
rules in place. We have done this on a voluntary basis to have 
all of the marketers of these antibiotics for use in food 
animals make labeling changes to remove growth promotion as an 
indication for the use of these antibiotics, and they have all 
voluntarily complied. The phase-in period to make those changes 
in the labels is to start at the end of this year. So we would 
look to see changes start to occur as a result of those 
practices.
    And the other very important point of those requirements is 
to make sure that the use of those antibiotics for other 
purposes is under the direction of a veterinarian.
    So both of them I think will be very helpful in terms of 
addressing the problem.
    Senator Feinstein. Thank you very much, Commissioner.
    Thank you, Mr. Chairman.
    Senator Moran. You are welcome, Senator Feinstein. Thank 
you very much.
    Just to educate myself in a more general way, let me raise 
a couple of topics that are a result of the questions and the 
testimony.

                          FOOD ILLNESS DEATHS

    One of the things I wanted to ask about is the cause of 
death. You cite the CDC statistics, the 128,000 hospitalized, 
3,000 die related to foodborne illness. Is there a breakdown of 
those deaths or hospitalization related to consumer preparation 
versus the food that was tainted prior to preparation? Do we 
know where the cause lies with the consumer versus the 
provider?
    Dr. Ostroff. It is not a very easy question to answer, 
especially when you are sometimes talking about a relatively 
long period between the time that the exposure may have 
occurred and when certainly the illness occurs and when the 
death occurs.
    Having said that, we deal with a whole variety of different 
pathogens, some of which deal with items that are supposed to 
be cooked. Sometimes you are dealing with raw commodities like 
in the produce space. And so ultimately in most instances what 
you want to try to do--and I think what FSMA is designed to 
do--is to try to keep it from being there in the first place. 
And I think if you can successfully do that in many of these 
commodity areas, then you will successfully be able to have an 
impact in reducing these problems from occurring.
    Senator Moran. So there is a reduction that could occur in 
the likelihood of the problem that reduces the importance of 
consumer preparation of the food item.
    Dr. Ostroff. Let me just say without question that you 
never want to send any suggestion that consumers can become lax 
in the way that they handle their food because I do not think 
that we would want to ever send such a message. I think what we 
do want to do is to be able to enhance consumer confidence that 
the food that comes into their kitchens does not contain 
pathogens----
    Senator Moran. That was very artful. I will reask my 
question which would be there is no way--is there, Dr. 
Ostroff--that consumer preparation is not important regardless 
of what arrives in the consumer's home.
    Dr. Ostroff. You said it perfectly.
    Senator Moran. Thank you.

                      DOMESTIC AND IMPORTED FOODS

    You indicate--well, first of all, I wanted to follow up on 
Senator Merkley's point about imported food versus domestic 
food. And he was asking for equity. An indication that you had 
indicated in your testimony that there is an importance to 
making sure that there is not an economic disadvantage to 
domestic producers. There is not a double standard I think is 
the way we would say it in Kansas. Does that double standard 
exist today? Is there a difference in the nature and the 
likelihood of foodborne illnesses from imported food versus 
domestic food?
    Dr. Ostroff. Since I have been answering those through the 
questions, I am going to turn that one over to my colleague.
    Mr. Taylor. I think the answer is that under current law 
pre-FSMA, but also under FSMA, the standards are the same. I 
mean, Congress has made it very clear in FSMA that the same 
standards are to be applied. The same safety is to be achieved 
whether foreign or domestic.
    The real difference and where there is a different 
challenge is in the ability to verify that those standards are 
being met, and we have very different challenges with imports 
than we do with domestic because we have an inspection force 
here. We can legally go into facilities. We can directly hold 
firms legally accountable. We have a whole set of relationships 
with the States who go into these facilities all the time. We 
can really cover that. There is no amount of foreign inspection 
that Congress will ever pay for us to do that would provide a 
comparable level of oversight through inspection overseas. And 
so that is why we have got this multifaceted toolkit of foreign 
supplier verification, more foreign inspections but very much 
collaborating with foreign governments. So the difference is 
really not so much the standards. They are the same standards. 
The question is how do you verify. And the imports provide a 
different verification and challenge than domestics.
    Senator Moran. And, Mr. Taylor, under FSMA the ability to 
enforce those standards is going to, in large part, rely on the 
certification of those who are importing food that their 
providers, their foreign suppliers, are in compliance.
    Mr. Taylor. Well, that is the foundation for the new system 
because the U.S.-based importer is legally directly accountable 
to us. We can hold them legally accountable for doing that job 
properly. So that is where we have the direct legal handle. But 
then we can go over and again inspect foreign facilities. If we 
see a problem, we can keep that food from coming in. We can 
work with foreign governments again to foster good practices 
and to rely on their inspection activity. But, yes, the direct 
legal accountability for imports, in terms of private sector 
responsibility, is on that U.S.-based importer. So that is why 
that foreign supplier rule and its proper implementation is 
just so foundational.
    Senator Moran. What does that mean the importer is most 
likely to do to be able to sign that certification? What is 
that company going to do in a foreign country to make certain 
that when they attest that standards are being met, that they 
are actually being met?
    Mr. Taylor. So under the regulation that we have proposed 
and you will see coming forward--and I am not here announcing 
the final content of the regulation, but I think the elements 
of it are evident from the proposals that we have put out and a 
supplemental proposal that we put out last year. But the whole 
idea is that--and again, this is just following the 
congressional mandate--the importer must have a program, a 
documented program where they have identified their suppliers, 
they have come to understand their suppliers' capabilities for 
food safety, they have approved their suppliers, they know the 
practices the supplier is undertaking, and they look at 
records. And under some circumstances, when justified by risk, 
because it is intended to be a risk-based foreign supplier 
verification program, we would envision the U.S.-based importer 
doing an audit, actually having an audit conducted of that 
foreign supplier and on site onto that foreign producer. So it 
is having a real program that we can then audit and then, 
obviously, go behind that and sample product when it is coming 
in, go behind that and actually inspect the foreign facility, 
if we choose to. But it is that accountability for the importer 
that is the new feature that is so crucial.
    Senator Moran. The word ``audit'' has a different meaning 
than the word ``inspect.'' Is that true?
    Mr. Taylor. Yes.
    Senator Moran. So when the importer is auditing, that 
importer is not inspecting. They would not be doing the same 
thing that an FDA inspector would be doing in a foreign 
country.
    Mr. Taylor. Well, it is different because when you talk 
about inspection where we are used to going in and looking at 
facilities and conducting a physical exam of a physical place--
the ``audit'' term that we are using applies to auditing the 
program, checking the records, being able to get confidence 
from examining the records and talking to the importer that 
they know what they are doing and they are doing the right 
thing. And so in that sense, it is a very records-intensive 
audit activity that will be at least a major component of 
ensuring this is being done properly.
    Senator Moran. Mr. Taylor, thank you.
    I have more questions, Senator Merkley, but maybe a way to 
accommodate your schedule is to turn now to you, and if you are 
unable to stay for my final round, I would not be offended.
    Senator Merkley. Thank you very much, Chairman.

                            VIBRIO INCIDENCE

    I wanted to draw attention to the report that you have all 
displayed, the 2014 Food Safety Progress Report. For folks who 
are numerically challenged, you have boiled it down to happy 
faces, grim faces, and very unhappy faces. And the unhappiest 
of all is the face representing Vibrio. And over on the other 
chart that you have provided, you show that while every other 
disease has decreased since the 1998-till-now time period, 
there is one disease that has increased in incidence and that 
is Vibrio. What is the story? What particulars should we know 
about the challenge this disease represents?
    Dr. Ostroff. Well, Vibrio can also be a significant 
disease. It comes in a couple of different forms. There are 
several different pathogens that are encompassed under the 
label of Vibrio, and they are, in general, associated with 
seafood products. Now, I think it is important to put in 
context that in terms of the overall numbers, the number of 
illnesses associated with Vibrio was actually quite small and 
certainly a very small fraction of what we see in the United 
States from either Salmonella or Campylobacter. Some of this is 
associated with actual spread of Vibrio. In some instances, it 
was largely confined to certain areas of the country, and 
because of movements that occur with emerging diseases, it 
spread to other areas where it traditionally has not been. But 
it is a trend that we have been seeing particularly along the 
east coast.
    Senator Merkley. I was reading an article recently about 
the ponds where shrimp are farmed on land in Asia and where 
massive amounts of antibiotics are used to control the various 
diseases that are rampant in those ponds. Is that import of 
shrimp from these farms one of the factors contributing to the 
Vibrio expansion?
    Dr. Ostroff. I would have to get you specific information 
about whether or not that is contributing, but by and large, to 
my knowledge, most of the Vibrio-related illnesses are not 
associated specifically with imported shrimp.
    [The information follows:]

    While Vibrio related illnesses have been increasing in the United 
States in recent years, investigations conducted by state and local 
health departments have associated these infections with consumption of 
raw oysters and other raw forms of molluscan shellfish in the week 
before illness.  A summary of these infections, including their recent 
increased recognition along the Atlantic coast, can be found on the 
website of the Centers for Disease Control and Prevention at 
www.cdc.gov/vibrio/investigations/index.html.  Vibrio infections are 
most common during warmer months when the organism is more prevalent in 
the marine environment.  Infections can be greatly minimized by 
consuming only thoroughly cooked molluscan shellfish.

    Senator Merkley. Thank you.

                  SALMONELLA IN PEANUT BUTTER OUTBREAK

    Back when we were working on this bill, a young man and his 
father came out from Oregon to testify. The father was a police 
officer. The son, when he was 3--his name is Jacob Hurley. He 
had experienced a life-threatening case of Salmonella from 
contaminated peanut butter. And he was one among more than 700 
who were sickened by contaminated peanut products in 2009. I 
believe that the company involved in that was the Peanut 
Corporation of America.
    If we look back on that particular, well-publicized 
incident, how would the preventive controls rule that we have 
just passed have made a potential significant difference in the 
risk of that disease?
    Mr. Taylor. So that is an unusual case in many respects in 
part because of the vast scale of the damage that it did and 
the thousands of products that had to be recalled because this 
firm was selling not only peanut butter in bulk but peanut 
ingredients that went out into thousands of processed foods. It 
was a catastrophic event for the food system.
    It also involved intentional conduct by the owner and 
operator of that facility and the well-publicized subsequent 
criminal prosecution and conviction.
    What FSMA will do, even in that situation, is provide a 
much stronger basis for inspectors, when they go into 
facilities, to not be reliant just on looking around at the 
facility conditions, and pre-FSMA with no access to the records 
of the facility, under FSMA we will have a much stronger 
ability as investigators to go into facilities and make 
assessments of the system and to be able to detect and find 
records that might actually document positive analytical 
results such as those that occurred in this particular case 
that would reveal a problem that needs to be addressed. So 
there is always going to be that rare instance where purposeful 
criminal behavior happens, and there needs to be swift remedies 
for that.
    But I think even in these cases, we will be able to be more 
effective in our investigatory role in assessing systems and 
whether this sort of practice is going on in facilities that 
needs to be addressed very forcefully, and FSMA gives us new 
rules for addressing that sort of situation forcefully. If we 
identify this sort of problem through inspection, under FSMA we 
can actually suspend the registration of that facility and shut 
the facility down administratively. And that is an important 
tool in these sorts of extreme cases.
    Senator Merkley. So as you note, there were exceptional 
circumstances, leaky roof, mold, animal contamination, so on 
and so forth, kind of egregious behavior regarding some known 
problems. But in terms of the inspections you mentioned and the 
ability to kind of have teeth, that matters.

               PREVENTIVE CONTROL RULE AND TRACE ABILITY

    But there is another element of the preventive controls 
rule--I believe it is in the preventive controls rules--that 
involves developing a tracking system for ingredients that go 
into processed foods. And can you just comment on whether you 
believe that is going to make a difference?
    Mr. Taylor. So FDA has historically--since the Bioterrorism 
Act in 2001 was enacted, it has had authority to require firms 
to keep records of where their incoming materials came from and 
where their finished products have gone, one up, one down 
recordkeeping. FSMA adds somewhat to our authority in this area 
by giving us the authority to set standards for how that firm 
connects the dots between the incoming and the outgoing. And so 
that will be a step, and that is a rulemaking that is underway 
to put that in place.
    FSMA frankly put some constraints on FDA in terms of 
traceability because it precludes us from requiring essentially 
a farm-to-table pedigree or the kind of tracing that is done by 
UPS and FedEx. We are precluded from requiring that sort of use 
of technology to improve traceability. So from our standpoint, 
traceability is crucial. It is how we can investigate outbreaks 
much more expeditiously and get to the cause of problems and 
solve them.
    But traceability is going to have to come into the modern 
era fully through public-private collaboration, finding ways to 
harness industry innovation with the support of us and dialogue 
so we can be sure whatever they do helps our investigators, as 
well as the firms themselves. But the work to be done yet is in 
that area.
    Senator Merkley. Thank you very much, Mr. Taylor, Dr. 
Ostroff, Mr. Tootle. I appreciate it. Thank you.

                           FSMA COLLABORATION

    Senator Moran. One of the things I read in your testimony 
that I wanted to highlight and ask you to confirm to me how 
serious you are about this and how confident I can be that it 
will remain the policy, and that is, you indicate the approach 
to inspection is aimed first at fostering and facilitating 
compliance rather than finding and penalizing regulatory 
violations. That is a policy, in my view, that every regulatory 
Federal agency should adopt. The goal is to make improvements 
in cooperation with the regulated. And it seems to me--and we 
have had this in other agencies previously in which they seem 
to be that was the direction they were going, but over time, 
the joy of penalizing became too great and the attitude of 
cooperation disappeared.
    Is there some assurance that you mean what you say in your 
testimony and that it will last as part of the nature of the 
Food and Drug Administration as it implements and enforces 
FSMA?
    Dr. Ostroff. Well, all I can say is that we do believe that 
the approach that is expressed in FSMA, which is to work 
collaboratively with regulated industry--and when I say 
``regulated industry,'' we mean from the farm to the transport 
into people's homes--that we work collaboratively to encourage 
them and to work with them to do it right. And we know that 
ultimately doing it right has tremendous impact. That is not to 
say because, you know, you always have to--and I am sure you 
are quite aware. There is the carrot and the stick. And we know 
that the carrot is quite an effective way to promote 
improvements in food safety, but that does not mean that we are 
not going to use the stick when we need to use the stick.
    Mr. Taylor. If I could just add why I believe this will 
remain the policy over time regardless of who happens to be 
sitting in these chairs, partly we have put it in writing. We 
have made this commitment to the industry and to the public, 
and people support this externally. But equally important for 
your purpose, the people at FDA embrace this wholeheartedly. 
The people who are at the front line in our agency are public 
health people. Enforcement is a tool, and that has been the 
culture of the agency given the statute we have had and the 
framework for food safety, which has basically been an 
enforcement-oriented statute and program. But with FSMA, we are 
now public health at the front line, and our front line people 
love that. They would much rather be getting good food safety 
outcomes and doing public health than trying to rack up 
enforcement numbers. That is just not the fundamental mentality 
of that cadre of people, including the young people coming into 
the agency. It is an extraordinarily exciting time for them and 
for the whole agency. So I think the future is here in terms of 
the culture change that is going on, and we are working in many 
ways to institutionalize that and embed that in the practices 
of the agency.
    Senator Moran. Well, would it not be fair--I mean, I 
recognized when I asked that question, it may sound as if you 
are trying to take care of business or farmers, but is the 
reality not that we end up with a safer food supply system when 
this is the attitude?
    Mr. Taylor. We know and you know, and if you talk to the 
people in the food business, it is just obvious the vast 
majority want to produce safe food at a personal level and it 
is in their intense business interest to do that. And so our 
whole strategy is based upon that assumption. We need to work 
with that vast majority who want to comply, support that 
compliance, verify that it is happening. And for those who are 
not complying, we will act swiftly and we will take whatever 
action is needed to protect consumers, and in these extreme 
cases like Peanut Corporation of America, invoke punitive 
remedies as a deterrent. But, no, I think working with those 
whose interest is aligned with ours on food safety is how we 
will get the best public health----
    Senator Moran. If I can respond to that before Dr. Ostroff 
speaks, in the world I come from in Kansas, the rumor of food 
disease or animal-borne diseases causes dramatic consequences 
to farmers, to ranchers. It does not take an actual case. Just 
the thought that something may be wrong. And so I am certainly 
not opposed to strictly strongly enforcing penalties and 
putting bad actors out of business because they have a huge 
consequence certainly to the consumer and the safety of our 
food supply, but for those same business men and women, those 
same farmers and ranchers, they cannot afford financially to 
have the rumor the reality that there is something wrong with 
what they produce.
    Mr. Taylor. And our strategic interests are fully aligned 
on that.
    Dr. Ostroff. And I think you are absolutely right. We know 
that the ramifications from foodborne outbreaks that occurred 
years ago still ripple through certain commodities.
    The other thing that I will say is that the approach that 
we will be taking under FSMA is really a fundamentally 
significant change to the way that we approach food safety, and 
it is really critical because a number of things that are 
encompassed in the funding request that we have made to 
Congress is designed to ensure that up and down the system, we 
can reorient the workforce to be able to implement the things 
that you were saying in terms of being able to work 
collaboratively with industry, being able to educate industry, 
and being able to oversee and ensure that what they are doing 
is up to standards takes resources. And I do not know any other 
way to say it. And we do know, without question, that unless we 
receive the total amount of the request, that something is 
going to have to give in some aspect of what we are doing.
    Senator Moran. You could not help yourself.
    Dr. Ostroff. I could not help myself.
    Senator Moran. And I will be happy to visit about that 
topic. Let me finish up a couple other items.

                   STATES ROLE IN FSMA IMPLEMENTATION

    When it comes to the State of Kansas, the State of Oregon, 
the State of California, what will the role be for those States 
as a result of FSMA and its implementation? What happens 
different at the Kansas Department of Health and Environment?
    Dr. Ostroff. Well, the approaches that are being taken at 
the Federal level--those same types of changes will also occur 
at the State level. The States and localities are really very 
critical partners in implementing FSMA as it is designed to be 
implemented. They are our front line eyes and ears. They carry 
a lot of the workload in not only working with their regulated 
industries at the State and local level, but particularly in 
certain areas. And the one that comes to mind most is the 
produce rule. We will look very much towards working with the 
States to be able to provide the type of front line support to 
all of the farmers within their States to be able to 
appropriately implement the new requirements for FSMA. And so 
they are really critical to the success of this endeavor.

                            ANIMAL FEED RULE

    Senator Moran. Let me ask one question related to the 
animal feed rule and contract farmers. Doctor, you indicated--
Commissioner, you indicated to me that in advance of this 
hearing, that what I was going to hear from the folks out there 
in that world would be all requests to make sure that Congress 
appropriated sufficient funds to implement FSMA, and that you 
had worked your way through many of the challenges and had a 
lot of input from stakeholders, as you described. And I 
appreciate that, and it seems to me that that is in large part 
the reality.
    One area that I have heard concern about is the definition 
of what a farm or farmer is. And you are shaking your head and 
so maybe I do not need to describe the issue. Is there 
something afoot that I ought to know about the direction that 
you are going? What I have heard, that there is concern from 
farmers who have no involvement in anything other than raising 
the livestock, the animal, that FSMA will affect their 
operations as well when all the processing and everything 
occurs downstream. And in fact, the feed, most importantly, is 
not grown or provided by them. It is provided by upstream 
buyers of those they have contracted with. This is an issue--
have I described it adequately. You were once smiling. Now you 
are frowning.
    Dr. Ostroff. Well, no, because the specific way that a 
farmer is defined is really critical to certain parts of these 
rules, not only the preventive controls but also to the produce 
rule. And so we have worked quite closely with those that will 
be impacted by this rule to make sure we can get it about as 
right as we possibly can.
    I will ask Mike because I know he has been immersed in this 
particular issue for the last several years.
    Mr. Taylor. I do know the issue very well, and the fact 
that there is presumably still some folks who have some 
concerns just shows that there is an exception to every rule--
but stakeholder support for the rules.
    But I think that what you are talking about is the 
situation where there are vertically integrated poultry 
operations where a Perdue or a Tyson will own the chickens. 
They will manufacture and own the feed. They will provide it to 
contract growers who own----
    Senator Moran. The growers only grow.
    Mr. Taylor. The growers only grow.
    The growers--if they have a concern that they are affected 
by this, I have not heard that and I do need to hear that. The 
affected party is the operator of that feed mill, that is not 
being managed on or by a farm operation but rather by this big 
vertically integrated poultry enterprise. That feed mill is 
subject to the animal feed preventive controls rule. The 
requirement is very practical and risk-based and so do not 
address issues that do not need to be addressed in terms of 
ensuring the safety of animal feed. But those feed mills are 
subject to preventive controls. If the poultry operator or any 
farmer--and this is the common practice for poultry--is growing 
or processing their own feed on their farm in their feed mill 
for their animals, that is part of the farm operation and would 
not be subject to the preventive controls rules.
    So I would be happy to engage whoever has the concern and 
connect them with our Center for Veterinary Medicine and work 
through whatever the question is. But that is basically the way 
the rule----
    Senator Moran. You answered the question better than I 
asked it, and I think that is the assurance that they were 
having to hear.
    Mr. Taylor. Okay. Well, again, I am happy to talk to them 
if that would help.

                             BUDGET REQUEST

    Senator Moran. Let me talk just a moment about the 
appropriations process. And I indicated in my opening statement 
this will continue to be a priority certainly of mine and I 
think of this subcommittee. And you mentioned specifically the 
amount of money that the President's budget requests and our 
ability to meet that at this point has not occurred. But we 
worked hard to put more money into FSMA implementation as we 
prioritize within the dollars that we have within our 
jurisdiction. And if those dollar amounts change, we are 
interested in reviewing and reprioritizing based upon what the 
needs are of FDA and others to try to make certain we make the 
right priority decisions.
    But let me ask a couple of things about how the money has 
been spent in the past. As I indicated in my opening statement, 
the number, I believe, is an 8-percent increase over the last 5 
years for implementation of FSMA at FDA. Mr. Tootle, am I 
saying that correctly?
    Mr. Tootle. I think it is 4 percent, sir.
    Senator Moran. Of course, you do.

                             FSMA SPENDING

    Senator Moran. Well, let me ask how that money has been 
spent in implementation and how has it been allocated. Is it 
across food safety inspections, foodborne disease surveillance, 
detection? How have you decided how to spend that money over 
the past 5 years? And I will consult with my expert.
    Dr. Ostroff. So the total amount since 2010 that has been 
allocated specifically for FSMA--I believe the number is 
approximately $162 million over that time period. It has been 
used in a whole variety of ways, but as you probably recognize, 
there has been a tremendous effort on our part to be able to 
appropriately lay the groundwork to get these rules to a place 
where those rules are both implementable and will work. And 
that is no mean task. As you know, we have had tremendous 
numbers of outreach activities to the various stakeholder 
groups. There have been somewhere in the range of 600 or so 
meetings that have occurred, either public meetings, 
interactions with regulated industries, various trade 
associations. As you know, we have walked facilities and farms 
from one coast to the other. There has been a significant 
effort to actually do all the writing that it takes to get 
these rules to the place where they were. As you know, we 
issued a number of supplemental rules. And so that has heavily 
contributed to a lot of the resources that we have used to get 
to the point where we can actually get to where we are now, 
which is to start implementing.
    Mr. Taylor. In addition, there are a number of programmatic 
and capacity investments that we have made that I think are 
very significant as well. Some of it includes technical 
staffing, increasing technical staffing at the agency, so we 
can support the industry, our State partners, our own 
inspectors as they implement this. So this is at our Center for 
Food Safety and Applied Nutrition principally. We have doubled 
the investment in the States to close to $50 million over the 
last few years. We have been able with the resources we got, 
including these increases, to meet the FSMA mandate for high-
risk inspections, the frequency mandate, and exceed that and do 
that earlier than expected. We think that has been an important 
part of getting ourselves in a position to succeed under FSMA.
    And then the import area has been an area of investment. We 
have significantly increased the number of inspections, as I 
mentioned. We have expanded the foreign offices, things we have 
talked about. So there have been some significant programmatic 
investments in capacity for ourselves and the States to be 
ready to implement FSMA. It is part of an ongoing sort of 
buildup so we can succeed going forward.
    Senator Moran. Thank you, Mr. Taylor.
    Mr. Tootle, it is apparently one of those circumstances in 
which both are right.
    The desired outcome has been achieved. Food has increased 
by 8 percent, FSMA by 4.

                         REPRIORITIZING FUNDING

    I think this is my final question. Is there any 
opportunities--let me ask that differently because there has to 
be. As you implement FSMA, are there opportunities for 
reprioritizing existing spending that that spending is no 
longer necessary because you are headed down a different path 
than the way the FDA operated in the past? So are there any 
savings to occur as a result of the implementation of FSMA?
    Mr. Taylor. My Commissioner is looking at me, so I will say 
something.
    Dr. Ostroff. Because my short answer would be no.
    Mr. Taylor. I think I am going give yes. That is a no 
because I want to try to explain, though. If you look at the 
overall funding of the foods program, about three-quarters of 
it pre-FSMA goes into the field based activities that relate to 
food safety but doing it the old way. What we are talking about 
is adding frankly incrementally to that base resource so we can 
reorient, redeploy all of that resource to doing food safety in 
the way envisioned by FSMA.
    Senator Moran. It is not the best answer.
    Mr. Taylor. I wanted to get credit for the fact that we are 
not just continuing to do all the old stuff and then add on the 
new thing.
    Senator Moran. That is the nature of my question.
    Mr. Taylor. Yes, sir. And the answer is we are redeploying 
but it does not mean we can stop spending the money that is 
needed to support that workforce. We have to, in fact, invest 
in it so it can work in this modern prevention-oriented way in 
a much more sophisticated regulatory framework. So, yes. So it 
is redeployment as opposed to adding on resources on top of 
resources that are still deployed doing the old thing.
    Senator Moran. That is what I want to hear. And since you, 
Dr. Ostroff, wanted to answer no, I will give you the 
opportunity to say yes.
    Is the reality not, is the truth not that we can now--as we 
do things differently, you redeploy assets, resources that were 
directed in the old way of doing business to the new way of 
doing business?
    Dr. Ostroff. So this is not going to require fewer people 
to be successful. It is just going to require that those people 
do things differently than they have been doing them, but the 
people that we need to be successful for FSMA will not--you 
know, we are not going to have people go away. And in point of 
fact, given the various responsibilities that we have under 
these rules, we need every single one of those people to be 
successful in implementing this. So from the standpoint of what 
we have been doing with our field force and what we have been 
doing with our laboratories, those responsibilities do not 
disappear under FSMA.
    Senator Moran. Dr. Ostroff, thank you for your testimony. 
Mr. Taylor, thank you for being here. Mr. Tootle. Anything you 
would like to make certain that is included in the record 
before we close this hearing?
    Dr. Ostroff. Well, I will just close by saying I am the 
eternal optimist. The request that we made for this fiscal year 
for FSMA implementation from my perspective is absolutely 
critical to its success. And to make this have its maximal 
impact, which we hope that it will have to change some of these 
graphs that you see here on the right and the left, every 
component of that request is vitally important to the success 
of this endeavor. And so we will have some incredibly difficult 
choices to make if we cannot get that particular request. And 
so I recognize that you have been an ardent supporter of the 
success of FSMA, and we certainly are totally appreciative of 
the efforts that you have made to this point, and we are very, 
very appreciative of the resources that did show up in the 
subcommittee's and full appropriation for FSMA implementation. 
All I can say is that there will be some significant shortfalls 
that will result with that particular number, which will make 
it very challenging for us to be able to put in place right 
from the get-go what we need to do to be successful in this 
endeavor.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Moran. Doctor, thank you very much. I appreciate 
your testimony. Thank you for being here. I appreciate the 
presence of my colleagues. And for members of the subcommittee, 
either those that were here or who were not, any questions that 
they would like to submit for the record should be turned into 
the subcommittee staff within 1 week, which is Wednesday, 
September the 23rd, and we would appreciate having a response 
back from FDA within 4 weeks subsequent to that point in time.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
               Questions Submitted by Senator Jerry Moran
                             produce safety
    Question. Please provide a food safety risk rationale why FDA 
concluded that Produce Safety provides adequate regulatory oversight 
for on-farm packinghouses that pack any amount of produce not grown on 
the same farm, and ``secondary activities farms'' that are majority 
owned by the primary production farm(s) that provide a majority of the 
produce packed, but an off-farm packinghouse that performs the same 
activities on the same commodities requires the added complexity of the 
Preventive Controls rule if more than a majority of fresh produce 
packed is not grown by the packinghouse majority owner(s).
    Answer. Produce packing houses that fall under the new farm 
definition and pack covered produce would be covered by the forthcoming 
produce safety rule. Produce packing houses that do not fall under the 
new farm definition would be facilities covered by the preventive 
controls for human food rule. We recognize that this means that 
establishments performing basically the same activities will be 
governed by different regulatory regimes. We are limited by our 
statutory authority. FSMA sets up a dichotomy, where farms packing and 
holding covered produce are subject to the produce safety rule, with 
its regulatory structure, and facilities required to register are 
subject to the preventive controls for human food rule, with its 
regulatory structure. We have expanded the farm definition as far as we 
think we can, while still reflecting what a farm is in the real world.
    However, we expect that the specific steps necessary to ensure the 
safety of produce would generally be the same for on-farm and off-farm 
packing houses. For example, the preventive controls rule allows a 
packing house, for produce covered by the produce rule, to comply with 
the applicable requirements for packing and holding under the produce 
rule rather than to comply with the Current Good Manufacturing Practice 
(CGMP) requirements. In addition, although an off-farm packing facility 
would be required to establish and implement a food safety plan and 
establish preventive controls for food safety management components, we 
expect that, in general, off-farm packing houses can look toward the 
produce safety rule for guidance as to what to include. We expect that 
an off-farm packing facility's food safety plan would focus on a few 
key preventive controls with counterparts in the proposed produce 
safety rule. For example, we expect that the food safety plan for an 
off-farm packing facility would include preventive controls such as 
maintaining and monitoring the temperature of water used during 
packing. We also expect that an off-farm packing facility would 
establish sanitation controls to address the cleanliness of food-
contact surfaces (including food-contact surfaces of utensils and 
equipment) and the prevention of cross-contamination from insanitary 
objects and from personnel to food, food packaging material, and other 
food-contact surfaces. These preventive controls have counterparts in 
the proposed produce safety rule.
                              animal feed
    Question. In regard to the Rule for Preventive Controls for Animal 
Feed, the FDA has indicated it did not intend to regulate farmers/
growers of animals. However, it appears that the Animal Feed rule will 
cover a significant number of contract farming operations, even though 
the owners of the animals have 100 percent control over feed 
manufacturing.
    How many feed mills and/or farm operations do you expect this rule 
to cover?
    Answer. The Preventive Controls for Animal Food (PCAF) rule applies 
to all facilities that are required to register with FDA under section 
415 of the FD&C Act because they manufacture, process, pack, or hold 
animal food for consumption in the US. Farms are not required to 
register and therefore are not covered by the PCAF rule. Whether a feed 
mill is covered by the PCAF rule depends in part on whether it is 
considered part of a farm. FDA's Food Facility Registration database 
tracks the number of registered facilities. As of August 9, 2015, there 
were 5,919 domestic animal food facilities registered and 9,804 
domestic facilities that were registered as human and animal food 
facilities. The 5,919 domestic animal food facilities are covered and 
likely a portion of the facilities that are registered to produce both 
human and animal food. The facilities that produce both human and 
animal food may choose to follow human food current good manufacturing 
practice and preventive control requirements throughout their facility 
instead of following the requirements of the PCAF rule for their animal 
food (as long as any hazards for the animal food are addressed). Within 
the total of domestic registered facilities, there may be some 
facilities that are subject to one or more exemptions from the PCAF 
rule or are subject to modified requirements.
    Question. Are you going to prioritize regulatory oversight on the 
animal food rule, and does the agency plan provide guidance to clarify 
this issue?
    Answer. Full funding as requested in the fiscal year 2016 
President's Budget is necessary for FDA to implement all of the FSMA 
rules, including PCAF, in a holistic, risk-based way. FDA has been 
developing implementation plans for the PCAF rule, and we are also 
currently working on development of regulator training and guidance 
documents. FDA is planning guidance documents to help industry comply 
with the requirements of the PCAF rule. The first guidance will be for 
implementation of the Current Good Manufacturing Practices provisions, 
closely followed by a guidance document on human food by-products for 
use as animal food. FDA will make available another guidance document 
that will address the hazards associated with different foods and how 
to apply the preventive controls requirements. There will also be a 
Small Entity Compliance Guide that explains the actions a small or very 
small business must take to comply with the rule.
                             import safety
    Question. How many foreign manufacturing facilities are there and 
what are the top countries that export to the United States?
    Answer. There are approximately 118,104 registered foreign food 
facilities. The following table provides the top ten countries that 
export to the United States in order from most to least food import 
lines. The top two countries are Mexico and Canada.



    Question. What is the process to inspect/approve products from 
these facilities? How does FDA interact with foreign governments, and 
their inspection regimes?
    Answer. The process of inspecting foreign food facilities begins 
with the Center for Food Safety and Applied Nutrition (CFSAN), which 
identifies foreign facilities for FDA inspection based on risk factors 
including whether or not they produce high-risk commodities or employ 
high-risk practices in the manufacturing process. Specific foreign 
countries are not targeted for inspection unless there are specific 
disasters, events, or country-wide practices associated with production 
that may pose a unique risk. FDA foreign food facility inspections are 
conducted by dedicated foreign food inspection cadre/investigators, 
domestic food inspection investigator volunteers, and foreign office 
investigators based overseas. The Office of Regulatory Affairs (ORA) 
plans and conducts foreign inspections for U.S.-based investigators, 
whereas inspections conducted by overseas-based investigators are 
planned by the relevant FDA foreign office (FDA has investigators based 
overseas within FDA's foreign offices in China, India, and Latin 
America). Specific foreign inspections trips are planned based on firm 
location, availability, reason for inspection, and commodity. After the 
completion of a foreign inspection, FDA may take steps such as placing 
a firm's product on Import Alert, based on observed and documented 
violations. FDA regularly interacts with foreign governments and their 
inspection/regulatory regimes. When FDA intends to conduct inspections 
of facilities in foreign countries, CFSAN informs the foreign 
government regulatory authorities and invites the foreign authorities 
to observe the FDA inspections. ORA or an FDA foreign office provides 
the foreign regulatory authority with information that includes the 
timeframe of the inspections, the list of firms to be inspected, and 
final itineraries if desired. Foreign regulatory authorities often 
accept invitations to observe FDA inspections, which provide learning 
experiences for the foreign authorities.
    FDA's India Office and the Indian drug regulatory authority will 
collect data pertaining to either regulatory agency's observations of 
the other's inspections in the future. This data-gathering exercise 
will facilitate data analyses for developing a better understanding of 
current inspectional and regulatory practices of each regulatory agency 
and developing strategies to better cooperate on matters of mutual 
regulatory concern.
    The Latin America Office has conducted foreign inspections and 
environmental assessments accompanied by foreign counterparts. These 
activities are conducted in an effort to leverage our combined 
resources, ensure the application of standards, and increase regulatory 
capacity. During accompanied inspections, the foreign regulatory 
authority and FDA conduct concurrent inspections of an establishment. 
During the inspections, there is constant communication and discussion 
between the two authorities. We have seen certain foreign authorities 
take regulatory action on the spot when conditions that pose a serious 
risk to the health of consumers are encountered. Foreign regulatory 
authorities have taken their own samples and have ordered the 
destruction of potentially contaminated products. The same situation 
occurs when a collaborative/joint environmental assessment in response 
to a foodborne illness outbreak or a food contamination event is 
performed. If FDA subject matter experts find a major violation, 
foreign counterparts may be able to take immediate regulatory actions. 
They may also conduct a follow-up inspection at the firm to ensure that 
corrective actions were implemented.
    The China, India and Latin America Offices have shared information, 
as appropriate, with regulatory counterpart organizations in China, 
India and Mexico after inspections in those countries. This has 
resulted in actions by the regulatory counterpart organizations based 
on violations observed by FDA.
    In 2014, FDA signed the following arrangements with Chinese, 
Indian, and Mexican regulatory authorities that affect FDA's 
interactions with those authorities regarding food safety inspections:
  --Two Implementing Arrangements with Chinese regulatory counterparts 
        that outline cooperation regarding inspections of food and drug 
        facilities in each other's countries. Since the signing of the 
        two Implementing Arrangements, cooperation and the exchange of 
        regulatory enforcement information have increased. The number 
        of FDA inspections that Chinese regulatory counterparts have 
        observed has also increased. Additionally, FDA received visas 
        for new inspectional staff whose visas had been previously 
        delayed.
  --A Memorandum of Understanding (MOU) with Indian regulatory 
        authorities that will improve cooperative activities in the 
        area of food safety. The India Office also conducts quarterly 
        meetings with Export Inspection Council (EIC) to advance the 
        implementation of the MOU and share information for regulatory 
        and/or risk-based decisionmaking.
  --A Statement of Intent with Mexican authorities to develop and 
        implement a Produce Safety Partnership that aims to achieve 
        mutual confidence in one another's produce safety systems. 
        Under the Statement of Intent, five working groups were 
        established. Two of these working groups have focused on 
        inspections: Exchange of Information and Training of Auditors/
        Inspectors and Outbreak Response. These two working groups have 
        conducted thorough, in-depth discussions that have led to 
        enhanced interaction when FDA conducts inspections in Mexico.
    FDA's China, India, and Latin America Offices have also engaged in 
technical workshops with our foreign regulatory counterparts to 
strengthen the regulatory understanding and capabilities of 
inspectorates abroad.
  --FDA's China Office has engaged with Chinese regulatory authorities 
        regarding data integrity and compliance in the area of Low-Acid 
        Canned Foods (LACF) by holding classroom training on FDA's 
        regulations and inspection training at a facility. A total of 
        30 Chinese inspectors attended, including one inspector from 
        each of the Chinese provinces that export LACF products to the 
        United States as well as 10 inspectors and several managers 
        from various Guangdong authorities' offices where the training 
        was held.
  --FDA's India Office partners with Indian regulators to train them on 
        food- and drug-related issues and inspectional techniques, good 
        manufacturing practices, and the detection of data integrity 
        issues.
  --The Latin America Office has facilitated participation by foreign 
        regulatory officials/inspectors in courses provided by FDA's 
        Office of Regulatory Affairs training component (ORA-U), 
        thereby helping enhance the knowledge, skills and capabilities 
        of foreign regulators, as well as helping them better 
        understand the U.S. food safety system.
  --FDA's Europe Office does not include investigators among its staff, 
        yet it facilitates FDA inspections of facilities in Europe by 
        cultivating and maintaining relationships with regulatory 
        counterparts in Europe and working with U.S. governmental 
        agencies in-country with complementary missions, e.g., the U. 
        S. Department of Agriculture's Foreign Agricultural Service.
    In addition, FDA's overseas offices contribute to FDA's 
international inspections by analyzing reports/audits by foreign 
regulatory counterparts to aid in facility selection.
    Question. How do you propose to support and build upon these 
efforts to open FDA offices in foreign countries? Could you provide 
more detail on the types of activities these offices should be carrying 
out, and what benchmarks we might use to measure the success of these 
activities?
    Answer. Since 2009, FDA has operated foreign posts strategically 
located around the globe, including in China, India, Mexico, Belgium, 
United Kingdom, Costa Rica and Chile. The India and China posts have 
significant numbers of investigators in the foods/feeds and medical 
areas. The goals of the foreign posts include:
  --Building FDA knowledge around the foreign competent authority's 
        (CA's) capacity, the role industry(ies) plays in the country, 
        and the dynamics between these two.
  --Strengthening FDA linkages with CAs and public and private 
        stakeholders for increased and more timely information and 
        collaborative approaches to tackling issues of concern to FDA.
  --Increasing awareness of foreign governments, industry and others 
        about FDA regulatory requirements, as well as new legislation 
        such as the FDA Food Safety Modernization Act and the Food and 
        Drug Administration Safety and Innovation Act.
  --Conducting FDA inspections and investigations in country, including 
        for-cause and surveillance inspections. FDA encourages CAs to 
        observe our foreign inspections, which provide learning 
        opportunities for foreign regulators.
    Measuring impact is a complex process(es). The Office of 
International Programs is developing metrics to benchmark and better 
measure success of these types of activities performed at FDA foreign 
posts. These could include the number of FDA inspections conducted in 
the country or region, but optimally would measure the impact of FDA 
inspections, workshops and other collaborative activities on the rate 
of violative products from the country or region and capacity of 
foreign regulators conducting inspectional work.
    Question. What, specifically, are obstacles these offices face in 
monitoring foreign food production and foreign food safety systems?
    Answer. The food safety systems in some countries are complex and 
involve multiple regulatory authorities at the central and regional/
state/local levels. Responsibility for regulatory oversight may not be 
well-defined or able to be measured. Implementation of food safety 
standards and enforcement activities may vary significantly by region. 
Thus it can be challenging to monitor and, more importantly, understand 
the regulatory systems, regulatory capacity and national policy 
dynamics.
    Language and cultural contexts are also challenges in building FDA 
knowledge around foreign food production and food safety systems, 
particularly given the difficulty of translating often nuanced policies 
written in a foreign language.
    Question. What types of authorities and resources will those 
offices need in order to be effective?
    Answer. FDA is currently evaluating if additional authorities and/
or resources will be needed in fiscal year 2017.
                                 ______
                                 
              Questions Submitted by Senator Jeff Merkley
    Question. How has FDA worked with NIFA at USDA on outreach and 
training for FSMA? Do you expect that small local organizations will be 
able to compete for FSMA training dollars, both at USDA and FDA?
    Answer. FDA and USDA's National Institute of Food and Agriculture 
(NIFA) have joined in a collaborative partnership to administer and 
manage the National Food Safety Training, Education, Extension, 
Outreach, and Technical Assistance Program using competitive grants, 
with the goal of providing training and technical assistance to owners 
and operators of small and medium-sized farms, beginning farmers, 
socially-disadvantaged farmers, small processors, and/or small fresh 
fruit and vegetable merchant wholesalers, as mandated in Section 209 of 
FSMA. Community-based organizations (CBOs) are among the eligible 
entities to receive grant funding, and the requests for applications 
have specified that this program will provide significant opportunities 
for funding through subcontracts and for partnerships with eligible 
stakeholder groups who work directly with the target audiences.
    The joint program will first award competitive grant funds that 
enable an awardee to establish a National Coordination Center (NCC) for 
Food Safety Training, Education, Extension, Outreach, and Technical 
Assistance and then award grants for the establishment of four Regional 
Centers (RCs) across the country. The RCs will work with local 
communities to ensure that the training teams include representatives 
from non-governmental organizations, CBOs, cooperative extension 
services, food hubs, local farm cooperatives, and other entities that 
can address the specific needs of the communities they serve.
    FDA issued a request for grant applications for the establishment 
of the NCC on December 31, 2014, which closed on March 16, 2015.\1\ FDA 
has awarded the International Food Protection Training Institute a 
grant of up to $600,000 over 3 years to establish the NCC.
---------------------------------------------------------------------------
    \1\ http://grants.nih.gov/grants/guide/rfa-files/RFA-FD-15-003.html
---------------------------------------------------------------------------
    NIFA published a request for grant applications for the 
establishment of two of the Regional Centers--one in the Southern 
Region and one in the Western Region--on May 18, 2015, which closed on 
June 29, 2015.\2\ NIFA has awarded more than $2 million in grants to 
establish these RCs. The University of Florida in Gainesville will 
establish the Southern Regional Center, with Oregon State University in 
Corvallis charged with establishing the Western Regional Center.
---------------------------------------------------------------------------
    \2\ http://nifa.usda.gov/sites/default/files/rfa/
FY%2015%20FSMA%20RFA_to%20post.pdf
---------------------------------------------------------------------------
    Additionally, on August 27, 2015, FDA published a request for grant 
applications for the establishment of the other two Regional Centers, 
one in the Northeast Region and one in the North Central Region.\3\ 
This request is open through November 2, 2015, and eligible applicants 
can be found at the link provided.
---------------------------------------------------------------------------
    \3\ http://grants.nih.gov/grants/guide/rfa-files/RFA-FD-16-005.html
---------------------------------------------------------------------------
    Question. In your statement, you say that FDA plans to fund 
additional training programs through cooperative agreements. Please 
provide more detailed information.
    Answer. FDA-funded cooperative agreements encompass a range of 
actions to support implementation of the FSMA rules.
  --The agency has entered into a five-year cooperative agreement with 
        the National Association of State Departments of Agriculture 
        (NASDA) that brings together a range of state partners to 
        collaboratively plan implementation of the forthcoming Produce 
        Safety rule.
      --Experts from FDA and NASDA are working together to develop a 
        set of best practices for implementation of the produce rule. A 
        coalition of states with strong interest in leading this 
        implementation effort is actively participating in the 
        development of these practices.
      --NASDA will help facilitate industry training and will also play 
        a role in the delivery of training to state regulators.
  --To accommodate alternate approaches to FSMA readiness, the FDA 
        plans to fund development of specific training programs through 
        cooperative agreements. The agency's goal is to work with 
        groups that understand the special needs of and have direct 
        access to businesses that face unique circumstances and 
        challenges in implementing FSMA. These training programs would 
        include providing an awareness of the underlying reasons for 
        the new standards and would ensure that training addresses the 
        unique needs of the target audiences.
    Specifically, cooperative agreements are planned to support 
curricula development and dissemination among two such communities: 
local food producers, including those engaged in direct marketing, and 
tribes.
      --The agency plans to allocate fiscal year 2016 funds for the 
        development of training curricula and delivery, in addition to 
        education and outreach, with a focus on small and mid-size 
        businesses involved in local food production, including those 
        that engage in sustainable and organic farming. Eligible 
        entities will include community-based organizations and other 
        grassroots organizations that work directly with the intended 
        audience.
      --The FDA anticipates funding a similar cooperative agreement for 
        the development of training curricula and dissemination in 
        tribal communities. Tribal governments and community-based and/
        or non-governmental organizations will be among those eligible 
        to receive the funding.
      --The FDA will be involved in facilitating communications between 
        the Alliances and the participants in the new cooperative 
        agreements to maximize use of materials that are already 
        developed, when appropriate.
    Question. FDA officials have stated that if FDA doesn't get its 
full budget request, all of the increase provided will go toward the 
two rules just published, and produce safety will have to wait. Why 
shelve one very important item completely instead of taking a more pro-
rata approach?
    Answer. The fiscal year 2016 President's Budget requested for each 
of its six proposed FSMA funding categories is the minimum amount FDA 
needs to effectively make progress on the critical implementation tasks 
in each category. All of the funding categories are vital to achieving 
FSMA's goals of a modern, preventive food safety system that protects 
consumers, strengthens public confidence, and reduces cost to industry 
from food safety problems. A significant shortfall of funding in these 
categories will unavoidably disrupt and delay FDA's plans for 
implementation of FSMA.
    The urgency of receiving full funding in fiscal year 2016 is that 
it is the year that both preventive controls regulations are scheduled 
to become effective and, thus, the last year to make investments that 
are crucial to orderly, effective, and timely implementation. In FDA's 
own estimate of funding need, enactment of the President's request for 
a budget authority increase of $109.5 million, for a total of $1.3 
billion in Budget Authority, and total Program Level of $1.5 billion 
when accounting for all requested resources, would make it possible for 
FDA to move forward in 2016 toward successful implementation of FSMA.
    If FDA were to receive less than full funding requested in the 
President's Budget for FSMA implementation in fiscal year 2016, FDA 
would focused on the highest priority activities. FDA's prioritization 
of activities aligns with the President's Budget policies related to 
FSMA. These priorities were decided with the full knowledge of the 
compliance implementation dates for the FSMA regulations identified.
    FDA would prioritize its focus on the FDA and state inspection 
modernization, training and industry assistance investments needed to 
implement preventive controls in all food facilities effectively and 
efficiently.
    FDA will make the best possible use of any available resources, but 
failing to make the proposed investments in any of these priority areas 
will force decisions to delay implementation of key elements of the new 
food safety system.
    Question. Will your revised proposal for irrigation standards for 
fresh cured onions remain when the final rule is published?
    Answer. As mentioned in the originally proposed produce safety rule 
(2013), we proposed to adopt an approach focusing on the likelihood of 
contamination of produce posed by the agricultural practices applied to 
the crop. We conducted a qualitative assessment of risk (QAR) of 
hazards related to produce production and harvesting. The draft QAR 
indicated that all produce commodities are potentially subject to 
similar microbiological hazard pathways: commodities can potentially 
become contaminated from, for example, direct exposure to contaminated 
water or soil amendments. Use of poor agricultural practices could lead 
to contamination and illness, even where the potential for 
contamination is otherwise relatively low. Therefore, we proposed to 
adopt a regulatory approach for minimizing the risks associated with 
those hazards and, as appropriate, provided flexibility for the use of 
alternative measures that would provide the same level of public health 
protection as the proposed standard.
    We received many initial comments and questions on this approach 
and on the topic of agricultural water, some of which were submitted by 
the onion industry. We are considering these comments as we continue to 
develop our thinking surrounding food safety on the farm. With regard 
to your question on the proposal for irrigation standards and onions, 
we also heard many concerns regarding the treatment of onions under the 
rule during our listening sessions and meetings with growers. The 
proposed rule provides a staggered compliance approach which allows an 
additional two-year compliance period for farms to comply with certain 
agricultural water standards.
    We have also evaluated the comments received to the docket for the 
Supplemental Notice and are carefully considering them in developing 
final requirements. Our goal is to determine an approach to 
agricultural water standards that will provide flexibility to allow the 
standards to be applicable to diverse irrigation and growing 
conditions, while still protecting public health.
    Question. For irrigation water testing, the growers in my state 
were hopeful that FDA or USDA could look into ways to identify local, 
federally-approved, resources that could test irrigation waters 
strategically for an entire system, instead of requiring individual 
owners to test the waters of every ditch and pipe. Are you considering 
ideas such as this?
    Answer. As outlined in our Supplemental Notice, we proposed to 
allow data sharing among farms if the farms are taking samples from the 
same water source and no there is no reasonably identifiable source of 
likely microbiological contamination between sampling sites and the 
points at which the farms draw their water. In fact, we encourage such 
sharing when appropriate. We included a proposed provision 
(Sec. 112.45(e)) that would explicitly allow data sharing under certain 
circumstances.
    Under proposed provision Sec. 112.45(e), we are proposing that a 
farm may meet the requirements related to agricultural water testing 
using the farm's own test results or data collected by a third party or 
parties, provided the water source(s) sampled by the third party or 
parties adequately represent the farm's agricultural water source(s) 
and all other applicable requirements of part 112 are met. This 
provision would provide flexibility for a farm to determine the 
appropriate means by which to meet the proposed testing requirements in 
proposed Sec. ?1A112.45.
    Under the supplemental proposed rule, farms using data collected by 
a third party or parties would still need to satisfy all applicable 
requirements of the proposed rule related to agricultural water 
testing. For example, the proposed rule includes requirements related 
to the timing of collection of samples, the number of samples 
collected, and specified analytical method to be used for testing, and 
recordkeeping.
    We are currently evaluating the comments received on the topic and 
are carefully considering them in our efforts to determine an approach 
to agricultural water standards that will provide flexibility to allow 
the standards to be applicable to diverse irrigation and growing 
conditions, while still protecting public health.
                                 ______
                                 
              Questions Submitted by Senator Patrick Leahy
    First, I want to thank the Department and Deputy Commissioner for 
Foods and Veterinary Medicine Michael Taylor for continuing to engage 
with the state of Vermont and our farmers and specialty producers. I 
hope that the Deputy Commissioner's many visits to the state have 
helped you to develop the best program possible for the industry, 
farmers, and consumers.
    But states and farmers are nervous, and rightfully so. There are 
serious price tags attached to these food safety rules, not only for 
the Federal Government, but also for the states, and for our farmers of 
all sizes who do not have the infrastructure in place to meet these new 
rules. I think we need to acknowledge that we cannot implement these 
rules without adequate funding. The FDA cannot implement FSMA on its 
own without involvement from the states, and we cannot ask our states 
to take on this burden on their own. Finally, we cannot expect farmers 
to make such monumental changes on their farms without technical and 
financial support.
                         state budget concerns
    Question. Vermont is one of 25 states that do not have any 
authority or capacity, or framework for that matter, to regulate the 
produce industry. With no guarantee that there will be Federal funds to 
support them in this work, I hope you can understand the reluctance 
these states have to develop a new produce program ahead of that 
promise of support and any funding.
    What assurances can you give to this Committee and states like 
Vermont that the FDA will prioritize this food safety work in your 
fiscal year 2017 budget request?
    Answer. The continued implementation of FSMA remains a key priority 
for FDA and fiscal year 2017 will be an important year for FSMA 
implementation. In particular, FDA plans are currently focused on areas 
such as implementation of the Produce Safety rule and continuing to 
enhance our import safety systems.
    FDA is currently working with the Administration to determine the 
appropriation level of food safety funding to include in the fiscal 
year 2017 President's Budget. We are looking forward to discussing our 
future budget needs in more detail when that determination is complete.
    Question. What will you be able to do if we continue to face lean 
Federal budget years and we are not able to fully fund this work 
through the appropriations process?
    Answer. In FDA's own estimate of funding need, enactment of the 
President's budget authority request for food safety of $1.3 billion, 
an increase of $109.5 million above fiscal year 2015 would make it 
possible for FDA to move forward in fiscal year 2016 toward successful 
implementation of FSMA. At this time, FDA would focus its efforts on 
the Preventive Controls rules which were finalized in September. We 
must continue our education and outreach efforts to ensure that 
industry is prepared to comply with these finalized rules. Beyond 
fiscal year 2016, without the additional funding requested in the 
President's Budget, FDA would need to reexamine FSMA implementation 
efforts.
    The success of building a modernized food safety system depends on 
FDA and industry working together, as well as working with State and 
other regulatory and public health partners, after the final FSMA rules 
are issued. Full funding of the President's budget authority request is 
essential to maintaining momentum toward timely and comprehensive 
implementation of FSMA and avoiding the disruption and loss of 
effectiveness that would result if FDA, the states and the industry are 
not adequately prepared to get implementation right. Without adequate 
funding to support this strategy, FDA will be unable to perform its job 
under FSMA, and the American people will not see the full public health 
benefits of the law.
    FDA is firmly committed to implementing FSMA the right way from the 
start. This means investing in the food safety culture change that is 
happening within FDA, but it also means being faithful to the 
comprehensive, holistic vision of food safety modernization laid out in 
FSMA. Congress directed FDA to build a modern food safety system, 
addressing food safety challenges across the spectrum of farms, 
manufacturers, and transporters of food, both domestic and foreign. The 
pieces of this system are closely interconnected and FDA cannot 
credibly hold domestic producers to the new standards if we are not 
doing the same for importers and their foreign suppliers. Nor can FDA 
do the reverse, holding importers and foreign suppliers, but not 
domestic producers, to new requirements. FDA believes that if we do not 
implement the new FSMA-mandated food safety system in the comprehensive 
way Congress envisioned, from the start, we will fail to achieve the 
FSMA goals of food safety, strengthened consumer confidence, and a 
level playing field for U.S. producers.
    Question. Are there ways to ease into the regulatory work the 
states will need to do until the FDA can provide them with the 
necessary amount of support?
    Answer. The states will play a key role in gaining and maintaining 
compliance with the produce safety rule in the farming community, if 
funding permits. FDA is committed to working with our state partners to 
make this a reality. FDA is aware that there may be a variety of ways 
that states plan to assist and engage in facilitating and overseeing 
industry compliance with the produce regulation. These activities span 
from outreach and education to inspections on behalf of FDA or 
enforcement of comparable state requirements. FDA is also aware that 
the timeframe for states to engage in produce safety regulatory 
activities may vary widely. FDA is working with state representatives 
to develop implementation plans that provide for different 
collaboration models consistent with individual state's level of 
engagement in the produce safety regulatory paradigm. FDA is also 
exploring different mechanisms to oversee industry compliance in the 
event the state chooses to focus its activities solely on outreach and 
education or when additional time is needed by the state to establish 
an inspection program or to establish and enforce comparable state 
requirements.
                          support for farmers
    Question. In Vermont, where we are historically a dairy state, 
there are a lot of new diversified produce farms that are working on 
older dairy farms. That means they may not have metal processing 
equipment, or equipment they can sanitize, and there are exposed beams. 
Production agriculture most often takes place side-by-side with value 
added processing. For these farms, some of your rules will be a real 
challenge to meet as they look to modernize their operations. In a 
small state like Vermont, these requirements may cost upwards of 
hundreds of millions of dollars, funds these farmers simply don't have. 
I am struck that we do not have a ``NRCS-like'' agency at USDA or FDA 
to help the farmers to address food safety issues that are highlighted 
by these new rules. Running these farms out of business because of 
these costs cannot be the answer.
    What partnerships can you develop with the U.S. Department of 
Agriculture (USDA) to help farmers make these infrastructure 
improvements?
    Answer. FDA has been working with USDA for several years on all 
aspects of our produce safety regulatory program. For those small 
farmers that may need to add new food safety practices to their 
operations, FDA, in collaboration with USDA and other stakeholders, 
plans to offer guidance and other support to help them achieve 
compliance. More specifically, USDA staff worked with FDA to develop 
and review provisions of the produce safety regulation, and USDA staff 
are working with FDA and our state partners to develop post final rule 
implementation strategies and best practices that will enable state 
organizations to use their resources effectively. As mentioned above, 
FDA and USDA-NIFA are also co-funding one national and four regional 
coordinating centers for food safety training, which will focus on 
providing needed education and technical assistance to small and 
medium-sized farmers. FDA and USDA also jointly fund the Produce Safety 
Alliance, which is tasked with creating standardized curriculum 
covering FSMA requirements and good agricultural practices. The 
curriculum will include materials on understanding and performing a 
risk assessment for individual farms to consider in determining if 
infrastructure improvements may be needed. In addition, USDA 
administers a variety of grant, loan and other financial assistance 
programs for which farmers may be eligible to apply.
    Question. What new programs or authorities are needed to help our 
farms to modernize to comply with these new rules?
    Answer. FDA is working at many levels to support programs aimed at 
assisting very small and small farmers to understand and comply with 
the produce safety rule. More specifically, FDA and USDA are funding 
educational opportunities to provide food safety training to produce 
farmers, such as training developed through the Produce Safety 
Alliance, so that they understand the basis of the requirements of the 
produce safety regulation and how to comply with the requirements. In 
addition, FDA has established a Technical Assistance Network to serve 
as a resource to respond consistently to questions from farmers and 
other stakeholders about interpretation and implementation of the 
produce safety regulation.\1\ FDA is also working closely with our 
state partners to develop education and outreach programs that will 
provide important educational resources and tools to help farmers 
comply with the requirements.
---------------------------------------------------------------------------
    \1\ For more information, see http://www.fda.gov/Food/
GuidanceRegulation/FSMA/ucm459719.htm.
---------------------------------------------------------------------------
    Question. What should we tell a farmer in Vermont who cannot afford 
to make these improvements without Federal support?
    Answer. It is FDA's intention to target our education efforts to 
the smaller businesses that may not be as familiar with our 
requirements, as well as some of the larger farms, so that they 
understand the regulations and have training and tools to comply with 
them.
    Based on our outreach efforts and public comments, we proposed in 
September 2014 revisions to several key requirements of the original 
proposed rule on produce safety to be more flexible and less burdensome 
in key areas. For instance, we proposed a tiered and more targeted 
approach to water testing and revisions to the microbial standard for 
agricultural water used during growing produce (other than sprouts) 
that will be more flexible and less burdensome on farmers while still 
protective of public health. We removed the nine-month proposed 
minimum-time interval between the application of untreated biological 
soil amendments and harvesting until the agency collects and reviews 
further scientific evidence. We modified the definition of ``farm'' to 
help reduce the burden on a farm that packs or holds produce grown on 
another farm such that it would be subject to the produce safety rule 
and not also the preventive controls rule. The proposed rule also 
reduces the burden on small entities in part through the use of certain 
exemptions and limitations, and provides all farms flexibility for 
alternative practices to be used for certain requirements with adequate 
scientific support. In addition, States (including the state of 
Vermont, for example) could also submit a request for a variance for 
one or more requirements of the proposed rule. Finally, we proposed to 
provide farms that meet the definition of small and very small 
businesses an additional two and 3 years to comply with most provisions 
of the rule.
    We recognize that it will take time and a concerted, community-wide 
effort for the wide range of farms to come into full compliance with 
the new requirements. FDA is committed to working with the produce 
community and with partners in the USDA, state and local agencies, and 
foreign governments to facilitate compliance through education, 
technical assistance and guidance.
    At the Federal level, USDA has opportunities designed to assist 
farmers with developing and growing their businesses. These 
opportunities come in several forms--including education; outreach; and 
grant, loan and other financial assistance programs--all of which are 
designed to provide farmers with resources to meet their individual 
needs. Further, FDA established the Technical Assistance Network that 
we intend to link to external Technical Assistance Networks; these 
networks will collectively serve as a resource for anyone subject to 
the regulations who needs assistance with rule interpretation and 
specific technical or scientific questions. We are counting on USDA's 
Cooperative Extension personnel, among others, to play a key role in 
the external Technical Assistance Networks to help provide assistance 
to the industry.
    (Additional information to USDA's various grant programs is 
available at: http://
    www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateA&
    navID=AMSGrants&leftNav=AMSGrants&page=AMSGrants&acct=AMSPW;
    http://www.grants.gov/search-
grants.html?agencies%3DUSDA%7CDepartment
    %20of%20Agriculture).
    Again, FDA's ability to achieve our goal of successfully supporting 
farmers in compliance efforts is dependent on adequate funding.
    The FDA is working with the USDA to establish one national and four 
regional food safety training centers. I am concerned that limiting 
delivery of food safety training nationwide to just these 5 centers may 
not effectively reach the grass-roots level and the targeted, intended 
beneficiaries.
    Question. Will the FDA also provide funding for on-the-ground food 
safety training to be delivered by university extension programs, non-
governmental organizations, and associations representing farms and 
small food processors/wholesalers?
    Answer. The Agency recently released a FSMA training strategy \2\, 
which outlines training options and delivery formats as well as 
introduces the partners in government, industry, and academia who are 
working with FDA on the development and delivery of training to the 
global community of food suppliers.
---------------------------------------------------------------------------
    \2\ http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm461513.htm
---------------------------------------------------------------------------
    Industry training will be an important component of successful 
implementation of FSMA. The needs of small- and mid-sized farms and 
facilities are at the center of FSMA training development and will be 
met through multiple efforts:
  --FDA has funded the creation of public-private Alliances (e.g., the 
        Produce Safety Alliance, Food Safety Preventive Controls 
        Alliance, and Sprout Safety Alliance) as a resource for 
        industry and to facilitate widespread understand of the new 
        requirements to support compliance.
  --FDA is partnering with USDA's National Institute of Food and 
        Agriculture (NIFA) to provide grants for food safety training, 
        education, extension, outreach, and technical assistance to 
        owners and operators of farms, small food processors, and small 
        fruit and vegetable merchant wholesalers. Community-based 
        organizations (CBOs), non-governmental organizations. 
        Cooperative extension programs are among the eligible entities 
        to receive grant funding, and the requests for applications 
        have specified that this program will provide significant 
        opportunities for funding through subcontracts and for 
        partnerships with eligible stakeholder groups who work directly 
        with the target audiences
  --Recognizing the great diversity among members of the food industry, 
        FDA will be funding cooperative agreements that will develop 
        training options for local food production systems and tribal 
        operations.
  --The agency is partnering with the National Association of State 
        Departments of Agriculture (NASDA) to collaboratively plan 
        implementation of the produce safety rule. NASDA will help 
        facilitate industry training while also having a role in the 
        delivery of training to state regulators.
    It will take time and adequate resources to make these efforts 
work. FDA is committed to making sure that everyone in the food supply 
chain knows what training and education resources are available, and 
how to gain access to them.
         risk assessments for soft-ripening and raw milk cheese
    Question. I have heard from many Vermont cheese producers who are 
concerned about regulations the FDA may develop that will impact the 
production of soft-ripening or raw milk cheese. These concerns were 
highlighted in comments submitted to the FDA by Allison Hopper, CEO of 
Vermont Butter & Cheese Creamery, who is a producer of soft-ripened 
cheese, and a member and past president of the American Cheese Society, 
and Catherine Donnelly, PhD, a University of Vermont professor and 
expert on the microbiological safety of food who has developed an 
extensive knowledge concerning sources of and mitigation strategies for 
control of Listeria in cheese making facilities. I will also include 
these comments in this hearing record.
    I hope these comments will help inform the Quantitative Risk 
Assessment the FDA is developing. Specifically, I would like to 
highlight a point that I hope the FDA will take to heart. Your risk 
assessments on soft-aged cheeses and raw milk cheeses include data 
relating to illegal, unlicensed producers. These producers are 
operating outside of the law, and will likely do so regardless of any 
regulatory changes. However, as Deputy Commissioner Taylor has seen 
first-hand, our small artisanal cheese makers in Vermont undertake 
extensive quality and safety programs to ensure their cheeses are safe. 
I fear that any regulatory change could have severe impacts on these 
Vermont cheese makers, even though they currently meet or exceed 
current regulations. These risk assessments are no doubt limited by a 
lack of information, but they could also be prejudiced by these cases 
of illegal or un-licensed producers.
    What assurances can you give me, and to Vermont cheesemakers, that 
you will work to remove any data pertaining to these illegal or un-
licensed producers from the final risk assessment so they do no create 
an unfounded bias against the careful work and processes done by our 
legal cheese producers?
    Answer. FDA recognizes the broad diversity in cheese manufacturing 
operations and approaches and has been working with the American Cheese 
Society in particular to learn more about artisanal cheeses and 
measures that cheesemakers take to ensure their products are safe. In 
conjunction with the July 2015 release of the joint FDA/Health Canada 
risk assessment on Listeria monocytogenes in soft-ripened cheeses, we 
announced a request for comments that would assist our efforts to 
identify and evaluate measures that might minimize the impact of 
harmful bacteria in cheeses made from unpasteurized milk. The Agency is 
committed to working and sharing an open dialogue with the artisanal 
cheesemaking community as we work on these efforts.
    The joint FDA/Health Canada risk assessment published in July 2015 
was first released as a draft risk assessment in 2012, and public 
comments were solicited. The public comments were considered and 
incorporated in the final assessment, as appropriate. In conducting the 
risk assessment, FDA followed best practices established by national 
and international institutions, which include taking steps to reduce 
any possible bias that could be introduced by the data used, conducting 
a peer-review process, and providing an opportunity for public comment.
    Question. I and others have worked hard to support and cultivate 
the artisanal cheese industry here in the United States. How are you 
working to harmonize our cheese regulations with the European Union so 
that we do not create trade barriers or risk American jobs?
    Answer. FDA is not currently undertaking efforts to harmonize its 
cheese regulations with those of the European Union. As far as FDA 
knows, not harmonizing our cheese regulations with those of the 
European Union is not having a detrimental impact. That being said, FDA 
welcomes feedback on this issue and is committed to working and sharing 
an open dialogue with the artisanal cheesemaking community. The Agency 
remains dedicated to ensuring a safe and wholesome food supply using 
the latest science to protect human health, and promoting dialogue with 
industry, consumers and other interested parties.

                          SUBCOMMITTEE RECESS

    Senator Moran. Again, thank you for your testimony. Thank 
you for the way that you have answered questions today and have 
presented testimony. And please express my gratitude to the 
folks at FDA for the outreach that has occurred in the 
development of these orders of control.
    With that, the subcommittee stands adjourned.
    [Whereupon, at 3:26 p.m., Wednesday, September 16, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]



   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016

                              ----------                              


                      WEDNESDAY, OCTOBER 21, 2015

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:01 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
    Present: Senators Moran, Blunt, Cochran, Daines, Merkley, 
Tester, and Udall.

         A Review of Rural Development in 21st Century America

STATEMENT OF HON. LISA MENSAH, UNDER SECRETARY FOR 
            RURAL DEVELOPMENT
ACCOMPANIED BY:
        TONY HERNANDEZ, ADMINISTRATOR, RURAL HOUSING SERVICE
        BRANDON MCBRIDE, ADMINISTRATOR, RURAL UTILITIES SERVICE
        SAMUEL RIKKERS, ACTING ADMINISTRATOR, RURAL BUSINESS-
            COOPERATIVE SERVICE

                OPENING STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. The subcommittee hearing will come to order. 
Good morning to those in front of us and to my colleague here 
at the dais.
    Today, our hearing is one in a series in which we are 
focusing on the appropriations process and how it affects 
agencies under our jurisdiction. This one is attentive to Rural 
Development (RD) at the U.S. Department of Agriculture (USDA), 
and we are interested in the strategic investments that are 
being made and can be made on behalf of rural America and the 
people who live there.
    Thank you, Under Secretary Mensah, for being here, and your 
three administrators. It is a pleasure to have you here, and we 
look forward to having a conversation with you about the nature 
of things that you are undertaking for the benefit of our 
country, but particularly the rural part of our country.
    I particularly, again, would tell you in this public forum 
thank you very much for your visit to Kansas, and I am glad to 
hear you say that we treated you well. I would say that you are 
just being kind and polite, but I know that we did. I know my 
State.
    Agriculture has been a bright spot and continues to be in 
our Nation's economy, 16 million jobs nationwide. I would say, 
Madam Secretary, that one of the primary interests in my 
running for public office was a belief in rural America and 
desire to see that it prospers so that we have a chance to have 
our children and grandchildren raise their families in the 
places that we in rural America call home. It is something that 
we cherish, and it is something that we want to make certain is 
preserved and future generations have that option in their 
lives.
    Rural Development is largely tasked with maintaining and 
improving that quality of life, and it can be providing loans 
for low-income families to own their first home, spurring 
economic development with grants to a small business, providing 
communities with financing to allow customers affordable 
utility rates.
    Rural Development continues to serve a significant role, 
and we want to make certain that you have the necessary tools. 
I always indicate that a constituency of mine is taxpayers. We 
want to make certain that the money the taxpayers provide you 
is well-spent, and we are anxious to hear about that today.

                           PREPARED STATEMENT

    Often, where I come from, economic development can be 
whether or not there is a grocery store in town. Many people in 
Washington, DC, do not have that experience, do not know how 
that could ever be an issue. But in many ways, they are some 
things that are very basic.
    Many rural communities today are facing unique and ever-
increasing issues related to urbanization and technology. 
Again, we want to hear what you have to say and work with you 
to see that good things happen.
               Prepared Statement of Senator Jerry Moran
    This hearing will come to order. Good morning. Today's hearing will 
focus on Rural Development at the Department of Agriculture and its 
strategic investments in rural America. Thank you Under Secretary 
Mensah, Administrator Hernandez, Administrator Rikkers, and 
Administrator McBride for being here today. Under Secretary Mensah, I 
enjoyed visiting with you recently in Kansas and hope you will return 
soon and often.
    Agriculture remains one of the bright spots in our nation's 
economy, supporting more than 16 million jobs nationwide and forming 
the backbone of our rural communities. For those of us who grew up in 
rural areas, it is a lifestyle we cherish and hope to preserve for our 
children and future generations to come. Rural Development is largely 
tasked with maintaining and improving that quality of life. Whether 
it's providing loans for low-income families to own their first home, 
spurring economic development with grants to small businesses, or 
providing communities with financing to allow customers affordable 
utility rates,
    Rural Development continues to serve a significant role in the 
nexus between need and opportunity.
    In my home state of Kansas, we determine economic development by 
whether or not your town has a grocery store. Many issues facing rural 
communities are unique to those areas in an ever-increasing urbanized 
and technologically-advanced world. I look forward to discussing the 
Rural Development mission and other relevant topics with our witnesses 
today. We have a lot to cover this morning, so I will turn it over to 
Senator Merkley for any remarks he may wish to give.

    Senator Moran. We have a lot to cover, and I will turn to 
my ranking member, Senator Merkley.

                   STATEMENT OF SENATOR JEFF MERKLEY

    Senator Merkley. Thank you very much, Mr. Chair. Thank you 
for putting together this hearing. It is a pleasure to have all 
of our witnesses here today.
    USDA Rural Development provides a remarkable set of 
opportunities to improve the quality of life in rural America. 
Very low and low-income families can receive the assistance 
they need to become first-time homeowners. Affordable 
multifamily housing and rental assistance is provided, 
particularly for very low-income and elderly and disabled rural 
residents.
    Remote rural communities can receive the help needed to 
construct hospitals, schools, child and elderly daycare 
facilities, and obtain health and safety vehicles and equipment 
and other essential community facilities.
    Other Rural Development programs include support for clean 
water and sanitary waste disposal projects and the expansion of 
high-speed rural broadband, which is critical for our rural 
communities.
    Rural Development is sustaining America's longstanding 
commitment to ensure adequate and affordable electric service. 
In addition, Rural Development supports opportunities for the 
creation and expansion of rural businesses, increasing job 
growth and income generation.
    Here in the Senate, we see these functions of USDA Rural 
Development as vital. There is strong support on this 
subcommittee for the work that you do. Of course, not 
everything always goes perfectly, and this hearing is an 
occasion for us to make inquiries but also to have you let us 
know of the difficulties that you are facing and the ways that 
program delivery could be improved to serve rural America.
    We are also pleased that we will be having a second panel, 
which will provide perspectives on these issues from users, 
advocates, and interest groups. I want to particularly thank 
Mr. Tony Chrisman, who came here from Oregon to offer insights 
from his extensive experience developing and rehabilitating 
affordable housing for low-income families in Oregon.
    So, again, Mr. Chairman, thank you for holding this 
hearing. I look forward to the testimony.
    Senator Moran. Senator Merkley, thank you very much.
    Under Secretary Mensah, we are delighted to have you with 
us, and we look forward to your testimony now.

                 SUMMARY STATEMENT OF HON. LISA MENSAH

    Ms. Mensah. Thank you so much, Chairman Moran, Ranking 
Member Merkley, and members of the subcommittee. Thank you for 
the opportunity to discuss the program successes and challenges 
of the Department of Agriculture's Rural Development mission 
area.
    I am accompanied this morning by Mr. Brandon McBride, Mr. 
Sam Rikkers, and Mr. Tony Hernandez. They are the 
administrators for Rural Development's Utilities, Business, and 
Housing programs, respectively.
    USDA Rural Development has a loan portfolio of more than 
$210 billion. Thanks to your support, in fiscal year 2015, our 
staff provided funding of more than $27.7 billion in rural 
areas throughout the United States and its territories.
    Rural Development is the catalyst for rural renewal. The 
projects we support create jobs, attract private investment, 
stimulate entrepreneurship, offer new economic opportunities, 
and connect rural areas to the world. They ensure that our 
rural main streets and our rural small businesses matter.
    Let me give you a few examples of what Rural Development 
funding does in a few States.
    On my first trip to Kansas, you, Mr. Chairman, and I had 
the chance to meet USDA Rural Development business development 
grant recipients like Kansas Main Street. Our grants support 
locally grown business development in the downtown area of 
communities, which are so important to rural economies. In 
Kansas, I was also impressed to hear about the Kansas Fiber 
Network, a network of rural telephone companies, all rural 
utilities borrowers, that provide advanced broadband services 
essential to business growth and stronger rural economies.
    This telephone company's network is dedicated to community 
outreach and business development, but it may not have been 
possible but for the low-interest loans we provide to rural 
telecommunications service providers. These affordable loan 
terms make financing possible for much-needed community 
investments.
    In Montana, we have a very close partnership with private 
sector entities like community economic development 
organizations. In my visit to Big Sandy, Montana, which happens 
to be the hometown of Senator Tester, I had the chance to visit 
Big Sandy Activities, a center we financed there that helps 
developmentally disabled people build skills and allows them to 
live and work in the community. I also saw firsthand how our 
business and industry guaranteed loan program was used to 
purchase and restore the Grand Union Hotel, strengthening the 
tax base and bringing jobs to Fort Benton, Montana.
    Rural Development support has enormous impact in small, 
rural towns. In my home State of Oregon, Imperial Stock Ranch 
in Wasco County is a family-owned and -operated business that 
supplied wool for Ralph Lauren designed sweaters. Supported by 
value-added producer grants, the Carver family has used these 
funds since 2008 to plan and for capital assistance.
    When I asked Jeanne Carver what this program is doing, she 
explained that it is bringing life back to the textile industry 
and creating jobs in rural communities.
    Our fundamental mission is to support thriving and self-
sustaining and prosperous rural communities. The President's 
2016 budget, which requests $38.9 billion for Rural 
Development, proposes to continue this good work.
    Every day, nearly 5,000 Rural Development professionals 
work to help rural businesses provide affordable rental housing 
and maintain and upgrade infrastructure investments. This work 
is important to the modernization of rural America and makes 
rural communities places where young people will want to stay, 
start families, build businesses, and create futures.
    Let me say just a little bit more about our three areas. I 
want to begin with housing. This is a special point of pride, 
our housing programs.
    Our 2016 rural housing budget of $28.6 billion will 
continue to help people in rural America, particularly those in 
greatest need, put a roof over their head. The bulk of this 
budget, $24 billion, supports private sector lenders in rural 
America and turns moderate-income rural Americans into 
homeowners.
    Let me say another bit about Rural Utilities Service. Here 
for over 80 years, USDA has funded basic infrastructure 
services, which make a significant difference in the quality of 
life in rural America. These investments keep electricity 
reliable and affordable, deliver faster Internet service to 
rural families, and provide clean and safe water for rural 
communities.
    Overcoming geographic and demographic challenges to offer 
access to robust broadband service is among the reasons that 
just 50 percent of those living in rural communities have high-
speed Internet service. In our fiscal year 2016 budget, the new 
farm bill Broadband Program proposes $44 million to fund 
broadband infrastructure, and the 2016 budget for the Electric 
Program requests $6 billion to continue to provide reliable 
electric service to rural consumers while making improvements 
to increase efficiencies.
    Let me say another word about our business and cooperative 
programs. These continue to bring investments and jobs to rural 
areas. The 2016 budget of just over $1 billion will help 
continue rural renewal, benefiting not just our rural 
communities, but growing a stronger economy for the entire 
country through investment in rural businesses, energy, and 
entrepreneurial support.
    Our 2016 budget requests $75.7 million to provide loans and 
$5 million in grants to rural small businesses, farmers, and 
ranchers to purchase renewable energy systems under our Rural 
Energy for America Program. Expanding investment in renewable 
energy projects improves the environment and helps create jobs.
    This 2016 budget also offers funding to spur development 
with opportunities through the Value-Added Producer Grant 
Program, the Business and Industry loan program, and the Rural 
Business Development Grant Program.
    Undergirding all these three programs is the investment we 
make in our people and our systems. The President's 2016 budget 
requests $686 million for the salaries and expenses of USDA 
Rural Development. This is particularly important since Rural 
Development's loan portfolio has grown to over $210 billion. It 
continues to grow each month, while staffing levels to manage 
this growth have not recovered from the declines of the past 
year.
    Congress has provided significant resources to make a real 
impact in rural places. There is something extraordinary about 
rural America's ability to survive and thrive. Investments in 
rural America are investments in our country's future. With 
your continued support, we can leverage our resources to turn 
Rural Development's transactional work into transformational 
work.
    I appreciate this opportunity to testify, and at this time, 
I am happy to answer your questions.
    [The statement follows:]
                 Prepared Statement of Hon. Lisa Mensah
    Chairman Moran, Ranking Member Merkley and members of the 
committee, thank you for the opportunity to discuss the programs, 
successes and challenges of the Department of Agriculture's Rural 
Development mission area. I am accompanied this morning by Mr. Brandon 
McBride, Mr. Sam Rikkers, and Mr. Tony Hernandez, Administrators for 
the Rural Utilities Service (RUS), Rural Business-Cooperative Service 
(RBS) and the Rural Housing Service, respectively.
    I am pleased to represent agency mission area with the primary 
responsibility of creating opportunities and improving the quality of 
life in rural areas. The investments we make in rural America 
contribute to rural growth, which is essential to national economic 
growth. Approximately 15 percent of the population of the United States 
is considered rural, while nearly 72 percent of our land mass is rural. 
Rural Development works on a daily basis to support the needs of that 
15 percent--the 46 million American citizens that provide the food, 
fiber and fuel that the rest of the nation--and the world--depend upon.
    USDA Rural Development has a loan portfolio of more than $210 
billion. In fiscal year 2015 our staff made loans, loan guarantees and 
grants of more than $27.7 billion in rural areas throughout the United 
States and its territories. Because Congress has supported our field 
based delivery structure, Rural Development has staff in every state to 
make the loans and grants that help our rural communities become 
stronger and more vibrant.
    Rural Development assistance includes direct and guaranteed loans, 
grants, and technical assistance. Rural Development's work is designed 
to maximize taxpayer dollars. Often our support is leveraged with 
private sector financing or is provided as a guarantee to private 
banks. Recipients contribute their own resources or obtain third-party 
financing, expanding the level of support we provide to rural 
communities. During this past year, the total Rural Development 
leverage--our use of non-Federal funds--was $7.67 billion, or 118 
percent of our $6.5 billion goal.
    Rural Development is the catalyst for rural renewal: the projects 
we support create jobs, attract private investment and stimulate 
entrepreneurship. Our investments build communities, offer new economic 
opportunities, and connect rural areas to the world. They ensure that 
our rural Main Streets matter and our rural small businesses matter.
    On my first trip to Kansas, I had the opportunity to visit Emporia, 
and along with Senator Jerry Moran, recognize USDA Rural Business 
Development Grant recipients. These grants will help recipients like 
Kansas Main Street Inc. with small business development in the downtown 
area of communities. The work of Rural Development supports a shared 
American conviction that locally-grown businesses are important to 
rural economies and enhance the quality-of-life for rural residents.
    In Kansas I was also impressed to hear about the Kansas Fiber 
Network, a network of rural telephone companies--all borrowers from our 
Rural Utilities Service Telecommunications program--which provides 
advanced broadband and telecommunications services--essential to 
business growth and stronger rural economies. This telephone company's 
network, which is dedicated to community outreach and business 
development, might not have been possible but for the types of low-
interest loans USDA provides to rural telecommunications service 
providers. Rural Development's affordable loan terms make financing 
possible for much-needed community investments.
    Every day, 4,600 Rural Development professionals work to help rural 
business, provide affordable rural housing, and maintain and upgrade 
infrastructure investments. This work is so important to the 
modernization of rural America; it connects citizens to broadband; it 
builds a cleaner future through renewable power and energy efficiency; 
it reduces child poverty by investing in businesses; it helps manage 
the growing healthcare needs of an aging population; and makes rural 
communities places where young people will want to stay, start 
families, build businesses and create futures.
    When I was in North Dakota, Sen. Hoeven and I discussed how 
critical affordable, reliable infrastructure is to rural America. 
Economic development investments in infrastructure, business and 
housing are an important part of building strong, sustainable 
communities. Oftenthese investments are simply not affordable. Loans 
and loan guarantees from Rural Development make these projects--which 
are so vital to rural growth--affordable to these communities.
    Recovery Act funding delivered an unprecedented investment in rural 
areas. Broadband and water and waste infrastructure will continue to 
improve the quality of life in rural areas for generations to come. Our 
successful Recovery Act broadband projects mean that Reservation 
Telephone Cooperative in North Dakota can improve efficiency and 
security of oil production and pumping through electronic monitoring. 
Baca Valley Telephone Company in New Mexico can now provide broadband 
across its 2,600 square mile service territory, serving some of the 
most remote farms and ranches in the U.S.
    As a result of $3 billion water and wastewater Recovery Act 
investments, 820 projects are providing cleaner, safer water to 
2,883,673 rural residents. This funding provided awardees like Grady 
County Rural Water in Oklahoma, a new source of water to serve their 
community. Previously, the water used to serve the district was sourced 
through Ft. Cobb Lake and often suffered from high iron and manganese 
content. In addition, several of the district's customers did not have 
access to a public source of water, hauling water to their homes or 
businesses or relying on private wells. As a result of Recovery Act 
funding and RUS' water and wastewater programs, Grady County now has a 
new water supply to provide clean, affordable water to their customers.
    Access to safe, clean drinking water is essential at any time, but 
especially during drought. Rural Development (RD) is actively working 
to assist eligible communities facing severe drought conditions. In the 
past 2 years, RUS has awarded 48 Emergency Community Water Assistance 
Grants (ECWAG) totaling $18.6 million in California to assist rural 
communities suffering drought impacts. In fiscal year 14, RUS awarded 
25 ECWAG grants totaling $9,730,570 million to rural California 
communities. The Agency also provided assistance to the City of San 
Joaquin to upgrade their systems in response to the drought. In fiscal 
year 15, RUS awarded 23 ECWAG grants totaling $8,870,944 for projects 
in the state. In addition the Agency awarded four Household Water Well 
Grants totaling $730,461 to three California non-profits to provide low 
interest loans to rural residents for individual water wells, 
particularly in drought- impacted areas.
    Rural Development also finances large, long-term loans to develop 
communities and grow businesses. We invest in smaller, specific 
projects targeted at the smallest producers. Weprovide financial 
support for underlying utility, housing and community facility needs of 
rural communities. These investments are the building blocks for 
economic development that is so critical to the future of rural areas.
    Our Rural Business and Cooperatives Service (RBS), in partnership 
with other public and private sector stakeholders, promotes rural 
business and employment opportunities and supports key energy 
investments that grow rural Americans' ability to compete in the global 
economy.
    One of the foundations of our work here in Rural Development is the 
close partnership we've developed with private sector entities like 
community and economic development organizations. Senator Tester and I 
visited several Rural Development projects, including Big Sandy 
Activities--a center that helps developmentally disabled people build 
skills to allow them to live and work in the community. I saw firsthand 
how our Business and Industry Guaranteed Loan program was used to 
purchase and restore the Grand Union Hotel in Fort Benton. This loan 
helped restore the Hotel, built in 1882, strengthening the tax base and 
bringing jobs to Fort Benton. Rural Development support has an enormous 
impact in this rural town.
    The same B&I program provided DeVilbiss Healthcare, LLC with a loan 
to purchase equipment and machinery and to transfer manufacturing 
operations from China back to the United States. DeVilbiss manufactures 
and distributes respiratory medical devices and products such as 
nebulizers, oxygen concentrators, and continuous positive airway 
pressure equipment. The financial assistance preserves 92 jobs and 
creates 20 new jobs in rural Pennsylvania. These projects not only help 
rural businesses grow, but help reverse recent rural outmigration 
trends.
    Loans and grants from our Rural Housing Service and Community 
Facilities Programs (RHS and CF) support rural residents and the 
communities in which they live. Congress has defined for us a powerful 
set of housing and community development programs to ensure that rural 
families can live in safe, affordable homes and thriving communities.
    Rural housing programs anchor communities and play a key role in 
creating and sustaining wealth through home ownership. When a mobile 
home park in Shelburne, Vermont went up for sale, community leaders 
came together to ensure affordable housing would still exist downtown. 
Thanks to a $1 million RHS loan, the Shelburne Vermont community now 
has the Wright House --one of five apartment buildings in Harrington 
Village, an affordable housing community that is home to over 36 senior 
citizens and persons with disabilities.
    Our tribal investments support a wide range of needs in Native 
American areas. At the beginning of October, I was in North Dakota on 
the Spirit Lake Reservation to announce Rural Business Development 
Grants to create a business incubator in a renovated mall that would 
provide jobs and entrepreneurial opportunities. Rural Alaskan Village 
Grants are building water and waste systems, making communities safer 
and increasing the quality of life in remote Alaskan communities. High 
Energy Cost Grants deliver cleaner and more cost effective energy 
sources across the country. Projects announced in September will 
benefit a number of Alaskan Natives and Native American areas, such as 
the project to install wind turbines in the St. Francis community of 
the Rosebud Sioux in South Dakota.
    These are just a few of the many projects in which Rural 
Development is proud to invest. Our fundamental mission is to support 
thriving, self-sustaining and prosperous rural communities. Without RD 
funding, many rural communities could not make the investments to help 
them grow and prosper in the years ahead. Without these programs, rural 
communities would lack access to basic housing, safe water, broadband, 
and support for rural small business. Yet we know we have more to do.
    We are committed to working with partners to best serve rural 
areas. We understand that solid public-private partnerships and well-
placed intentional investments can--quite literally--mean life or death 
for some communities.Because of the funding you provide to us--$38.3 
billion in 2015--people who live in rural places today see historic 
opportunities in sectors such as local and regional food systems, 
emerging markets, the bio-economy, and manufacturing.
    The President's 2016 budget, which requests $38.9 billion for Rural 
Development--proposes to continue that work by giving priority to 
investment in rural businesses that want to take advantage of emerging 
markets as well as focus resources in areas of greatest need. Rural 
Business- Cooperative Service--A Force for Rural Jobs and 
Revitalization.
    USDA's Rural Business-Cooperative Service (RBS) continues to bring 
investments and jobs to rural areas. The 2016 budget requests over $1 
billion to help continue this rural renewal--benefitting not just our 
rural communities, but growing a stronger economy for the entire 
country through investment in rural business, energy, and 
entrepreneurial support.
    The 2016 budget requests $75.7 million to provide loans and $5 
million in grants to rural small businesses, farmers and ranchers to 
purchase renewable energy systems and increase energy efficiency 
through the Rural Energy for America program. Expanding investment in 
renewable energy projects improves the environment and helps create 
jobs, ultimately offering opportunities to enhance prosperity in rural 
areas.
    Today, we are using lessons learned from our lengthy experience in 
rural America to help communities capitalize on emerging opportunities 
in the 21st Century economy. Consider our work in the rapidly expanding 
area of local and regional food systems. USDA's ``Know Your Farmer, 
Know Your Food'' initiative provides tools and resources to farm and 
food businesses, including those run by women, people of color, and 
veterans as they tap into the growing market for local food. Rural 
Development is helping connect these rural businesses to new market 
opportunities with business planning assistance, infrastructure 
development and our boots on the ground to leverage resources and get 
the deals done for these businesses. In the last 3 years alone, we have 
supported over 600 local food businesses as they diversify and reach 
new markets.
    For example, a Poplarville, Mississippi resident and veteran of the 
wars in Iraq and Afghanistan, launched a hydroponic agriculture 
operation. Funded in part by RBS, an ``Armed to Farm'' workshop helped 
this new farmer better manage the business side of his operation. After 
shadowing other agribusinesses, he says he now feels more confident 
about the future of his company, SmithPonics.
    This 2016 budget offers funding to spur development of products and 
opportunities for rural business innovation with the Value Added 
Producer Grant Program, the Business and Industry loan program and the 
Rural Business Development Grant Program.
    Throughout my travels to rural communities, it was clear that 
addressing the challenge of outmigration and giving our rural children 
opportunities to stay and use their skills to earn a living in their 
communities was extremely important to local community leaders, family 
members and businesses. I know this can be done. Imperial Stock Ranch 
in Wasco County, Oregon is a family-owned and operated business that 
supplied wool for Ralph Lauren-designed sweaters worn by United States 
athletes at the Sochi Winter Olympics. They also launched a ``ranch-to-
runway'' line of clothing with award-winning fashion designer Anna 
Cohen. They did all of this nearly three thousand miles removed from 
the frenetic pace of New York City's fashion district. The Carvers have 
benefitted from USDA's Value-Added Producer Grant (VAPG) program since 
2008, using funds for planning and capital assistance. Our VAPG 
program--one of nearly 50 programs and services administered by Rural 
Development--is breathing life back into the textile industry and 
creating jobs here in the United States.
rural housing services--anchoring communities with homes and essential 
                               facilities
    A special point of pride for Rural Development is our housing 
programs. Since 2009, Rural Development has helped more than 900,000 
rural families buy, repair or refinance a home and provided funding for 
3,000 multi-family housing developments. Access to safe, modest, 
affordable housing is vitally important to the health and growth of 
rural areas. Helping to make the American Dream a reality is a 
tremendous responsibility. I am delighted that through our housing 
programs are often stepping stones on the journey to homeownership 
which will help build wealth and security for rural families. We offer 
one of the best home mortgages in the United States and boast a low 
default rate.
    The 2016 Rural Housing budget of $28.6 billion will continue to 
help people in rural America, particularly those in greatest need, put 
a roof over their heads. The bulk of this budget--$24 billion--supports 
private sector lenders in rural America by guaranteeing the mortgages 
they make to help moderate income rural Americans become homeowners. 
Another vital part of our housing program provides rental assistance to 
low-income people who live in USDA-financed multi-family housing. In 
fiscal year 2016, Rental Assistance of nearly $1.2 billion will help 
create a sustainable program to offer rural residents--most of whom are 
seniors with fixed incomes--the security and peace of mind of a safe 
and affordable place to live. We have worked hard to address challenges 
of providing sustainable rental assistance to those who rely on this 
program, and I am optimistic that continued efforts and investment will 
lead to a stronger program to better serve rural residents.
    In this, the 50th year of Rural Development's Mutual Self-Help 
Housing Program, we also completed 50,000 homes through partnerships 
and sweat equity. In fact, several Members of Congress and 
congressional staff participated in self-help builds this year to help 
us mark this important milestone.
    Rural Development is committed to continually testing new ways to 
address housing needs in rural America. The USDA Energy Efficiency 
Manufactured Home Pilot Program was introduced this summer in New 
Hampshire and Vermont. A low-income home buyer interested in purchasing 
a high-performance modular home and placing it in a mobile home park 
would be eligible for a 30-year mortgage at a 3.25 percent interest 
rate. Very low-income home buyers may be eligible for an interest 
subsidy down to 1 percent. The mortgage is the first of its kind for 
residents of mobile home parks, where home buyers face high interest 
rates, short loan terms and high energy costs.
    The Rural Housing Service (RHS) continues to make tremendous gains 
to its systems and processes--and recently took on a decade of needed 
upgrades. As of this spring, our guaranteed Single Family Housing loan 
program is now paperless. Not only are we saving 37,500 reams of paper 
every year, we've lowered postage costs, saved printer ink, and are 
moving loan guarantees out the door much more quickly and making our 
programs easier for our customers to use.
    We are also in the process of modernizing the delivery of the 
Single Family Housing direct loan program through automation. Beginning 
fiscal year 2016, RHS will implement an automated underwriting system 
nationwide, permit third parties to submit applications electronically, 
and move from paper-based to electronic customer files. These 
improvements will provide underwriting consistency nationwide, 
additional security features, and the ability to seamlessly transfer 
work when states experience increases in applications.
    The men and women of USDA take seriously the responsibility of 
supporting those who live and work in small towns and rural 
communities. They have worked hard to reduce backlogs, increase 
efficiencies and reduce program costs. These successes include the 
Single Family Housing Guaranteed Loan Program, which significantly 
decreased the amount of time staff spends processing a guaranteed loan 
request and save millions of dollars in cumulative operational and 
administrative cost each year. These time and cost-saving processes 
make it possible for government programs to continue manage a growing 
portfolio and meet mission goals with smaller operating budgets and 
reduced workforce.
    From fiscal year 2012 to fiscal year 2014, Rural Development 
invested in 335 Public Private Partnership community infrastructure 
projects across rural America in 49 states. RHS leveraged over $3.5 
billion in community facilities direct loan funds from 2012 to 2014, 
with $1.2 billion from institutional investors and the capital credit 
markets to strengthen investment in critical infrastructure projects, 
spurring economic growth and job creation, and increasing access to 
healthcare, education and other critical services. The 2016 budget 
request of $2.3 billion for the Community Facilities (CF) program would 
enable 13.7 million residents to benefit from improved health, safety 
and educational facilities. Services such as those provided by 
Pikeville Medical Center in Kentucky, which offers healthcare to 
patients from persistently poor areas, can grow. Pikeville Medical 
Center used the CF program to construct a new medical office building 
containing research facilities, outpatient surgery suites, endoscopy 
facilities, physical exam space, labs and lecture halls.
    Building on this success, and working with others to understanding 
the needs of the region, Rural Development partnered with the 
University of Pikeville, the Appalachian Regional Commission, and the 
U.S. Economic Development Administration by providing a $40 million 
Community Facilities loan for the construction of a health professions 
education building to provide instruction and demonstration for the new 
College of Optometry, School of Nursing, and other student support 
services. This funding enabled USDA to establish a Public-Private 
partnership for the new facility.This partnership resulted in a 
facility that added 75 jobs to the local economy and created a 
distributed community-based clinic model that added an additional 25 to 
30 jobs in local clinics. In addition, the facility brought new 
services to the region, as previously there was no College of Optometry 
serving that state or many of its neighbors.
    In communities like Pikeville, public private partnerships have 
bought together critical resources, innovative capacity, financial 
expertise, project development skills and technical assistance, to 
large complex community infrastructure projects at a time when RHS 
staff resources have been reduced. They have strengthened underwriting 
with another set of eyes, reducing RHS credit risk and providing a 
long-term partnership for servicing loans and communication with the 
borrower. Most importantly, these partnerships allow USDA to assist 
more rural communities, invest in vital community facilities, and help 
more rural residents.
    In other rural areas, we are supporting organizations that are 
addressing more basic needs and on the front lines of the fight to 
alleviate poverty. Second Harvest of South Georgia is a non-profit that 
feeds hungry people in 30 Georgia counties and is the largest in 
Georgia outside of the Atlanta metro area. USDA provided funding 
through a $5.2 million Community Facilities loan to build a 
distribution facility in Thomasville that produce up to 10,000 meals a 
day for South Georgia residents in need.
 the rural utilities service--investing in infrastructure for a modern 
                             rural america
    For over 80 years USDA has funded basic infrastructure services, 
which make a significant difference in the quality of life in rural 
America. Rural Utilities Service (RUS) investments keep electricity 
reliable and affordable and deliver faster Internet service to rural 
families and to businesses, allowing them to compete in the global 
economy. Our water and wastewater programs provide clean, safe water to 
help healthy rural communities grow and prosper.
    We are proud of the work of RUS to deliver much needed broadband 
infrastructure in the past 5 years. Because of the Recovery Act 
Broadband Improvement Program, RUS was able to successfully invest 
nearly $3 billion in 254 projects in 45 states and territories to 
deliver high speed Internet to rural areas unable to draw competitive 
for private service. As companies build out these services 260,000 
rural households, 17,500 businesses and 1,900 schools, libraries and 
healthcare facilities have new service with potential for exponential 
growth in the future. Loans under this program have been extremely 
successful.
    We know we still have work to do. Overcoming geographic and 
demographic challenges to offer access to robust broadband service is 
difficult and among the reasons that just 50 percent of those living in 
rural communities have high speed Internet service. The fiscal year 
2016 budget request for the Farm Bill broadband program seeks $44 
million to fund broadband infrastructure in rural areas. RUS received 
15 requests for $118 million in funding for a $55 million program, 
demonstrating the need to bring high-speed Internet to rural areas.
    The White House in September released a report on ways to continue 
to bring broadband to unserved areas. We are beginning work on those 
important next steps of getting robust broadband service available to 
all who live in rural areas, not just the 50 percent who currently 
benefit from access to high-speed Internet.
    We believe that all RUS programs that fund broadband will be an 
important resource in this effort, which is why the 2016 budget is 
requesting $65 million, an increase of $30.2 million over fiscal year 
2015, for broadband access in rural communities that are least likely 
to have broadband infrastructure needed for economic development.
    The 2016 budget request for the RUS electric programs is requesting 
$6 billion to continue to provide reliable electric service to rural 
consumers.
 investing in the people and core services that make rural development 
                          investments possible
    All of the good work of Rural Development is only possible because 
of the people who do this work. After years of retrenchment we are 
carefully rebuilding or staff and making sure they have the right tools 
to be strong partners in rural America. The President's 2016 budget 
requests $686 million for the salaries and expenses of USDA Rural 
Development to support the delivery of the direct and guaranteed loans 
and grants, technical assistance and economic development strategies 
outlined above. In addition, this investment in our people will help us 
continue to provide quality service not just in our national office, 
but in the field, where staff know rural communities because they are 
part of those communities. New employee hires will fill mission-
critical skill shortages resulting from a two-year hiring freeze. This 
is particularly important since Rural Development's loan portfolio has 
grown to more than $210 billion, while staffing levels to manage this 
growth have not recovered from declines of the past few years. This 
level of funding also includes information technology investments to 
the Comprehensive Loan Program, which safeguards the portfolio from 
cyber threats and improves management capabilities.
    Over the course of the last several years, we have chosen to be 
proactive in identifying and assisting areas of greatest need in rural 
America, rather than waiting for those places to find us. StrikeForce, 
Promise Zones, Stronger Economies Together and other initiatives are 
just a few of the many reasons that I am so fiercely proud of the 4,600 
Rural Development professionals nationwide. Our Agency and its partners 
are willing to help us move assistance to the places that need it most.
    Congress has provided significant resources to make a real impact 
in rural places. Yet the opportunities and the challenges of rural 
America make it clear to all of us that more needs to be done. I am 
deeply moved by seeing taxpayer dollars at work in rural communities. 
There is something extraordinary about rural America's ability to 
survive and thrive. It is a place where values count and where 
stewardship is a meaningful obligation. Working to address rural 
challenges is an amazing privilege.
    In the time that I've been with USDA, I've witnessed rural 
resiliency on a very personal level. I watched the town of Floresville, 
Texas turn out in force to launch their improved water treatment 
system. I visited the Peoples Rural Telephone Cooperative in Jackson 
County, Kentucky which built a state-of-the-art, fiber-to-the-premise 
network that offers isolated rural residents the same economic, 
educational and social opportunities available to residents in urban 
areas. I toured a condiment manufacturer in Brundidge, Alabama that is 
expanding its business and market share with support from Rural 
Development. Each of these investments made in rural communities is an 
investment in our country's future.
    I appreciate your continued interest and support of Rural 
Development programs. When countries cannot make rural infrastructure 
work, it impedes not only their rural places and people; it holds back 
the growth of the entire Nation. USDA Rural Development and our 
partners address the unique needs of communities often lacking large 
populations or other support mechanisms. Together, we can coordinate 
and leverage our resources to turn Rural Development's transactional 
work into transformational work.
    I appreciate the opportunity to testify before the Senate 
Agriculture Appropriations Committee. At this time, I am happy to 
answer your questions.

    Senator Moran. Under Secretary, thank you very much.
    We will turn to the gentleman from Montana and recognize 
him.

                      RURAL DEVELPMENT VISIBILITY

    Senator Tester. Thank you, Mr. Chairman. Thank you for 
having this hearing, and thank you for your generosity in 
giving me a first crack at this, because I have another 
meeting.
    Thank you all for being here. I appreciate it very, very 
much.
    I am going to go a couple different directions here. I am 
also a product of rural America. You saw my hometown, Lisa, and 
it was good to have you there. You guys do a lot of good work.
    You talked about the Rural Utilities Service (RUS). Quite 
frankly, I do not think we would have power to this day if it 
was not for RUS. The same thing could be said for telephone, 
and we will get to broadband in a minute.
    But the question is now. I mean, that was in the days of my 
grandfather and father and mother and grandmother. So they knew 
it. They knew they would not have power unless we had the 
cooperative movement and government support. We would not have 
been able to cut the ribbon on that water processing plant in 
Big Sandy without Federal Government support.
    Yet, when I go talk to my neighbors, I am not sure that 
they think the Federal Government had anything to do with any 
of these projects. What can be done about that? Quite frankly, 
we have to do something with the budget. We have to do things 
that are smart to move forward. I think pulling investment from 
rural America would be a mistake, but there are some who want 
to do that, and some of them are my neighbors who get full 
advantage of these programs.
    So the question is, what can we do to educate people about 
these projects that would not be done, whether it is a water 
project in Big Sandy, whether it is Big Sandy activities, the 
second biggest employer in the town--by the way, the first 
biggest employer is the public schools, both government 
agencies, both government entities, in a sense--or whether it 
is revamping the private sector like the Grand Union Hotel that 
you talked about, which is a jewel and brings in a lot of 
business to that area. What can we do to inform people? What 
can you do to inform people?
    Ms. Mensah. Senator, I appreciate your passion about our 
almost invisibility in some ways, and I think there are a 
couple things we can do.
    In part, we need our private partners to also explain our 
role in supporting them. So this is a partnership. When we come 
in and we do a renovation, we do it in partnership with our 
private partners. So we need some help from the people whose 
loans we guarantee to also say this message.
    Senator Tester. Okay.
    Ms. Mensah. And the other thing is the way we ourselves get 
out the word. One of the best things that I think you have done 
in this budget is to allow us to be a field-based agency. We 
are not invisible. We have staff in all of our 50 States that 
are the neighbors of these people. The more we can be the 
neighbors, I think we have a special advantage in a way other 
Federal agencies do not.
    So I would say those two things.
    Senator Tester. Thank you. It is maybe not this way all 
over the country, but we have probably come off the best 6 
years in agriculture we have ever had where I live. We have had 
incredibly good crops and high prices. That does not happen 
very often. Yet starting at about the mid-1980s, it has 
happened progressively along since the homestead days, but 
starting about the mid-1980s, we have seen a mass exodus off 
the land, an incredible mass exodus.
    My farm, for example, we are 1,800 acres. People go, wow, 
that is big. No, that is about a third the size of the average 
farm in Montana. And, quite frankly, because of that 
consolidation both in the marketplace on inputs and the 
marketplace on where we sell our products because it is very 
limited, we have seen a lot of consolidation on the ground, a 
lot fewer farms, a lot less people, a lot bigger farms.
    The chairman could probably say it in Kansas. I mean, rural 
America is de-populating in a big, big, big way. The rural 
population is declining across-the-board.
    So when we talk about economic recovery, and we talk about 
your programs that are very important, we talk about the farm 
bill, we have to look and say, are we really doing economic 
development in rural America the best we can do? It could be 
argued, and it is argued by some with some merit, that these 
programs have all failed because the population is getting 
less, it is not getting more.
    We are not seeing economic growth in rural America like we 
are in urban areas. We are not seeing people staying in rural 
America like they once did. As that swirl keeps happening, it 
gets worse. It does not get better, until we turn it around.
    Now I will tell you that I appreciate the work you do, and 
I support your programs. And I think we need to be doing all we 
can do to empower you because I think you are the key, more 
than any other thing we do in rural America, whether it is in 
housing, broadband, whatever it might be, to bring it back.

                            BROADBAND ACCESS

    But in Montana, and I would bet it is the same in eastern 
Oregon, and I would bet it is the same in Kansas, our broadband 
is not where it needs to be. I was going to say another word, 
but I am not. It is not where it needs to be. We have a lot of 
folks here being left out of the 21st century economy.
    By the way, when you live in rural America, there are not a 
lot of customers, so broadband gives you that ability to get to 
those customers.
    We just had Wheeler out, Chairman of the Federal 
Communications Commission (FCC), last week. Great guy, by the 
way.
    Do you talk to him, Mr. McBride?
    Mr. McBride. I have, yes.
    Senator Tester. Do you talk about what can be done in rural 
America, as far as utilizing your dollars, public-private 
partnerships, or however you want to do it, to maximize those 
dollars to get broadband to houses and businesses in rural 
America?
    Mr. McBride. Yes, sir. Thank you for the question.
    The President appointed a Broadband Opportunity Council 
earlier this year. What that council encouraged us to do more 
than anything else was to communicate more amongst agencies, 
know what other folks were working on in terms of expanding 
broadband access and how we can do that. That has helped us at 
RUS in terms of having regular weekly meetings with other 
agencies, including the FCC, and talking about what we can do 
to support the expansion of broadband access.
    Senator Tester. So what does that really mean? I mean, I 
got you. You are talking. And by the way, communication is 
important, and we need to break down the silos, and we need to 
go down that whole line. But what does that really mean as far 
as getting projects on the ground to get Montana wired up?
    I would bet you a dollar to a doughnut, Chairman Moran can 
say the same thing about Kansas, and Heidi Heitkamp can say the 
same thing about North Dakota. So this isn't just Montana.
    What are we doing? What are we actually doing to be more 
effective with the programs that we have, so that we know, when 
we fight like hell to get you extra dollars, that that money is 
actually getting to the ground and it is not getting ate up in 
administration, and it is actually doing what it needs to do to 
get these folks connected up?
    Mr. McBride. Yes, sir. At the President's direction, what 
we have done is we have looked at each of our existing 
authorities and each of our programs.
    Senator Tester. How do you to determine need?
    Mr. McBride. I am sorry?
    Senator Tester. How do you determine need?
    Mr. McBride. Determine need?
    Senator Tester. How do you make that call, whether that 
money goes to north-central Montana, whether it goes to a place 
that is a little bit more populated, or whether it goes to an 
urban area?
    Mr. McBride. Well, for our programs at RUS, there are loan 
applications. So we try to get the word out, go to conferences 
and visit with potential borrowers and the groups that are 
interested in expanding broadband. But then we work with them 
to see whether a loan application is possible and what would 
make sense for their business case.
    Senator Tester. I am not making a judgment here--and I am 
sorry for going way over time. I will wrap this up.
    Do you feel that you are getting that information out so 
that your partners on the ground in remote frontier areas know 
their options?
    Mr. McBride. Yes, sir. We can always do better, but we are 
doing the best that we can.
    As the Under Secretary mentioned, we have a great field 
operation, and they do a lot of work in terms of letting people 
know about our programs. So we are doing the best that we can 
to spread that message.
    But you are correct. Less than 50 percent of rural America 
has access to the same high-speed Internet.
    Senator Tester. And I will tell you, just in closing, it 
breaks my heart to see what is going on in rural America. It 
really does. I mean, in my hometown, we have lost both hardware 
stores. We have lost two of the three grocery stores.
    We have even lost three of the five bars. That's how bad 
it's getting. I mean, now we have a crisis situation.
    We have to be more effective. I am not going to be here for 
the second panel, but I really hope that the folks who are 
going to be on these panels address the kind of communication 
that you need to make sure we are doing it right from the top 
end, and, quite frankly, talk about the need that is out there, 
actually, if we met the need of your partners, if it would 
actually do any good at keeping people around or if this is 
just the trend and it is going to happen and we cannot do a 
damn thing about it.
    I personally do not believe that. I do not think it is just 
on your shoulders, by the way. I think there are a lot of other 
things that we need to be doing about developing capitalism and 
the marketplace for the inputs and for our sales and all that 
kind of stuff, because it is a highly noncompetitive market in 
my opinion.
    So thank you, Mr. Chairman. I appreciate the courtesy, and 
I apologize for taking too much time.
    Senator Moran. Thank you for joining us, Senator.
    Senator Merkley.

                          PROGRAM DUPLICATION

    Senator Merkley. Thank you very much, Mr. Chairman.
    Thank you for your testimony.
    Under Rural Development, there are approximately 50 
programs. So if you were to identify two or three that need to 
be looked at very closely, as perhaps ones that are weakest or 
duplicates, what would you point to and say we should take a 
close look at this for potential consolidation? Or perhaps 
there is a more cost-effective way to achieve the same mission?
    Ms. Mensah. That is a hard question, making us choose 
between our children.
    Senator Merkley. Yes, I know, choosing between your 50 
children.
    Ms. Mensah. What I can say without--speaking impromptu 
here--is that there are 50 programs. Some are in statute that 
are very close to each other, so there are many specifics that 
tell us to work in particular areas, Alaska villages, colonias. 
I think there is a reason why we were asked to look 
specifically at those, even though it is broadly in the same 
area.
    What I really think is that our three core areas, each have 
dominant players. There is no question that the Single-Family 
Housing Guarantee program dominates in our housing program. 
There is no question that the Business and Industry Guaranteed 
Loan Program dominates in our business program. There is no 
question in our Rural Utilities program, the size and scale of 
our electric programs and our new farm bill broadband.
    What I have seen is that our administrators know how to get 
the most out of these programs. I don't feel that there is 
waste and costly duplication. What I feel is that every grant 
program that we have, and some of those are grant programs, 
there is a group of people who take so seriously how we get 
these dollars in rural America. So I would ask you not to look 
at the number of those programs, but look at their impact.
    Some of our programs, even modest, like the self-help 
housing program of $17 million, that is just such a critical 
program in the way it builds self-help housing. We have done 
our 50,000th house this year.

                              PARTNERSHIPS

    Senator Merkley. Okay, so let's take that for a moment. 
Thank you very much for coming out to Oregon to visit a self-
help housing program. Of course, it is wonderful that you come 
from Oregon. I was hearing the stories about Kansas and Montana 
and getting a little jealous, but I knew you would come to 
Oregon, and we are delighted you did.
    But let's take that for example. That model of sweat 
equity, build your own house, low-cost loan, is very similar to 
the Habitat for Humanity model. Have we looked at whether that 
model makes sense to do independently or to do through 
subsidies to groups like Habitat for Humanity? Is there a more 
cost-effective way to undertake it?
    Ms. Mensah. Well, I will ask Tony Hernandez. I know I will 
say that, actually, we have partnered with Habitat. I, in fact, 
saw a property this spring where we were direct partners with 
Habitat.
    But, Mr. Hernandez, would you speak to our partnership with 
others?
    Mr. Hernandez. Thank you very much.
    Senator, we are very excited to partner with lots of 
organizations. What we do best is that we are a mortgage 
company. We also provide technical assistance grants to help 
those nonprofits.
    What we are doing with Habitat is trying to get them to use 
our product, which is the 502 direct loan, to help them build 
more homes. They are trying to become a mortgage company as 
well. We are a larger mortgage company. We can actually help 
them acquire more lots and use our product so they can build 
more homes.
    So we are in the homeownership business, not just building 
and financing. What we are trying to do is partner with other 
groups, just like Habitat, across the country. We have met with 
the national Habitat organization and smaller groups to say, 
how can we help you do more if you use our product?
    Senator Merkley. Thank you. I am going to cut you off 
there, because you are talking about the partnerships, which 
are wonderful.
    I want to turn to another question, but I appreciate that.

                      RURAL ENERGY SAVING PROGRAM

    The Rural Energy Savings Program is one that was authorized 
in the farm bill. Secretary Vilsack pledged to implement it. We 
understand that Rural Development, there is an existing 
program, energy efficiency and conservation loan program, which 
is similar to Rural Energy Savings Program in that it is 
basically low-cost loans to do energy-saving retrofits to 
buildings. However, it has not been taken up because interest 
rates are higher.
    Has there been any progress that can be reported at this 
point in actually implementing the Rural Energy Savings 
Program?
    Ms. Mensah. Thank you, Senator.
    I will say that you are correct that there is a similar 
program, but let me ask, since the Rural Energy Savings does 
work closely with our Rural Economic Development Loans and 
Grants (REDLG) program. Let me ask Acting Administrator Rikkers 
to tell you where we are in the process of implementing this.
    Senator Merkley. Great.
    Mr. Rikkers. Senator Merkley, the RESPA (Rural Energy 
Savings Program Act) program, as it is referred to, we stand 
with you. You have been an advocate for cost-savings through 
energy efficiency both for small businesses and consumers that 
RESPA is targeted toward.
    We are encouraged that the Senate mark on this year's 
appropriation bill provides funding for that RESPA program. 
With that funding, we believe that that will help clear a path 
and really help us continue to work with your staff to make and 
implement that program.
    [The information follows:]

    Rural Energy Savings Program Act (RESPA) is a voluntary program 
that will create jobs and lower energy bills for families, farms, and 
small businesses by promoting energy-saving improvements to homes and 
buildings in rural communities. The program will assist rural electric 
co-operatives in offering low-interest loans to their consumer-members 
for efficiency improvements, allowing repayment of the loan through 
savings on monthly electric bills. Individual co-ops or State-based 
groups of co-ops will apply to the Rural Utilities Service (RUS) within 
the USDA for loans to fund local energy efficiency programs. RUS loans 
to the co-op for efficiency programs will bear a zero percent interest 
rate. The co-op can re-lend to consumer-members for efficiency 
improvements at low-interest to defray the cost of administrating the 
program.
    Rural Development has developed a work plan and is currently 
assessing how to best implement the program in the loan portfolio of 
the Rural Economic Development Loan and Grant program.

    Senator Merkley. Okay, I will look forward to future 
reports. Please keep me apprised.
    My time is up. Thank you so much.
    Senator Moran. Senator Merkley, thank you.

                       RENTAL ASSISTANCE PROGRAM

    Let me ask about housing, Mr. Hernandez or Madam Secretary. 
Over the last 3 years, appropriations for rural rental 
assistance have grown by $336 million. Yet we have indications 
that the amount requested for rental assistance renewals for 
fiscal year 2016 will not be adequate.
    We have worried about that. In fact, our appropriation bill 
language criticizes the administration, the program, and the 
ability of Rural Housing Services to provide accurate 
information on the amount needed to renew those existing rental 
assistance agreements.
    Can you provide detailed information on the amount 
necessary to renew all the expiring rental assistance 
agreements for fiscal year 2016?
    Ms. Mensah. Thank you, Senator, for the question about 
rental assistance. As you know, this drives our ability to be 
in the affordable housing business in rural America, 14,000 
properties, and rental assistance is crucial to it.
    There is no question financing this program is a challenge 
for us. We continue to be in conversation with you because it 
is a challenge. Our estimates are made 2 years in advance. And 
yes, they are often off.
    So we acknowledge this challenge. We acknowledge that, yes, 
we will likely need more than we had estimated. I do not have a 
precise number for you today.
    Senator Moran. We, certainly, would like that information. 
Obviously, the appropriation bill requires that information be 
provided. You need it to manage the program. We need it to make 
certain that we do our job in a fiscally responsible way, so 
there are no surprises.
    With a fixed amount of money that we have to spend within 
this budget, that number helps determine what other programs 
within USDA, including Rural Development, might receive. That 
requires us to have the best information possible to make those 
decisions.
    So I reiterate that request, and we look forward to having 
a conversation with you to get those numbers.
    Ms. Mensah. Thank you. I look forward to that as well. We 
take it seriously.
    [The information follows:]

    When formulating its budget request, RHS uses the best estimates of 
local tax, utilities, and other operating expenses. However, these 
items may change and cause fluctuations above the estimate. To help 
moderate the impact of cost fluctuations that the agency can account 
for, RHS implemented an updated method for obligating rental assistance 
(RA) in October 2015. This tool provides more accurate estimates of 
future property-level funding needs. It also processes rental 
assistance contract renewals more quickly and efficiently. The updated 
RA obligation tool estimates RA needs on a per property basis, with the 
objective of improving accuracy by using more timely data and reducing 
the incidence of second renewals. The obligation tool provides as near-
real time data as possible, and the built-in inflation factor adjusts 
for the time lag between budget development and receipt of the 
appropriation. The revised estimate for fiscal year 2016 is 
$1,389,695,000, which is $217,795,000 above the fiscal year 2016 
President's budget request. The revised estimate assumes that the re-
renewal prohibition carried in the fiscal year 2015 law will not be in 
the fiscal year 2016 law, including for the units with contracts 
renewed during the current continuing resolution which carries the 
fiscal year 2015 prohibition.

                         UNIVERSAL SERVICE FUND

    Senator Moran. Let me ask, this could be for you Secretary 
Mensah or Administrator McBride, the issues related to RUS and 
the FCC, it was raised a bit by the Senator from Montana. But 
it seems to me that we have set the stage in which the FCC has 
made decisions related to revenues that are going to be 
received that then affect the ability to repay loans.
    So I have been worried for a long time, going back to the 
original order of the FCC particularly related to the Universal 
Service Fund, whether or not companies across Kansas and around 
the country will have the necessary revenues, first of all, to 
provide the service, but secondly, in the absence of adequate 
compensation for the Universal Service Fund, the ability to 
repay RUS.
    You indicated conversations have taken place. I have tried 
to get Rural Development and the FCC chairman in the same room 
to have these conversations. It seems to me that there was an 
unwillingness to have that occur.
    So what I am looking for is I guess the degree of 
coordination that is taking place. I heard you indicate to 
Senator Tester that meetings occur, but can you assure me in 
pretty definite terms about the assistance that RUS is making 
known, the problems and challenges that will arise to your 
borrowers should orders affecting the Universal Service Fund 
continue down the path that they have been on.
    Mr. McBride or Secretary.
    Ms. Mensah. I think I will ask Administrator McBride to 
speak to this issue of coordination.
    And you have asked for an assurance? I can tell you we will 
assure you that we will be in dialogue with our Federal 
partners on this.
    Senator Moran. In that regard, how serious is the issue? Am 
I raising something that is relevant?
    Mr. McBride. Any time that you are talking about something 
that will impact one of our borrowers, I have concerns, because 
we want to make sure that our portfolio is strong, and we 
believe that it is.
    In terms of what is happening with FCC, we do communicate 
with them regularly. As they develop their proposals, we 
provide some feedback. But they are a regulatory agency, so 
there is a little bit of separation there. But we do try to 
discuss the potential impacts of their rulemaking.
    Senator Moran. They are a regulatory agency, and they are 
an independent agency, but you are part of an administration. 
What I am looking for is that there is an assurance that at a 
higher level within the administration that the position that 
Rural Utility Services is in and will be in as a result of 
decisions at the FCC related to Universal Service Fund is being 
communicated to the FCC.
    I guess I am also interested in--you tell me that you 
communicate with them, what do they say? Have you seen any 
evidence that they are doing anything different, as a result of 
you raising these issues?
    Mr. McBride. Yes, sir. They have heard our concerns, and I 
know that they have tried to take that into consideration. We 
have communicated that at a high level with them.
    Senator Moran. Let me go at this one more time. 
Fortunately, as the chair, I get to have as many rounds as I 
like, so I will see if I can ask this question perhaps for the 
last time on this topic. But tell me what your concerns are. 
How dramatic of a consequence could changing the Universal 
Service Fund be to the ability of your borrowers to pay back 
their loans they have borrowed? And what is the contingent or 
possible liabilities that will accrue to your agency as a 
result of FCC orders?
    Mr. McBride. I do not have the answer to your second 
question, because I do not know exactly how they will make 
final changes to the Universal Service Fund (USF). I know that 
they are aware that we are concerned about their modeling and 
how that might impact our program. We have shared that 
information with them and had those conversations with them.
    Senator Moran. In another round, I would like to explore 
further why perhaps rural telephone companies and others, 
potential borrowers, are not seeking loans from RUS. My guess 
is that there is a causal relationship because we do not know 
what the FCC is going to do in regard to the Universal Service 
Fund, so there is not only the fear of, ``Can I repay my 
loan?'' but there is also the fear that I should not take out a 
loan. The consequence there is that fewer Americans in rural 
America will be served by broadband.
    Mr. McBride. You are correct that there were some concerns 
in recent years. Actually, this year, we did see a slight 
increase in terms of the loan dollars that we were able to put 
out from our traditional infrastructure program. We also saw an 
increase in applications for our farm bill broadband loan 
program. So there is an increase in interest in our programs.
    Senator Moran. I look forward to exploring that. Thank you, 
Mr. McBride.
    The Senator from Montana, Senator Daines.
    Senator Daines. Thank you, Mr. Chairman.

                 BROADBAND AND UNDERSERVED COMMUNITIES

    I spent decades in the private sector before coming to 
Washington, DC. I was, for 12 years, part of a cloud computing 
company we started up in Boozman, Montana. We took the company 
public. Oracle acquired us a couple years ago.
    In fact, if I were to ask you where Oracle was going to put 
their North America cloud command operation center for the 
entire Oracle cloud, if I said, is it going to be in Silicon 
Valley, Boston, New York, perhaps even Tel Aviv or Singapore, 
if I told you it was the Boozman, Montana, it wouldn't have 
been your first guess, anyway.
    I think this is showing what is going on in technology 
today, where technology has removed geography as a constraint 
and this nexus of a quality of life of rural America that we 
have, where the millennials say, ``I want to have my cake and 
eat it, too. I don't want to have to sit in traffic for 2 
hours. I want to be able to get to a trout fishing stream, get 
to the mountains, and so forth. But I want a world-class 
career, best in class, that relates to my business experience, 
too.'' We have that now, thanks to technology.
    So I've lived it. I've breathed it. I'm passionate about 
ensuring that we provide connectivity here for all of America, 
including rural America.
    That also translates to our ag communities, where our 
farmers and ranchers are now high-tech operators, in terms of 
what they do. It is amazing what is going on there. Certainly, 
in agriculture, we improve productivity and we not only feed 
our country, we feed the world.
    So a question for Under Secretary Mensah. In your 
testimony, you highlight the need for more work to be done in 
expanding rural access to broadband and that just 50 percent of 
those living in rural communities have high-speed Internet 
service.
    Despite this fact, the administration's Broadband 
Opportunity Council recently released a report on increasing 
broadband employment and directed RUS to make funding available 
in areas that already have a broadband provider.
    Many communities in Montana, and I know I can speak--
Senator Tester was just here earlier and made his comments from 
a Montanan's perspective.
    By the way, we had Chairman Wheeler, Senator Tester and I 
did, last week in Montana. It was great to have him there to 
see what is going on in rural America.
    But many Montanans do not have access to broadband, not 
even one provider, let alone thinking about having two. We 
should be focusing dollars, I think, on unserved communities, 
not just improving speeds for those who already have 
connectivity.
    So the question is, how is RUS going to avoid duplicative 
investment and make sure that funding is given to those who 
need it, who virtually have no connectivity at the moment?
    Ms. Mensah. Thank you, Senator, for raising this issue. 
Thank you. It is, certainly, our intention to serve rural 
America with broadband services and to reach those areas which 
are beyond the last mile. So I want to share your seriousness 
about this.
    Let me ask, though, Administrator McBride to explain what 
it is like within the Rural Broadband program and RUS, and 
explain how we look at applications in our already-
oversubscribed farm bill Broadband Program, so that we do not 
have a duplicative situation.
    Mr. McBride. Thank you for the question, Senator.
    What the Broadband Opportunity Council overall was trying 
to look at was that there are some differences between 
broadband availability in rural America versus urban, in terms 
of high-speed Internet. So that was one of the issues that the 
council looked at.
    In terms of how we administer our programs at RUS, in the 
2014 farm bill, Congress included language directing us to 
require at least 15 percent of a potential application area be 
unserved. So we have direction from Congress to include that 
percentage of unserved residents.
    And also the farm bill sets the standard in terms of how 
many incumbent providers can already be there. So if there are 
already three providers in a proposed service territory, that 
application would be ineligible.

                   BROADBAND SERVICE IN TRIBAL AREAS

    Senator Daines. Let me ask a follow-up on that, pivoting 
over to our tribal lands. Montana is home to 12 federally 
recognized tribes, plus one State-recognized tribe, the Little 
Shell. Thanks to the dedication of Montana companies, like 
Triangle Communications, residents of the Rocky Boy and the 
Fort Belknap Indian reservations have access to broadband for 
the very first time.
    However, the broadband access on tribal lands continues to 
be an issue. In fact, high-speed broadband on most tribal lands 
in Montana is virtually nonexistent.
    Since 2009, USDA has awarded nearly $20 million in funding 
to provide broadband service in tribal areas. So the question 
is, what does RUS plan to do going forward to connect tribal 
communities?
    Mr. McBride. Thank you for the question, Senator.
    We are trying to expand our outreach to tribal areas and 
help them understand the programs that are available to them 
and potential applications.
    Earlier this year, we funded our first substantially 
underserved tribal area telecom application in New Mexico. That 
was a great project there that brought fiber to the homes in 
that area. So we are, certainly, open to this and would be 
happy to work with your constituents on this.
    Senator Daines. I am out of time, but the last comment, I 
think these investments in broadband infrastructure are really 
investments in innovation. This is really an opportunity what 
we are seeing around our country that we can lead globally 
here.
    When I was running businesses there in Boozman, Montana, I 
had an office in Tokyo and one in Sydney, but I could do it 
right there from Montana. This is really the wave of the future 
for our country. Thank you.
    Senator Moran. Senator Daines, thank you very much.
    The Senator from Mississippi, Mr. Chairman, welcome.

                   STATEMENT BY SENATOR THAD COCHRAN

    Senator Cochran. Mr. Chairman, thank you. I am pleased to 
join you in reviewing what the status of these programs are 
that are administered by this panel of witnesses.
    Thank you for the good work that you do and the outreach 
that you undertake to help acquaint organizations out there in 
the small towns and communities of rural America that there are 
Federal programs that are designed to make available 
fundamental ways of enjoying living out in the country, as they 
say, and yet having some of the modern conveniences that so 
many of us take for granted. So thank you for being here today 
and helping us review and implement ways that this subcommittee 
can be helpful through either legislative language suggested 
for adoption by Congress or regulatory action that you would 
like to modify.
    We want to work with you and be helpful to you.
    We are from the government. We are here to help you.
    Senator Moran. Mr. Chairman, thank you. Thanks for joining 
us.
    The Senator from Missouri, Senator Blunt.

                            BROADBAND ACCESS

    Senator Blunt. One other topic on the connectedness issue, 
which I think we all understand is really important that we get 
this done so that everybody does have capacity to compete and 
to offer products and to communicate.
    Mr. McBride, you mentioned a couple times unserved and 
underserved, and I wondered what programs you have that address 
both of those things. Frankly, several of us are on the 
Commerce Committee as well, and I am much more interested in 
assisting unserved areas than I am assisting a second 
competitor where there is already somebody there that might 
meet some definition of underserved.
    So do you want to talk about that a little bit, the 
difference in unserved and underserved, and what programs you 
might have, what areas, in both those categories?
    Mr. McBride. Yes, sir. Thank you for the question.
    We have four primary programs were we fund the expansion of 
broadband access. The first is our traditional infrastructure 
loan program, which is targeted to communities of under 5,000. 
We have a farm bill broadband loan program, which the 
population goes up to 20,000.
    Then we have two grant programs. One is the distance-
learning and telemedicine program, which helps improve health 
care access and educational opportunities. That is a grant 
program.
    The program that we have that actually targets unserved 
areas is called Community Connect. The subcommittee gives us 
around $10 million to $15 million a year, I believe, to make 
small grant awards to communities that do not have existing 
broadband service. That is our primary tool in terms of getting 
to communities that do not have access.
    Senator Blunt. Are the other three available to both 
underserved as well as unserved communities?
    Mr. McBride. Yes, sir.
    Senator Blunt. Then you look at those applications and 
decide where you are gaining the most new service?
    Mr. McBride. Yes, sir.
    In terms of the distance-learning and telemedicine, and the 
farm bill loan program, both of those programs are 
oversubscribed, so the competition is quite difficult for both. 
So certainly for the loan program, we are looking at areas 
where there is not much service or it needs to be improved.
    Senator Blunt. Thank you, Mr. Chairman.
    Senator Moran. Thank you, Senator Blunt.
    We are going to do another round of questioning. I am going 
to try to limit mine to perhaps one area, and it is back to 
you, Mr. McBride.
    Mr. Rikkers, do you feel left out? Or pleased?
    Mr. Rikkers. Happy to be here, sir.
    Senator Moran. All right.

             BROADBAND OPPORTUNITY COUNCIL RECOMMENDATIONS

    Senator Daines talked about this, Senator Blunt talked 
about this, underserved and no service. We have seen examples 
of that in our State. I noticed that in the development of your 
rules, you are headed toward the direction of not making loans 
when there is a loan to another company who already has and is 
providing service in the area, another RUS loan recipient.
    Mr. McBride. Yes, sir.
    Senator Moran. I did not say that very well.
    Mr. McBride. I understood.
    Senator Moran. Thank you for understanding. You have made 
the decision that you are not going to make loans to companies 
who want to provide service to a place that there is already a 
company providing service with an RUS loan. Is that accurate?
    Mr. McBride. Yes, sir.
    Senator Moran. And the part that caught my attention was 
the Broadband Opportunity Council's recent report. It seems to 
go the other direction. It is an August report that says, 
broadband loan eligibility should be expanded to different 
providers ``even though an incumbent exists.''
    How do you square what RUS's policy is versus what the 
broader group of people is saying is the goal?
    Mr. McBride. Certainly, with the Broadband Opportunity 
Council, the good thing about the council and its 
recommendations is that we were looking at all of our suite of 
programs to see what we could do to support broadband access. 
The council's actions would not require additional funding or 
additional legislation. It was just simply to look at our 
programs to see what we could possibly do.
    In terms of the issue that you raised, of course, we will 
have to follow what is in statute and what Congress has 
directed us to do, in terms of looking at potential applicants 
where there are already service providers. So that will be our 
lead focus.
    Senator Moran. Tell me once again what you understand 
Congress' direction to be in that regard.
    Mr. McBride. Well, in terms of the farm bill loan program, 
if there are three existing service providers, then an 
application to serve that service territory would be 
ineligible.
    Senator Moran. Okay. When you make a determination about an 
RUS loan to provide broadband services, the subsidy that is 
provided by RUS, is it what is designed to be the sufficient 
amount of additional revenue to make the service available to 
make it work? The question I have is, do you bring in other 
territories that already have incumbent providers, a larger 
community, for example, and allow a loan recipient--duplicate 
service is not the right phrase, but add additional service 
when there is already service being provided as part of the 
revenue source, so that areas that have no service get that 
additional revenue?
    I will try one more time. My question is this, is the 
subsidy sufficient to make this work, or do you need to have 
larger population areas within that territory to further 
subsidize the ability for that carrier to provide broadband?
    Mr. McBride. The three basic things that we would look at 
for new application are: Is the population of the area that 
they want to serve under 20,000? Did they include at least 15 
percent of an unserved area in their application? And then, how 
will their finances work?
    So we want to look at all those things to see what they do. 
Some of the applications that we received in the most recent 
round, they were proposing to serve up to 50 percent unserved. 
So we want to make sure that there are fewer than three 
existing service providers, and that they meet that target in 
terms of unserved population.
    Senator Moran. Fifteen percent of the proposed area of 
service is the requirement for the loan? Your application is 
based upon an area that has no service, that has to equal at 
least 15 percent of what they are applying to serve? Is that 
what you are telling me?
    Mr. McBride. Yes.
    Senator Moran. The other 85 percent could have an 
additional provider already providing the service.
    Mr. McBride. Yes.
    Senator Moran. Okay.
    Mr. McBride. As long as they do not have more than three.
    Senator Moran. And the revenue that is generated from that 
85 percent may be taken into account to determine your final 
criteria of whether or not this is fiscally, financially 
possible.
    Mr. McBride. Yes. We have to make sure that any loan that 
we make, that they will be able to repay us and be successful.
    Senator Moran. Okay. Thank you.
    Senator Merkley.
    Senator Merkley. Thank you, Mr. Chairman.

                    RENTAL ASSISTANCE 2015 SHORTFALL

    I want to go to rental assistance in more detail. The 
chairman asked about the shortfall, and the numbers that we 
have been provided for the shortfall for fiscal year 2015 was, 
very precisely, we're talking basically $101.5 million, 
precisely, is the number provided by your department.
    In the second panel, Tony Chrisman is going to present his 
story, which is typical of what has happened with that fiscal 
year 2015 shortfall, which is that the individuals who are 
operating multifamily projects, who own these projects, they 
are paid for each unit. Each unit, the family pays 30 percent 
of their income and then the balance is paid through this 
rental assistance program.
    But in August, mid-August, the money ran out. So the folks 
who have these multifamily projects stopped receiving payments.
    For example, for Mr. Chrisman, the total amount of rental 
assistance not paid to date is $365,000. That is that share of 
that $101.5 million shortfall.
    We provided authority for those shortfalls in fiscal year 
2015 to be filled back in, but the owners have not received any 
notice that they are going to be compensated for that 
shortfall. Are you planning to fill in the shortfall in 2015? 
Or are we going to leave these owners across America just 
hanging out there suffering this loss?
    Ms. Mensah. Thank you, Senator Merkley. That is, certainly, 
not our intention to leave owners hanging.
    I am going to ask Administrator Hernandez to speak to your 
specific question about how we want to catch up the shortfall 
that we had in fiscal year 2015 as we head into fiscal year 
2016.
    We are thankful that we were able to limp across the line 
into September, into our new fiscal year, and we do want to 
bring that whole again.
    Mr. Hernandez. Great. Thank you very much.
    Senator, our goal is to try to help as many of those 
property owners as we can. First of all, we are going to use 
the allocation that you have given us for appropriation this 
year for the continuing resolution (CR). We will fund those 
property owners who have run out of money and they are into the 
new fiscal year.
    Senator Merkley. So be specific. Are we going to backfill 
the missing payments from fiscal year 2015, the August and 
September payments that we failed to pay?
    Mr. Hernandez. We are trying to figure out how we can do 
that, sir. Right now, we cannot use the CR money to do that by 
statute, so we are trying to figure out----
    Senator Merkley. My understanding is that we did enable 
that to be done, but that there is reticence to do so. Is there 
a legal question? This has not come back to my attention. This 
is an issue we have been raising continuously. Can you please 
get us exact details on how that is the case? That was fully 
the intention that this was to be able to be backfilled.
    Mr. Hernandez. I will find out how we can do that.
    [The information follows:]

    The USDA is committed to delivering a sustainable rental assistance 
program and has made significant progress in addressing the challenges 
in managing the statutory and funding cycles of this important program. 
The fiscal year 2015 appropriations law prohibited a property from 
receiving a second renewal of fiscal year 2015 Rental Assistance (RA) 
agreement funding within a 12-month period. Because of this, the agency 
was prohibited from providing a second renewal in fiscal year 2015 to 
44 properties. Rural Development (RD) advised borrowers about steps 
that could be taken in order to leave operating funds in project 
accounts to pay project expenses, to the extent possible. The 
prohibition on second renewals was lifted by the Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Act, 2016 (Continuing Resolution) for properties that 
were renewed in fiscal year 2015. However, there is no additional 
language in the Continuing Resolution that allows USDA to reimburse the 
properties that did not receive the needed RA funding in fiscal year 
2015. Funding made available during the Continuing Resolution (CR) 
period allowed USDA to renew all the RA Agreements that needed a 
renewal as of October 1, 2015, under the same terms and conditions as 
previously authorized in fiscal year 2015 and it also included being 
able to renew the contracts for those properties that were prohibited 
from a second renewal in 2015. However, that prohibition remains in 
place for the 2016 contracts written under the CR authority per the 
same terms and conditions requirement.

    Senator Merkley. Okay. Because otherwise, you have all 
these owners who we made a contract with, we left them hanging. 
That can bankrupt a company very, very, very quickly.
    Furthermore, it sets up a real dilemma, because when 
someone leaves one of these units, the owner is required to 
take the family on the list who has the greatest need, which 
means their 30 percent of their personal income is going to be 
very little. If they're facing a situation where they are 
supposed to take a family who can pay very little rent, but 
then the U.S. Government is going to fail at the end of the 
year to complete their contracts, that is unacceptable, isn't 
it?
    Mr. Hernandez. Sir, we are working with your team to try to 
make sure we have more predictability, increased accuracy in 
the way we do the funding, to try to understand the costs of 
the buildings. That is why we have implemented new tools to 
have better accuracy in forecasting what it will cost.
    Senator Merkley. This is what I want to know. I want you to 
come back to us, and we will work together. This is rural 
affordable housing across America. We are talking about 260,000 
units, 14,000 projects, which got shortchanged.
    I don't think it is the intention of any of us that we 
should not fulfill the vision that we laid out.
    This is going to have huge repercussions for future 
willingness for developers and owners to participate in this 
program. Let's get this fixed.
    Madam Secretary, you didn't have a number for fiscal year 
2016, but the numbers that we have been provided is that we are 
$120 million short by best estimates on top of the $101.5 
million for fiscal year 2015. That is a huge issue.
    So if we are going to be running out again this coming 
August, we have to fix this. We need you all to come to us with 
a proposal so we can have this subcommittee really chew on it 
and say, okay, well, my understanding is it was fixed in the 
continuing resolution so it could be backfilled, and then for 
the start of fiscal year 2016, the authority was to be able to 
kind of forward load the funds. So we still had a problem, but 
at least we had fixed it for our owners for fiscal year 2015.
    I am hearing it has not been fixed. When I hear that there 
isn't a precise number for fiscal year 2016, I am afraid we are 
going to have this crisis again at the end of this year.
    Now that I have eaten up all my time, I just want to say, 
let's get to the bottom of this. Propose to us plans A, B, and 
C, and let's figure out how to resolve this.
    Mr. Hernandez. I look forward to the partnership, sir.
    Senator Merkley. Thank you.
    Senator Moran. Senator Merkley describes my understanding 
of the situation as well, that this was fixed, the backfill 
should occur. If there is a problem within the agency, we need 
to know that. My understanding is that your general counsel is 
trying to figure out how to do it. We believe we gave you the 
authority to do it.
    That does not solve the problem at the end of the next 
fiscal year, but it solves the problem at the moment. And it 
reduces exacerbating the circumstances we face in the future.
    Senator Blunt.
    Senator Blunt. Secretary Mensah, several questions on what 
the FCC might do that impacts what your agency is trying to do.

                               EPA RULES

    On other rules and regulations, the Environmental 
Protection Agency (EPA) has a couple rules now that have real 
impact in rural America, the power rule, I think about 75 
percent of the landmass of the country is served by rural 
electric co-ops. They are more heavily coal than the rest of 
the utility providers in the country. For the water rule, lots 
of concern in rural America about how that jurisdiction, if 
expanded as the EPA suggested, will impact what happens in 
agriculture and other areas.
    Some sense of your level of engagement, not necessarily the 
FCC rule that we already talked about quite a bit, but are 
these agencies reaching out to you in a way that you feel is 
adequate to get your engagement in these important discussions 
that impact rural America?
    Ms. Mensah. Senator Blunt, thank you for your question.
    Yes, I do feel that we are in a dialogue with our sister 
agencies. You mentioned both clean power and the water rule. We 
have a strong dialogue. We argue for rural communities. And we 
feel that when new rules are proposed, we are going to be there 
for our borrowers to help make any adjustments. So I am happy 
to answer more specific questions on power or water.
    Senator Blunt. Well, on power, I will ask one. On power, 
they have now come up with what is the proposed final rule. Has 
either USDA or your part of USDA taken a position on that final 
rule?
    Ms. Mensah. Let me ask Administrator McBride to describe to 
you how we have been working since the final rule has been 
proposed.
    Senator Blunt. So back to you, Mr. McBride.
    Mr. McBride. Thank you for the question, Senator.
    As EPA was developing its rule, we did have conversations 
with them and let them know our thoughts and how it might 
impact our programs. In terms of what the final result was from 
EPA, we do believe that they gave cooperatives additional time 
and additional flexibility to respond to the rule, so we do 
feel like they were responsive to the issues that we raised 
with them. Of course, we do not know the final result until the 
States developed their own plans. But we do believe that the 
EPA provided additional time and additional flexibility that 
will help our borrowers meet the new rule.
    Senator Blunt. At the Secretary level, at Secretary 
Vilsack's level, are he and the department supportive both of 
that rule and the other rule I mentioned, the water rule?
    Mr. McBride. The Secretary has been in contact with 
Administrator McCarthy and others, and believes that we will be 
able to help our borrowers meet the rules. So the Secretary has 
been very engaged, and we are working to help our borrowers 
meet the new requirements.
    Senator Blunt. You do not know whether he has personally 
endorsed the two new rules or not?
    Mr. McBride. I have not spoken to him directly about that.
    Senator Blunt. All right. I have not either, and I will.
    Thank you.
    Senator Moran. Senator Cochran, anything further?
    Senator Cochran. No, but I want to thank the panel for 
helping bring life and energy and imagination and hard work to 
the challenge of improving opportunities for happy and healthy 
lives in rural America. That is what the Rural Development Act 
sought to do when Congress adopted it. You are on the 
frontlines now in carrying out those ideas and suggestions when 
that act was first approved by Congress.
    Thank you for your good efforts.
    Senator Moran. Senator Udall.
    Senator Udall. Thank you, Mr. Chairman.

                         SEQUESTRATIONS IMPACT

    Last week, I had the opportunity to travel New Mexico and 
do some rural economic development meetings. Our State USDA 
Rural Development State director named Terry Brunner was there 
and announced some of the grants that go out. I cannot tell you 
how important those grants are in terms of supporting rural 
communities, supporting economic development, and really 
pushing the envelope in terms of helping people be more 
connected in rural communities with the rest of the State. So 
we really appreciate what you are doing.
    We know that the folks in rural New Mexico need support, 
need budget certainty, and need adequate resources to fund 
basic things like water infrastructure, housing, and high-speed 
Internet, which is not a luxury nowadays. It is actually a 
necessity.
    So let me ask you, Madam Secretary, the USDA Rural 
Development program is essential for addressing these unique 
needs, and I am worried that sequestration and the proposed 
cuts will further obstruct recovery and development. The 
Committee-passed bill provides $83 million less for Rural 
Development compared to the administration's request, and over 
$300 million less than was provided in 2010 due to unequal 
sequestration limits on domestic programs.
    What impact will these lower numbers have on your programs 
and, more importantly, on the families that rely on them?
    Ms. Mensah. Thank you, Senator Udall.
    Senator Udall. You bet.
    Ms. Mensah. I, too, share the concern. Any reduction in our 
programs hurts rural America. I see these programs. I am out 
almost every week somewhere with State directors, like you have 
seen. Every grant dollar that we are able to have the privilege 
to spend in rural America, I feel we can do it well.
    Similarly, the program levels, the loan levels, are being 
spent very, very carefully. It is a strong portfolio.
    So we appreciate anything you can do for our budget 
request. This is just essential funding for the development of 
our rural communities.
    And I would also say for the kind of State operation we 
have, you mentioned our State directors, you are supporting a 
field-based organization in Rural Development. We are not just 
a Washington organization. That layer of support in every State 
makes us so unique, and it is just essential dollars for us. So 
I thank you for your concern. I share it.
    Senator Udall. Thank you. And you are absolutely right. One 
of the things that I think really works is, with these State 
directors, they work creatively with rural communities in order 
to do the things that they need done, to become better 
communities, to get people more hooked up, whatever it is. It 
is a good program, and it is a dramatic example of why we 
should be out of the sequester.
    I mean, sequester hurts these rural communities, and we 
need to get back to adequate funding for these important 
programs.

             SUSTANTIALLY UNDERSERVED TRIBAL AREAS PROGRAM

    Now, Administrator McBride, I applaud your efforts in 
moving forward with the Substantially Underserved Tribal Areas 
(SUTA) loan program provisions in the farm bill. Thanks to this 
program, the Mescalero Apache Telecom company was a recipient 
of a $5.4 million loan to make telecommunication improvements 
for thousands of rural customers.
    This type of investment is critical to ending the digital 
divide in tribal communities.
    I will never forget, on this digital divide in tribal 
communities, when President Clinton tried to show the digital 
divide, he started out one day in Silicon Valley and ended up 
the day in Shiprock, New Mexico. In Silicon, they are obviously 
wired. In Shiprock, he was introduced by a young lady who was a 
top student in the school in Shiprock, and she had won a 
computer, but she was unable to even have access with that 
computer to the Internet. So that highlighted the digital 
divide in this country.
    So that is why this program is so important, the 
Substantially Underserved Tribal Areas program. I think we need 
to keep that strong.
    Can you describe for us the importance of loan programs 
such as SUTA and provide suggestions on ways we can expand on 
efforts to bring modern broadband infrastructure to tribal 
communities?
    Mr. McBride. Thank you for the question. I was in Mescalero 
in August. Terry Brunner, your State director, took me around. 
It was a great project, and they are doing great work there.
    We are trying to increase our outreach efforts. It is, 
certainly, a priority for us to make sure that the tribal areas 
know about our programs and their availability. It is, 
certainly, a challenge, expanding broadband into the most 
rural, most remote areas, but we believe that our partnership 
with the groups that we worked with before is strong, and there 
may be ways that we can share some lessons learned that might 
help other tribal areas expand their access.
    Senator Udall. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Moran. Thank you, Senator Udall.
    Secretary Mensah, thank you very much for joining us.
    Mr. Hernandez, Mr. McBride, Mr. Rikkers, thank you very 
much.
    We will turn to our second panel.
    Madam Secretary, there are a couple things we want to 
follow up with you.
    Ms. Mensah. Yes, I look forward to that.
    Senator Moran. I would invite Mr. Simpson, Mr. Lowry, Mr. 
Boisvert, Mr. Chrisman, to the table.
    We have four experts from across the country with us today. 
We are delighted to have you here. I will defer in a moment to 
the Senator from Mississippi, Senator Cochran, to introduce one 
of our panelists. But I would welcome them all, including Mr. 
Simpson.
    But, Mr. Lowry, thank you very much for joining us. Mr. 
Lowry is the president and chief executive officer of Sunflower 
Electric Power Association in Hays, Kansas.
    Brian Boisvert is the president and general manager of 
Wilson Communications in Wilson, Kansas.
    And Mr. Tony Chrisman is the vice president and owner of 
Chrisman Development, Inc., Enterprise, Oregon.
    The Senator from Mississippi.
    Senator Cochran. Mr. Chairman, I am pleased to join you in 
welcoming our panelists, particularly Bill Simpson, who is a 
friend of longstanding. His father was legendary for getting 
things done in Washington as a member of the staff for Senator 
Jim Eastland, who I replaced in the U.S. Senate when he 
retired.
    So this is a chain of command operation here. And if it 
looks like we are double-teaming you, we are, because in our 
State of Mississippi, I do not know of any piece of legislation 
or Federal program that has been more helpful and enriched the 
lives of so many as the Rural Development Act. I mentioned it 
in my questions and observations to the previous panel, when 
they were here.
    But this is also an indication of Congress' response and 
willingness to help in a positive way enrich the lives of 
people and create opportunities for economic growth and 
development, and generally the well-being of those who live in 
the small towns and rural communities of our great country.
    So thank you for helping carry on this great tradition, and 
we appreciate your good efforts. Thanks.
    Senator Moran. Thank you, Senator Cochran.
    We will work our way across the table, and we will begin 
with the testimony of Mr. Simpson. Thank you.
STATEMENT OF WILLIAM SIMPSON, DIRECTOR OF LEGISLATIVE 
            AND REGULATORY AFFAIRS, NATIONAL RURAL 
            WATER ASSOCIATION
    Mr. Simpson. Thank you, Chairman Cochran, Chairman Moran, 
Ranking Member Merkley. I am delighted to be here. Good 
morning. It is an honor to testify before the Subcommittee on 
Agriculture, water and waste programs, and the associated 
technical assistance that benefit the small rural communities 
that chairman Cochran referred to.
    As a native Mississippian, I am also extremely proud that 
this Rural Development title has helped my home State. From the 
top of the State to the bottom, you can see the tangible 
effects. Thank you for that.
    Before I get started, I wanted to offer a personal note 
about the subcommittee. One of the great honors in my life was 
to serve on this subcommittee. I was trained by a former clerk 
named Galen Fountain, a brilliant, kind, and decent man. He 
told me in the very beginning working on this subcommittee, you 
will work in a bipartisan fashion. You will sit at the table 
with the entire staff. Every word, every policy, every dollar 
will be jointly agreed upon. It made the Senate bill stronger, 
in my humble opinion, and it really made a difference.
    In a time when people criticize Congress for not adhering 
to their duties, I think that this subcommittee, in particular, 
needs to get the recognition they deserve in taking that stance 
and, throughout the leadership changes of this subcommittee, 
continuing on that path. I think this subcommittee should be 
recognized, commended, and duplicated for that activity.
    We have witnessed the reduction and restructuring of Rural 
Development, and its predecessor Farmers Home, field structure. 
Under Secretary Mensah mentioned it. I want to reinforce her 
comments. I know this budget climate is extraordinary 
difficult, but that is what I saw always as one of the 
strengths of Rural Development over Federal agencies is that 
they are out there in the communities. They live and work there 
to carry out the programs that you appropriate here, and the 
policies, including the farm bill. I know that really makes a 
difference.
    We share a mission with our Rural Development partner. It 
is a shared mission that every rural community, regardless of 
income and location, deserves to be served. And no one in Rural 
Development should be left behind.
    Our seasoned employees at the Rural Water Association have 
23 years of experience working in water and wastewater 
industry. Many of these folks could get other jobs that do not 
require extensive travel away from their home, but their 
passion and their love for this industry, and the work, and 
they get great satisfaction out of helping these rural 
communities. And the communities we help, quite frankly, do not 
have a lot of the capacity or expertise to do this activity 
without this experienced personnel.
    We accomplish this mission under three titles under the 
Rural Development title program with three programs.
    First is the Circuit Rider program. I hope you have all 
heard about that. Since 1980, this on-the-ground assistance to 
rural communities for water, wastewater infrastructure, it is 
across the myriad of issues they have, complying with State and 
Federal regulations, disaster response, rate studies, 
operations and management. We have 117 circuit riders 
throughout the country. As you all know, they also do emergency 
response.
    We believe there is a direct correlation with the work that 
our folks do and the extraordinarily low default and 
delinquency rate of the water and waste program that you 
appropriate.
    The second is the Wastewater Technical Assistance Program, 
similar to the Circuit Rider, but it is concentrated on 
wastewater treatment facilities. We help with design, upgrades, 
daily operation, maintenance. We have 70 technicians around the 
country in that area.
    Third, we have to commend the Rural Utilities Service for 
this. They started up a new energy efficiency program. The cost 
of electricity for a rural utility is the second highest cost 
behind labor. We started that as a demonstration. We are up to 
nine States now. We have had really good results in the 
beginning. We are returning $4.36 for every $1 of Federal 
investment to pay for our expertise, our person out there in 
the field doing this.
    I close with a suggestion for the subcommittee, and it is 
the current underlying statutory authority for 10,000 
population for eligibility for this program. In the past, this 
subcommittee could put these communities, if they had slightly 
grown or exceeded the limit, in a general provision. So now we 
are looking at the demographic change in rural America, people 
moving out, going into suburbanized areas that are ineligible, 
but these communities are still rural in characteristic. We 
would suggest that this subcommittee take a serious look at 
that.
    In summary, rural America has been strengthened by the work 
and the vision of this subcommittee. No community can grow 
without sustainable resources, water and wastewater services. 
We stand with our Rural Development partner to work in this 
arena and do anything that you ask us to do.
    Thank you, Chairman Moran, Ranking Member Merkley, Chairman 
Cochran. I will answer any questions that you may have.
    [The statement follows:]
                 Prepared Statement of William Simpson
    Good Morning Chairman Moran, ranking Member Merkley and members of 
the Subcommittee. It is an honor to testify before you on the 
Department of Agriculture's Water and Wastewater programs and the 
associated technical assistance programs that directly benefit small 
rural communities. As a native Mississippian, I am proud of the work of 
this Committee and specifically the impact of the Rural Development 
programs that have lifted-up the quality of life for so many of the 
residents in my home State from the Gulf of Mexico to our northern 
border with Tennessee. Thank you.
    Before I get started I would like to offer a personal note. One of 
the great honors in my life was to serve on this Subcommittee. I was 
trained by a former clerk named Galen Fountain who is a brilliant, kind 
and decent man. I learned early on that this Subcommittee, regardless 
if you are in the majority or minority, is tasked to work as a team in 
a true bipartisan manner to draft and establish the policy and funding 
levels within your annual allocation--with everyone at the table 
throughout the entire process, every word, every policy, every dollar 
would be mutually agreed upon.
    In a time where it is popular to criticize Congress on their lack 
of progress or inability to perform their duties, this Subcommittee is 
a shining example of how Congress meets those challenges and 
responsibilities even through difficult times. The entire staff, 
majority and minority, are recognized as capable, approachable, 
intelligent and true professionals. The fact that this tradition 
continues throughout the changes in the leadership of this Subcommittee 
over the years should be recognized, commended and duplicated.
    The Rural Development mission area has a wide and holistic approach 
necessary to enhance and protect the health and vitality of rural 
America. We look at these USDA investments, especially in water and 
wastewater infrastructure, and witness their tangible impact on the 
quality of life in these rural communities. People take it for granted 
that their water is always safe and uninterrupted. This is not just 
about digging trenches and putting pipes in the ground. These 
investments are the catalyst for economic and community growth. They 
provide direct benefits like employment opportunities for residents. 
They also provide indirect benefits like increasing the tax base to 
attract new businesses and housing developments. Without the advantage 
of water and wastewater services these foundations of a community would 
never be put in a position to succeed.
    The current water and waste disposal grant and loan programs 
operated by the Department of Agriculture's Rural Utilities Service 
have a long and successful history of providing critical infrastructure 
assistance to meet one of the most basic needs in rural America--
providing safe and affordable water and wastewater assistance to low 
and moderate-income communities. This is one of the highest rated 
government programs in history, and one with a default rate that is 
almost non-existent with a greater than 30 day delinquency rate of .42 
percent and greater than 1 year delinquency rate of .17 percent. The 
portfolio consists of over 16,000 loans that are valued at 
approximately $12.5 billion dollars. We believe the technical 
assistance provided by this Subcommittee to organizations like the 
National Rural Water Association and others has a direct correlation 
with the stability and health of this portfolio and protects the 
government and community's investment.
    All communities have elected and/or non-elected leaders that want 
to improve the quality of life where they work and live so their family 
and friends can benefit. The Rural Development staff lives and works in 
many of these same communities. They are part of the fabric of that 
community and also a vital Federal partner. This partnership has 
tremendous benefits, whether it's by providing critical infrastructure, 
securing affordable rental housing, providing broadband, telemedicine, 
constructing a heath care or child care facility or attracting and 
creating new businesses, it has and continues to impact lives.
    We have witnessed the restructuring and reduction of employees and 
offices in Rural Development and its predecessor, the Farmers Home 
Administration. I know it is difficult in this budget climate, however 
any efforts to preserve or enhance this field structure will make a 
difference in serving remote rural areas especially ones that 
experience pervasive poverty. You can see diminishing Rural Development 
housing, water infrastructure and other loan and grant activities in 
areas where staff and offices have been reduced, relocated or 
eliminated.
    The National Rural Water Association also shares a mission with our 
Rural Development partner. A shared mission to serve every rural 
community in need regardless of income or location. Like Rural 
Development, we want to ensure no community in rural America is left 
behind. Our seasoned field employees have an average of 23 years of 
experience working in the water and Wastewater industry. Many could 
find higher paying jobs and positions that did not require extensive 
travel, but they are on a mission and receive great personal 
satisfaction from their work. Many of the communities we serve simply 
can't afford the individual expertise necessary to operate and maintain 
their utility systems.
    We accomplish this mission by using three existing programs under 
the Rural Development Title.
  --First, the Circuit Rider program. Since 1980, Circuit Riders have 
        provided on-site technical assistance to small rural 
        communities for water infrastructure development, compliance, 
        training, certification, operations, management, rate studies, 
        disaster response, public health protection--all necessary to 
        encourage local responsibility and local solutions for 
        protecting and enhancing water resources. This mission is 
        simple. At the grassroots level we deliver on-the- ground 
        assistance to communities in need by providing safe, affordable 
        and sustainable water service. We currently have 117 Circuit 
        Riders throughout the country. From Dec 1, 2014 to September 
        30, 2015, Circuit Riders directly assisted 22,143 rural water 
        systems through 40,788 direct contacts totaling 207,607 hours 
        of work. This work performed by NRWA far exceeds our contract 
        requirements. Rural communities also rely on our circuit riders 
        in emergency situations. When flooding, extreme freezing, 
        tornados or hurricanes hit, the circuit riders reach out to 
        rural systems with generators, and technical help and 
        assistance to get systems back online and safe water flowing to 
        their customers.
  --Second, is the Wastewater Technical Assistance program. This 
        initiative provides on-the ground technical assistance directly 
        to communities for wastewater treatment facilities. Assistance 
        includes design and upgrade recommendations, daily operation 
        and maintenance advice, assisting with permit renewals and 
        helping these systems meet compliance requirements from state 
        and Federal regulations. We currently have 70 wastewater 
        Technicians throughout the nation. The wastewater Technicians, 
        from July 1, 2014 to June 30, 2015, provided 147,571 hours of 
        work directly contacting systems 35,969 times to assist 7,746 
        wastewater systems.
  --Third, we are in our 2nd year with a new energy efficiency program 
        created by the Rural Utilities Service (RUS). With electricity 
        as the second leading operational cost after labor for a 
        utility, reducing this expense provides increased stability and 
        frees up revenue to address upgrades or deferred maintenance 
        and at the same time reduces the burden to shift ever 
        increasing operational costs to the moderate or low-income 
        customers. We started this initiative last year with seven 
        states and expanded to nine states this fiscal year. From July 
        1, 2014 to June 30 2015, 240 assessments were completed with a 
        combined energy savings of $2,615,809. This initiative returns 
        $4.36 in savings to the utility for every $1 of Federal 
        investment.
    I will close with a suggestion for the Subcommittee- The current 
underlying statutory authority for the Rural Development Water and 
Wastewater programs is set at a 10,000 population limit. The Secretary 
has little flexibility or waiver authority to address communities that 
have grown or slightly exceed that limit. In the past, this Committee 
was able to list these communities in general provisions in order to 
continue to be eligible for the RUS Water and Wastewater programs.
    With the changing demographics of rural America, we believe that 
increasing the population limit to 20,000, with a priority given to 
smaller communities, would provide a benefit to rural America. We also 
believe this will increase the utilization rate for the Water and 
Wastewater Guaranteed program especially for communities with more 
resources and capacity necessary to debt service a commercial market 
rate loan.
    In summary, rural America has been strengthened from the work and 
vision of this Subcommittee. No community can grow and improve without 
the sustaining resources of water and wastewater services. Rural Water 
stands willing and able to work with you and our partners at Rural 
Development to accomplish this goal.
    Thank you Chairman Moran and Ranking Member Merkley for allowing me 
to testify and I would be happy to answers any questions that you may 
have at this time.

    Senator Moran. Mr. Simpson, thank you.
    Mr. Lowry, before you testify, on behalf of my colleagues, 
I want express my care and concern for the president and CEO of 
the National Rural Electric Cooperative, Jo Ann Emerson. Her 
health is a very challenging circumstance. I served in the 
House of Representatives where classmates and many of my 
colleagues are great friends of Jo Ann. And we express, on 
behalf of all of us, to her and her family and the folks at the 
Rural Electric Cooperative Association, our love and compassion 
for Jo Ann.
    Mr. Lowry. We will be certain to pass that on to her. I 
know that it will be welcomed and well-received. Thank you very 
much.
    Senator Moran. Thank you.
STATEMENT OF STUART LOWRY, PRESIDENT AND CHIEF 
            EXECUTIVE OFFICER, SUNFLOWER ELECTRIC POWER 
            ASSOCIATION
    Mr. Lowry. Mr. Chairman, thank you for allowing me to be 
here today. Ranking Member Merkley, Senator Cochran, I 
appreciate the opportunity to be here to talk about 21st 
century rural development.
    As Chairman Moran mentioned, my name is Stuart Lowry. I am 
the president and CEO of Sunflower Electric Power Corporation 
in Hays, Kansas. We are a generation and transmission 
cooperative, much like PNGC would be in the State of Oregon, or 
South Mississippi would be in the State of Mississippi. We 
provide wholesale services to over 350,000 Kansans.
    I am also here representing the National Rural Electric 
Cooperative Association, the organization that Jo Ann Emerson 
heads up. That is the service organization for over 900 not-
for-profit electric cooperatives in over 47 States that provide 
electricity to roughly 11 percent of the Nation's population. 
The development of the electric co-ops is really a perfect 
example of fostering rural economic development.
    The story of the Rural Electrification Administration (REA) 
effort to electrify rural America via electric cooperatives is 
well-known to everybody by now. The agency is now known as the 
Rural Utilities Service, and this agency and its programs have 
allowed electric cooperatives to become champions for 
strengthening rural America beyond just providing electric 
service.
    The Rural Economic Development Loan and Grant program, 
commonly referred to as REDLG, is an excellent example of a 
tool used by cooperatives to promote rural development.
    The loan program provides zero-interest loans to local 
utilities that they then pass through to small businesses for 
projects that generate local revenue and jobs. The grant 
program allows local cooperatives to establish revolving loan 
programs for other community projects.
    In 2015, the loan program directed loans to 29 cooperatives 
for energy efficiency projects, rail offloading equipment, 
ambulances, and renovations for retirement communities. In 
addition, 27 grants went to 18 cooperatives, which renovated 
schools, hospitals, financed fire equipment, purchased medical 
equipment, and updated 911 communications equipment.
    Kansas has many examples of REDLG success stories, but 
recently, two Kansas cooperatives well-known to Chairman Moran, 
Prairie Land Electric and Western Cooperative Electric, both 
used their revolving loan funds to purchase a CT scanner for 
the Sheridan County Health Complex. This adds a tremendous 
health benefit to a community of roughly 1,200 people. Similar 
examples exist in many other States, as well as the State of 
Kansas.
    REDLG's successes have generated a greater demand for 
funding. We greatly appreciate the chairman and subcommittee 
for recognizing this challenge.
    One critical source of funding for the REDLG program are 
the fees paid by cooperative lenders under the guaranteed 
underwriter program. The fees currently deliver $13 million 
annually. Two very important lenders to electric cooperatives, 
the National Rural Utilities Cooperative Finance Corporation, 
or CFC, and CoBank, have accessed funding through the 
Guaranteed Underwriter Program and have used these funds to 
help finance electric cooperatives investment in rural utility 
infrastructure projects. Fees from these transactions help fund 
the REDLG program.
    Additionally, rural America is increasingly capitalizing on 
programs for energy efficiency. Over 96 percent of cooperatives 
already provide these programs to their consumer members. Both 
the 2008 and 2014 farm bills included programs for RUS to help 
cooperatives increase energy efficiency for the benefit of 
their customers.
    Much credit is owed to this subcommittee, particularly 
Ranking Member Merkley, for his leadership to enact the Rural 
Energy Savings Program Act.
    A robust regulatory agenda in recent years, and increased 
bureaucracy, have admittedly been burdensome and challenging. 
In the Great Plains region Sunflower serves, we are concerned 
about recent regulatory initiatives, including those under the 
Endangered Species Act and the lesser prairie chicken.
    While the courts are considering various appeals, we 
continue to study the cost implications of listing the bird as 
threatened or endangered. Costs imposed on utilities via 
regulation are passed on to ratepayers, thus increasing the 
affordability of the service that we provide.
    This is just one more example of how rural cooperatives 
must pass costs on to our members in the face of 
overregulation.
    RUS finances future and improved distribution, 
transmission, and generating systems. We are particularly 
concerned that as a result of overregulation we will be 
required to spend more of these dollars on regulatory 
compliance costs. As such, it is vital that utilities spend 
their time providing safe, affordable, reliable electricity and 
using REDLG programs to contribute to a better rural America.
    Sunflower, NRECA, and the cooperatives across the country 
greatly appreciate this subcommittee and the full committee 
support for funding the RUS electric loan program at the $6 
billion level for fiscal year 2016.
    Thank you also for recognizing the value that these 
programs provide the rural communities we serve.
    Thank you for inviting me here to testify. I look forward 
to any questions you may have.
    [The statement follows:]
                   Prepared Statement of Stuart Lowry
                              introduction
    Thank you, Chairman Moran, Ranking Member Merkley, and members of 
this subcommittee for inviting me to testify today at your hearing on 
the Importance of Rural Development and, more specifically, on USDA's 
Rural Economic Development Loan and Grant (REDLG) program.
    I am Stuart Lowry, president and CEO of Sunflower Electric 
Corporation in Hays, Kansas. Sunflower is a not-for-profit, wholesale 
electric generation and transmission utility, commonly known as a G&T. 
Based on the cooperative business model, Sunflower is owned and 
democratically governed by its member-owners, six distribution 
cooperatives serving more than 350,000 members in central and western 
Kansas. Sunflower and its Distribution Cooperative Members provide more 
than 800 jobs in communities located in the western half of Kansas.
    I am also here today representing the National Rural Electric 
Cooperative Association (NRECA). NRECA is the service organization for 
more than 900 not-for-profit electric utilities serving over 42 million 
people in 47 states. NRECA's members include 67 G&T cooperatives that 
generate and transmit power to 66 of the 838 distribution cooperatives 
across the nation. Electric cooperative service territory makes up 75 
percent of the nation's land mass. Kilowatt-hour sales by rural 
electric cooperatives account for approximately 11 percent of all 
electric energy sold in the United States. NRECA member cooperatives 
serve over 42 million Americans, including more than 8 million member 
owners and 11,839 jobs in the 12 states represented on this 
subcommittee.
    I would like to thank the Chairman, Ranking Member, and the entire 
subcommittee on behalf of Sunflower and NRECA for their long-standing 
support of rural electric co-ops and their consumer-members. We are 
also grateful for Administrator McBride's leadership and service to 
cooperatives.
              electric co-operatives and rural development
    The development of electric co-ops is a perfect example of rural 
development. As many of you know, well into the 1900s, a lack of 
economic incentives left much of rural America literally ``in the 
dark''--unserved by private power companies. This led to President 
Roosevelt's forming the Rural Electrification Administration, then 
known as the REA, in 1935 to establish programs that would lead to the 
electrification of rural America via electric cooperatives. Now 
restructured as the Rural Utilities Service to include other rural 
utilities--such as those represented on this panel--RUS continues to 
operate programs that benefit rural America under the umbrella of Rural 
Development at USDA. Combined, these programs have allowed electric co-
ops to play a major role in strengthening small communities that are 
essential not only to the nation's economy, but also to the way of life 
valued by many.
    Electric co-ops continue to take seriously the seventh cooperative 
principle: Concern for community. The economic development work in 
Rural America is not done and we appreciate the Subcommittee focusing 
its attention on this important topic.
    In June, NRECA convened a Rural Summit here in Washington. The 
event gathered rural experts from the Administration in various Federal 
departments, non-profit groups, academia, and other rural leaders to 
hold a positive conversation about how to tackle the toughest issues 
facing rural communities and main street economies. The next steps are 
to take the Summit on Rural America into regional discussions around 
the country and to populate a guidance group that can collect and share 
best practices and ideas and explore a number of themes.
    One theme is harnessing the value of the multiple profiles and 
changing demographics of rural America. Another is growing interest in 
the assets in rural America and investing in the infrastructure and 
technology to connect rural America with the world. Participants also 
highlighted the need for new ways of doing business and developing 
educational opportunities and a workforce to conduct that business. 
Other panelists highlighted the quality of rural life and the need to 
address the public's perception of ``rural.'' These regional gatherings 
are expected to focus on growth and diversification of the local 
economies, the expanded role for technology in the rural economy, and 
the need to focus on collaboration and communication.
    Twenty-five years ago, NRECA was instrumental in forming the 
National Rural Economic Developers Association, an organization that 
provides education and networking for professionals who work to grow 
our rural communities. NREDA has been very active promoting and 
providing education for USDA programs, especially the Rural Economic 
Development Loan and Grant Program.
    REDLG is one of the programs that co-ops have utilized to help 
enhance small-town America, and Kansas is just one of the many success 
stories. REDLG is a $33 million loan and $10 million grant program 
available to co-ops for economic development activities. The loan 
program provides zero interest loans to local utilities that serve as a 
pass through to small businesses for projects that create and generate 
new jobs and revenue. The grant program provides funds to local 
cooperatives that use the dollars to establish revolving loan programs 
for specific projects. Once the loan is repaid to the revolving loan 
fund, the cooperative continues to deploy the funds for additional 
rural development projects.
    In 2015, the loan program directed $32.5 million in loans to 29 
coops that created 288 jobs and saved 436 more. These dollars enabled 
energy efficiency projects, purchased rail offloading equipment, 
ambulances, a library expansion and retirement communities. In 
addition, 27 grants went to 18 co-ops for $7.1 million, which renovated 
schools and hospitals, financed fire equipment, built fire halls, 
purchased medical equipment, and updated 911 communications equipment. 
The grant program saved 151 jobs and added 112 more.
    A specific example of the ways Kansas cooperatives have used this 
program includes
    Prairie Land Electric, headquartered in Norton, Kansas, and Western 
CooperativeElectric, headquartered in WaKeeney, Kansas, using funds 
from their revolving loan funds for the Sheridan County Health Complex, 
located in Hoxie, Kansas (population 11,201). The funds are being used 
for hospital upgrades, including the addition of a CT scanner, so this 
small community can enjoy improved access to healthcare. Together the 
cooperatives loaned $575,000 to the health complex for this project.
    Recently, Twin Valley Electric Cooperative from Altamont, Kansas, 
was awarded a $200,000 REDLG loan for RBK Manufacturing LLC in 
Coffeyville, Kansas (population 10,295). This successful manufacturer 
of aftermarket auto parts and equipment will purchase additional 
tooling equipment for expansion. The four additional jobs provided by 
this expansion are important in small communities like Coffeyville.
    These are excellent examples of how the REDLG program continues to 
provide benefit to rural America. Kansas cooperatives are in good 
company with the many other electric cooperatives that have used this 
program to improve their community.
    In Iowa, Corn Belt Power Cooperative and Butler County REC each 
loaned $60,000 from their respective Revolving Loan Funds to assist 
Allison Family Dental. Dr. Travis Harbaugh had just graduated dental 
school and purchased the existing dental practice in Allison, Iowa 
(population 1,025) from a retiring dentist. The purchase allowed a 
dental practice to remain open in a rural community, retain three jobs, 
and create four more.
    Sioux Valley Energy in South Dakota provided funding for the Lake 
Area Improvement Corporation to construct the Heartland Technology 
Center in the Hueners Technology Park. The technology park is in 
Madison, South Dakota,--(population 6,474). The Center has office space 
designed to meet the needs of businesses needing a high-tech setting 
and is located adjacent to nationally recognized Dakota State 
University to provide immediate access to some of the best qualified 
baccalaureate and masters graduates in computer science and information 
systems.
    An expansion for Brownmed Inc., headquartered in Spirit Lake, Iowa, 
(population 14,952), allowed the company to more than double its 
existing manufacturing facility of 30,000 square feet by constructing 
an additional 51,000 square feet. The company manufactures more than 85 
products for medical purposes, including the Seal Tight Cast, 
Plastalume finger splint and IMAK arthritis compression products. Total 
expansion costs were over $3.6 million. Iowa Lakes Electric Cooperative 
received a $1,000,000 Rural Economic Development Loan through USDA for 
the project, while loaning an additional $250,000 from their REDLG 
revolving loan fund. Corn Belt Power loaned $150,000 from their 
Intermediary Relending Program (IRP) Revolving Loan Fund toward the 
project as well. Brownmed employs 66 people, 50 of whom are in the 
Spirit Lake location. This is an excellent example of cooperatives 
using multiple USDA programs to create jobs in their communities.
    Recently, the list of entities eligible for the program has 
expanded, which has placed more demand on the funds. The Administration 
requested a budget of $60 million, and we would like to see the REDLG 
program funded as close to this recommendation as possible. We support 
reducing the maximum loan level to $1 million as this approach will 
allow more projects to be funded in rural areas-- where a little 
funding can go a long way.
    In recent years past, the REDLG program benefited from millions of 
dollars in unused funds carried over from previous years, dwindling 
dramatically from $57.9 million in fiscal year 15 to only $8.2 million 
in fiscal year 14. We appreciate the Subcommittee's efforts to make 
these funds available after the year in which they were appropriated. 
Unfortunately, given the high demand on the program, all funds have 
been used during the fiscal year. If in the future, any funds remain 
unused at the end of the year, we hope the Subcommittee will provide 
the opportunity to carry-over funds to the following year in support of 
the REDLG program.
                     guaranteed underwriter program
    One critical source of funding for the REDLG program is the fees 
paid by cooperative lenders under the Guaranteed Underwriter Program. 
The level of fees is currently at $13 million.
    We appreciate this subcommittee's work to increase the Guaranteed 
Underwriter Program to $750 million in the fiscal year 16 bill. This 
increase supports electric cooperatives by helping cooperative lenders 
maintain a balanced portfolio to provide loans at attractive rates as 
well as increasing the level of fees paid to support the REDLG program.
    Since 2005, the National Rural Utilities Cooperative Finance 
Corporation (Cooperative Finance Corporation) has accessed funding 
through the Guaranteed Underwriter Program and used the funds to help 
finance electric cooperatives' investment in rural utility 
infrastructure projects such as poles, wires and substations. As part 
of its long term commitment to the Guaranteed Underwriter Program, CFC 
also pays fees to help fund the REDLG program. Recently, another 
lender, CoBank has also utilized this program.
                           energy efficiency
    RUS has recognized energy efficiency as an integral component of 
electric cooperatives' energy resources. Co-ops have long been leaders 
among utilities in the area of energy efficiency with 96 percent of co-
ops already providing some energy efficiency program to its consumer-
members.
    Both the 2008 and 2014 Farm Bills included ways that RUS could help 
co-ops increase energy efficiency for the benefit of their consumers. 
The Energy Efficiency and Conservation Loan Program (EECLP) and the 
Rural Energy Savings Program (RESP) are designed to help co-ops promote 
energy efficiency and renewable energy to their consumers, saving 
energy while also saving consumers money on their energy bills. One 
such example is Midwest Energy Cooperative, located in Hays, Kansas, 
which was among the first co-ops in the country to provide on-bill 
financing for energy efficiency improvements for their consumer-
members.
    These energy efficiency programs have a positive financial impact 
on communities because they create jobs in rural areas and increase 
economic activity due to savings resulting from energy efficiency 
improvements.
    Much credit is owed to Ranking Member Merkley for his leadership on 
the Rural Energy Savings Program Act (RESPA), and we look forward to 
working with him and other members of this subcommittee on ways to make 
these programs most successful.
                         concerns going forward
    A robust regulatory agenda in recent years and subsequent increased 
bureaucracy have admittedly been burdensome. Electric co-ops are 
concerned about having to spend more time figuring out how to comply 
with new costly regulations and how to avoid passing those costs onto 
our consumer-owners, all of which leave less time and resources 
available for innovation and strengthening our existing services.
    For example, in the Great Plains region where Sunflower serves, we 
are concerned about recent developments with the Endangered Species Act 
and the Lesser Prairie Chicken. While the courts are considering 
various appeals, we continue to study the cost implications of listing 
the bird as threatened or endangered. This is just one more example of 
how rural cooperatives--averaging 7.4 consumers per mile of line and 
collecting annual revenue of approximately $15,000 per mile of line 
versus investor-owned utilities averaging 34 customers per mile of line 
and collecting $75,500 per mile--must pass costs to our members. Rural 
cooperative members are older, less financially stable, and fewer in 
number and thus have limited ability to pay higher electric rates 
created by the increased regulatory burdens.
    The RUS allows co-ops to finance future and improved electric 
distribution, transmission and generating systems. We are concerned 
that, as the result of overregulation, we will be required to spend 
more of these dollars on compliance costs. As such, it is important 
that RUS is adequately funded so that utilities can spend less time 
crunching numbers related to compliance costs for providing electricity 
and more time engaging in other activities and programs, such as REDLG, 
that contribute to an improved economy and a better quality of life for 
our members.
    Sunflower, NRECA, and co-ops across the country greatly appreciate 
this subcommittee and the full committee's support for funding the RUS 
electric loan program at the $6 billion level for fiscal year 16. Thank 
you for recognizing the value that the electric program and co-ops 
provide to approximately 42 million people every day.
    We look forward to providing any information that would be helpful 
to the committee and improving the opportunities or addressing the 
challenges that face rural America. I thank you for inviting me to 
testify and look forward to any questions you may have.

    Senator Moran. Mr. Lowry, thank you very much.
    We now turn to Mr. Brian Boisvert. Welcome.
STATEMENT OF BRIAN BOISVERT, CHIEF EXECUTIVE OFFICER 
            AND GENERAL MANAGER, WILSON COMMUNICATIONS
    Mr. Boisvert. Good morning. Thank you, Chairman Moran, 
Ranking Member Merkley, and Senator Cochran. Thank you for this 
opportunity to testify before you about rural 
telecommunications and its impact on rural development.
    I am Brian Boisvert, CEO and general manager at Wilson 
communications in Wilson, Kansas. I have been part of the rural 
telecom industry for 37 years and with Wilson for the past 15.
    Wilson communications is a local telecommunications 
provider serving 1,500 rural Kansans over a 1,000-square-mile 
area. We have 17 employees. We provide wireline voice, high-
speed broadband, and video services over a fiber-optic-based 
network. We have been an REA, RUS borrower since 1956, and we 
have a current loan for our fiber to the home build.
    Broadband is an integral element in the 21st century and 
beyond for rural development. Well-built and maintained 
broadband networks make it possible to live anywhere and obtain 
a college degree, be economically successful, receive 
specialized medical care, and have access to entertainment and 
shopping not generally available in rural communities.
    So-called smart devices are appearing every day. In the 
home, they monitor and help manage energy consumption, and they 
can also alert the homeowners that the kids have arrived safely 
home from school. Rural farming can be more efficient and safe 
with bin monitors, heat sensors, and fuel tank level alerts.
    Regardless of whether it is consumer-based for business or 
emergency services, it all relies on a well-built broadband 
network.
    As an illustration of the scale of rural broadband build 
networks, the Kansas rural telecommunication companies serve 
approximately 10 percent of the population, but our service 
areas cover 50 percent of the State's land mass. This is 
typical of rural telecommunication providers all across the 
Nation.
    A business model does not exist for these low-population 
density areas. This is why a predictable, sufficient, and 
sustainable Universal Service Fund is critical for rural 
development. Updated for broadband-capable networks, USF could 
have the same successful impact it had when bringing telephone 
service to every American.
    The FCC issued its transformation order in 2011 with the 
goal to modernize the Universal Service Fund. However, the 
order created uncertainty throughout the rural 
telecommunications industry, adversely impacting investments in 
broadband-capable infrastructure throughout areas served by 
rate-of-return carriers.
    Even as I sit before you today, the rural 
telecommunications providers still lack certainty for a 
sufficient, predictable, and sustainable Universal Service 
Fund. A USF that includes support for standalone broadband 
service will be a cornerstone in bringing economic benefit for 
rural development in small communities across the Nation.
    We see an ever-increasing connection, an interdependence 
between rural and urban areas. This relationship can be seen by 
considering the Nation's farms. The bulk of the Nation's food 
supply is produced in rural America, but their products supply 
the entire Nation.
    Agriculture, Kansas's dominant economic activity, can 
benefit greatly from broadband-enabled services. Ag operations 
can monitor grain prices online to optimize their revenues. And 
if they are in the cattle business, they can bring their herd 
to a local sale barn that is now utilizing online auctions. 
This expands their market to beyond buyers who could only drive 
to the sale.
    The rural telecom industry contributes both to rural and 
urban economies. Even at the height of the recent recession in 
2009, the rural telecom industry contributed $14.5 billion to 
the economies in States where they operated. The majority of 
this economic activity, 66 percent, went to the benefit of 
urban areas. Jobs supported exceeded 70,000, with 54.3 percent 
in rural areas and 45.7 percent of these jobs in urban areas.
    Building and maintaining these networks is clearly 
important, but so too is broadband adoption. Combined, I 
believe it will not only enhance rural development, but is 
critical to rural community survival.
    How do we achieve this? One important factor is the 
continued availability of RUS loans. Making capital available 
to small companies at competitive rates is critical for the 
continued investment in modern infrastructure. The ability to 
keep rural consumer rates reasonably comparable to urban rates 
is a key goal of universal service.
    Taken together, the availability to capital and ongoing USF 
support will help ensure rural development in a stronger and 
connected Nation.
    Thank you, Mr. Chairman, Ranking Member Merkley. I am happy 
to answer your questions.
    [The statement follows:]
                  Prepared Statement of Brian Boisvert
                              introduction
The Rural Telecommunications Industry
    Chairman Moran, Ranking member Merkley, and members of the 
subcommittee, thank you for this opportunity to testify before you 
about rural telecommunications and its impact on rural development. I 
am Brian Boisvert, CEO/General Manager at Wilson Communications. My 
remarks today are on behalf of Wilson Communications, as well as NTCA--
The Rural Broadband Association and their several hundred small 
community-based members that provide a variety of communications 
services throughout the rural far reaches of the nation.
    I have been part of the rural telecommunications industry for 37 
years and with Wilson for the past 15 years. Wilson Communications is a 
local telecommunications provider serving 1,500 rural Kansans over a 
11,000 square-mile area. Wilson has 17 employees. We provide wireline 
voice, high-speed broadband and video services over a fiber optic-based 
network. We have been REA/RUS borrowers since 1956 and have a current 
loan for our FTTH build.
    Small, rural telecom providers connect rural Americans to the 
world. Moreover, these rural network operators have been at the 
forefront of the broadband and Internet Protocol (``IP'') evolution for 
years, making every innovative effort to deploy advanced networks that 
respond to consumer and business demands for cutting-edge services. In 
rural America, that translates into economic development that produces 
jobs, not only in agriculture, energy and other industries with a 
strong rural presence, but in the healthcare sector, and just about any 
other retail industry that requires broadband to operate in this day 
and age. Broadband has become essential to delivering healthcare and 
securing the public safety. And much of the business world is already 
demanding higher broadband speeds to help it interact with and sell to 
customers near and far. Broadband and other services provided by the 
rural telecom industry serve as an incubator for small business ideas 
in rural America to be implemented and to flourish.
    Fixed and mobile broadband, video and voice are among the numerous 
telecom services that rural Americans can access thanks to the rural 
industry's commitment to serving sparsely populated areas--and the 
rural development and other essential governmental programs that make 
it possible to carry out this commitment. Broadband-capable networks 
facilitate greater interconnection of the community's resources and can 
enable citizens' participation in the global economy, blue-ribbon 
education, first-rate healthcare, cutting-edge government services, 
robust security and more efficient energy distribution and use.
    The rural telecom industry has always been at the forefront of 
technological innovation, being the first segment of the industry to 
completely convert to digital switched systems, provide wireless 
options to their hardest to reach customers, offer distance learning 
and tele-health applications, provide cable-based video, then satellite 
video, and now IP video to their markets, and it was a member of the 
RLEC community that first deployed an all-fiber system. The rural 
industry continues to lead in the deployment of broadband capable 
infrastructure.
            rural broadband benefits the entire u.s. economy
    A series of studies confirms that significant benefits flow from 
rural broadband investment to broader urban and statewide populations. 
For example, the Hudson Institute has found that investment in rural 
telecommunications delivers real payback for the entire nation, 
generating $14.4 billion annually in economic activity as of 2011--$9.6 
billion of which accrued to the benefit of urban areas, and more than 
70,000 jobs, 45 percent of which were placed in urban areas.\1\ In 
Colorado, rural telecom helped create 428 jobs, adding over $21 million 
per year to state payrolls.\2\ North Dakota saw an additional $18 
million in Federal tax revenue and $31 million in state tax revenue 
arising out 1,100 direct jobs and 800 secondary jobs generated by rural 
telecommunications activity.\3\
---------------------------------------------------------------------------
    \1\ Kuttner, Hanns, The Economic Impact of Rural 
Telecommunications: The Greater Gains, Hudson Institute, at 6, 8 
(2011).
    \2\ Shields, Martin, Cutler, Harvey, and Marturana, Michael, The 
Impacts of Colorado Telecommunications Association Members on the 
Colorado Economy, Regional Economics Institute, Colorado State 
University, at 9 (Oct. 26, 2011).
    \3\ McKee, Gregory, The Effect of Changes in Universal Service 
Funding on the Economic Contribution of Rural Local Exchange Carriers 
to the North Dakota State Economy, Department of Agribusiness and 
Applied Economics, Agricultural Experiment Station, North Dakota State 
University, at 16-19 (Dec. 2011) (``Like other RLECs, North Dakota 
RLECs buy many specialized products and services not available in state 
economies. National and international markets typically provide these 
products and services.'').
---------------------------------------------------------------------------
    The converse holds true, however, from adverse changes--``reforms'' 
that depress or cut investment in rural broadband hurt state economies. 
In Kansas, for example, potential cuts in Federal rural telecom 
programs were projected to result in $1.4 million in personal income 
tax losses and $1.3 million in retail sales tax losses.\4\ A personal 
income loss of $14.1 million was projected for 2012 alone in New Mexico 
from the same proposed cuts.\5\ Studies examining the impact of rural 
communications activity--including purchasing, employment figures, and 
projected tax revenues--confirm rural communications to be a powerful 
generator of urban economic growth and Federal and state tax revenue. 
In short, rural broadband is an investment with real benefit and 
returns for the nation as a whole.
---------------------------------------------------------------------------
    \4\ Kansas Rural Local Exchange Carriers: Assessing the Impact of 
the National Broadband Plan, W. Frank Barton School of Business, Center 
for Economic Development and Business Research, Wichita State 
University, at 11, 12 (2011).
    \5\ Peach, James, Popp, Anthony V., and Delgado, Leo, The Potential 
Economic Impact of the National Broadband Plan on the New Mexico 
Exchange Carriers Group, Office of Policy Analysis, Arrowhead Center, 
New Mexico State University, at 18 (2011)).
---------------------------------------------------------------------------
    To not have access to high-speed Internet in this day and age is 
unimaginable to most people, yet millions of Americans live in areas--
mostly in rural territory served by carriers other than small, rate-of-
return providers similar to Wilson--where there is no robust broadband 
that enables meaningful access to the countless economic and 
educational opportunities available through the Internet. These people 
have small business ideas that need broadband to succeed and they need 
jobs that small businesses can provide. Yet, as important as it is to 
deliver broadband to the unserved, it's equally vital that those 
already receiving broadband remain served--the benefits that flow from 
broadband are ongoing. If a network is built in a rural area but then 
becomes unsustainable or the services over it unaffordable or of poor 
quality, such developments deny the benefits of broadband for small 
businesses and all consumers. Thus, the mission of universal service--
and the economic benefits it delivers locally and to the nation as a 
whole--require ongoing operations, effort, and support to be realized.
                   rural utilities service financing
RUS Role in Rural Telecom Deployment
    USDA's Rural Utilities Service (RUS) plays a crucial role in rural 
broadband deployment through its telecommunications programs that 
finance network upgrades and deployment in rural areas. RUS has been 
lending for broadband capable plant since the early 1990s. RUS lending 
and Universal Service Fund (USF) support are inextricably linked as 
more than 99 percent of RUS Telecommunications Infrastructure borrowers 
receive high cost USF support. The presence of high cost recovery 
through USF support is therefore crucial to the RUS telecom and 
broadband loan calculus. RUS programs have helped rural providers 
deploy modern networks in many rural areas where the market would 
otherwise not support investment. Reliable access to capital helps 
rural carriers meet the broadband needs of rural consumers at 
affordable rates.
    Unfortunately, the success, momentum, and economic development 
achieved from the RUS's telecommunication programs were put at risk as 
a result of the regulatory uncertainty arising out of USF reforms--some 
enacted, some revoked, and some still pending consideration--which are 
discussed in greater detail below. It will be all the more important to 
continue providing RUS with the resources it needs to lend to the rural 
telecom industry as demand for financing should increase when reforms 
are improved and small carriers are given certainty, hopefully through 
targeted updates to the existing USF programs designed to re-establish 
clarity and promote broadband investment. As Congress continues to 
grapple with where to best direct scarce resources, it's important to 
note that the RUS Broadband Loan Program and the traditional 
Telecommunication Infrastructure Loan Program make loans that must be 
paid back with interest--creating a win/win situation for rural 
broadband consumers and taxpayers. Rural providers look forward to 
building on an already successful partnership with RUS.
Appropriations
    We appreciate the Appropriations Committee's efforts to ensure the 
FCC continues to receive direction with respect to USF cost recovery 
support and making sure that the RUS Telecommunications Program is 
adequately funded. The committee agreed as well with NTCA's request to 
extend the prohibition on the FCC from subjecting USF to the Federal 
Anti-Deficiency Act through December 31, 2017, and to extend the long-
running prohibition on any sort of primary-line restriction on USF 
support through the end of fiscal year 2016. The committee further 
agreed to reject the Administration's budget request to divert $25 
million in USF funds for additional unnecessary reviews and 
investigations in the wake of a series of earlier costly audits that 
identified no noteworthy program issues to begin with. This 
subcommittee also favorably responded to NTCA's request for report 
language directing the FCC to complete the development of a fully 
functional, broadband-oriented USF program for rural rate-of-return 
carriers. Mirroring language was also included in both the FCC bill and 
the RUS appropriations bills directing the two agencies to work 
together to ensure that the USF and RUS programs operate in a 
coordinated fashion rather than to the possible detriment of one 
another. Clearly this subcommittee played an integral role in 
developing each of these initiatives and ensuring they were a part of 
the package agreed to by the full committee, and we applaud your 
leadership.
                           universal service
The FCC's Universal Service Fund Reforms
    RUS programs represent one important side of the coin--governmental 
programs intended to provide capital to enable investment in 
infrastructure in rural areas. As mentioned earlier, however, there is 
another, equally important side of that coin--governmental programs 
intended to ensure that networks, once deployed, can be maintained and 
upgraded, and that services offered atop those networks will remain 
affordable and of high-quality for consumer adoption and use.
    No issue is perhaps more important to the fundamental capability of 
small telcos to deliver services in high-cost, sparsely populated rural 
markets than the availability of sufficient and predictable universal 
service support. The ongoing availability of USF support is essential 
to ensure that rural telcos can make the business case to invest in 
robust advanced networks, to enable the operation of those networks 
over many years, and to facilitate consumer use of services at 
affordable rates. (USF support is, in this regard, an essential 
complement to RUS programs that only serve to finance network 
construction in the first instance.) NTCA has made substantial efforts 
to restore regulatory certainty to the USF program, and has sought 
thoughtful upgrades to the USF mechanism consistent with a broadband-
oriented world.
    For rural areas like those served by Wilson Communications and 
other NTCA members, FCC rules still require customers to purchase 
landline voice telephone service in order for their connection to 
receive USF support. The customer is thus effectively denied the option 
of cutting the landline-voice cord and purchasing only broadband. Such 
outdated rules that undermine consumer freedom and inhibit 
technological evolution present an obstacle to the technology 
transition that consumers and industry are making and the FCC is 
working to expedite and facilitate in other contexts. While Universal 
Service programs should certainly support and require the offering of 
voice services, it should not compel consumers to buy voice to obtain 
affordable broadband. The FCC should move forward immediately to adopt 
and implement a carefully tailored update of USF that will provide 
sufficient and predictable support for broadband-capable networks in 
areas served by smaller rural carriers. Earlier this year, over 175 
members of Congress (including 61 senators) wrote to FCC Chairman 
Wheeler, urging him to make targeted fixes to the existing USF 
mechanism to solve ``the standalone broadband problem.'' \6\
---------------------------------------------------------------------------
    \6\ See US Senate letter led by Senators Thune and Klobuchar dated 
May 11, 2015 and US House letter led by Representative Kevin Cramer 
dated May 12, 2015, both sent to FCC Chairman Wheeler.
---------------------------------------------------------------------------
    The FCC is in the midst of considering such reforms now, and has 
made commitments to many in Congress to take action on ``the standalone 
broadband problem'' by year's end. We have been working closely as an 
industry with the FCC and other stakeholders to make this a reality. It 
is key, however, to ensure at the same time that these reforms are 
undertaken thoughtfully, with an understanding of the consequences of 
specific changes on investment incentives, access to capital, and 
ultimately consumers. As an industry that lived through a series of 
reforms in 2011 that created confusion and uncertainty and ultimately 
only depressed investment--until Congress helped to push the FCC to 
roll back some of the worst parts of that reform--it is essential to 
rural telcos that reform both gets done quickly and gets done right. We 
hope that the FCC will find a way to deliver on the requests of 
Congress to fix the standalone broadband problem, and we are committed 
to staying at the table to come up with a solution that responds to 
that call, fulfills shared principles for reform, and ultimately 
comports with the statutory mandates for a sufficient and predictable 
support mechanism that enables the offering of reasonably comparable 
services at reasonably comparable rates in rural and urban America 
both.
    The broadband revolution presents major opportunities for small 
businesses to innovate and grow, but the business (or entrepreneur with 
an idea) must have broadband access to take full advantage. Markets 
will ensure many consumers realize the full benefits of innovation at 
the lowest possible prices, but in rural areas there are often no such 
markets to speak of. Though small, rural providers have been leaders in 
broadband investment under the current statutory and regulatory regime, 
further law and policy changes will be necessary to ensure high cost 
rural areas remain served. A faithful and disciplined approach to the 
core Communications Act principle of universal service must therefore 
ensure that, even in the event of any statutory or regulatory update, 
those areas served through support from Federal and state USF 
mechanisms not only ``become'' served in the first instance, but that 
they ``remain'' served, and that consumers and businesses everywhere 
can make full use of sustainable advanced communications services at 
affordable rates.
    Finally, Congress should consider an express directive to the FCC 
to ensure that all who use our nation's networks--by whatever service 
or technology--are responsible to contribute to the universal well-
being and availability of those networks on an equitable basis. USF is 
still funded by assessing interstate and international long distance 
telephone service. The pool of assessable telecommunications service 
revenues is shrinking even as overall communications-related revenues 
grow. As a result, the USF program effectively has an artificial 
funding ceiling that lowers a bit each day due to the failure to 
broaden the contribution base. This de facto cap on the USF program 
will handicap severely our nation's ability to fulfill the statutory 
core principles unless changes are made. Indeed, broadening the 
contribution base to include the services that USF already supports has 
previously received bipartisan backing in the US House.\7\
---------------------------------------------------------------------------
    \7\ See H.R. 5828 Sec. 102(a), 111th Cong., 2d Sess. (2010).
---------------------------------------------------------------------------
                               conclusion
    Entrepreneurial small rural carriers have leveraged public and 
private capital, universal service support, and public-private 
partnerships to lead the ongoing IP Evolution. These small businesses 
play an essential role in deploying broadband to rural areas, and the 
services enabled by broadband are essential to the startup, operation, 
and growth of other rural small businesses. Rural America has a bright 
future powered by smart technologies that promote affordability, 
sustainability, and efficiency in the operation of rural industry and 
the delivery of essential services such as healthcare, education, and 
public safety--all key to rural population growth. The benefits that 
some rural communities are already experiencing will only be possible 
for all if robust broadband is available, affordable and sustainable. 
Rural telecom providers and lenders such as RUS must have regulatory 
certainty before they can make greater investments in the networks of 
the future. One important key to regulatory certainty is a broadband- 
oriented support mechanism for small, rate-of-return carriers that 
gives rural consumers options in selecting the services that best fit 
their needs on the networks that the mechanism helps to enable and 
sustain.

    Senator Moran. Thank you very much.
    Mr. Chrisman, before you testify, let me recognize the 
Senator from Oregon, Senator Merkley.
    Senator Merkley. I am delighted that Mr. Chrisman has been 
able to come and share his experience, and to be accompanied by 
his wife, Julie.
    Mr. Chrisman is from Enterprise, Oregon. Along with his 
brother, Doug, he has been working to provide affordable 
housing to Oregonians for 25 years. They have developed over 50 
affordable housing projects and manage an additional 50, 
serving more than 3,000 households across rural Oregon and 
Washington. Their business employs about 200 people.
    Mr. Chrisman is a valuable and successful user of Rural 
Development programs, specifically multifamily housing programs 
and USDA's rental assistance program. His insight and 
experience from the frontline will point to a substantial 
challenge that we have right now that needs to be addressed 
urgently.
    I am so delighted you could come and share your testimony.
    Senator Moran. Mr. Chrisman.
STATEMENT OF TONY CHRISMAN, VICE PRESIDENT AND OWNER, 
            CHRISMAN DEVELOPMENT INC.
    Mr. Chrisman. Thank you. Good morning, Chairman Moran, 
Ranking Member Merkley. My name is Tony Chrisman. I am a rural 
housing developer and property manager from Enterprise, Oregon.
    It is pretty interesting to hear all the stories about 
rural America. The town I live in does not even have a 
stoplight. But we have been able to develop a business even in 
that small community.
    It is an honor to appear before you today to discuss the 
urgent situation involving the USDA Rural Development 
Multifamily Housing Rental Assistance Program. My company has 
developed, owned, and managed affordable housing complexes for 
26 years. We developed over 50 affordable housing projects and 
manage an additional 50 projects, representing over 3,000 
households across Oregon and Washington. We have 200 employees.
    Seventy-five percent of the projects that we own and manage 
have been funded through the USDA Rural Development Multifamily 
Housing Program and receive project-based rental assistance 
directly from USDA Rural Development. That is the payment that 
is made on behalf of the low-income tenants, which pays part or 
all of their monthly rent and utilities.
    I am here to bring your attention to the current crisis 
that has occurred. This summer, we were alerted to the fact 
that the rental assistance program faced a shortfall of funding 
due to language that was included in the Consolidated and 
Further Continuing Appropriations Act of 2015. We received one 
notice in the mail from Rural Development that one of the 
projects we manage would no longer be receiving rental 
assistance for the next 5 months.
    We were very concerned about that. We began doing 
additional research and realized the balance of our Rural 
Development properties were also going to be affected.
    What we discovered was alarming. Due to a change apparently 
requested by USDA Rural Development, rental assistance 
contracts could no longer be renewed as they had been in 
previous years. In addition, due to the fact that USDA RD 
budgeted each project's rental assistance based on a statewide 
average and not their actual use, any project with a higher 
than statewide average of rental assistance faced a shortfall.
    In August of this year, Rural Development failed to provide 
rental assistance to many of our properties. As of last Friday, 
17 projects representing 770 low-income households have not 
received rental assistance for at least 1 month. The amount of 
rental assistance not paid to date is $365,000.
    For a small company such as ours, the consequences of this 
situation could bring an end to our business. We received no 
official notice or any indication from Rural Development that 
payments would not be made with one exception. These payments 
generally represent about 80 percent of the monthly revenue for 
each affected property.
    We have no idea when payments may resume. Unfortunately, 
just listening to Administrator Hernandez, it appears that they 
still have not decided whether they are going to pay the back 
payments or not, even after the continuing resolution.
    We are left in a no-win situation with low-income tenants 
who are unable to afford their rent and Rural Development 
unwilling or unable to pay rental assistance on their behalf.
    What is happening with our company and tenants is playing 
out across the country. There are 272,000 units of affordable 
housing and 14,900 properties across the United States that 
receive Rural Development rental assistance.
    We have talked to other affordable housing owners and 
managers across the country and discovered they are 
experiencing the same thing, and payments of rental assistance 
are not being made. Many owners and managers of these 
properties were giving the low-income tenants notice that they 
need to pay much higher rents as a result of rental assistance 
not being paid on their behalf.
    If this situation is not remedied, significant impacts will 
occur. First, without regular rental assistance payments, most 
tenants cannot afford the full rent on their own. As a result, 
they face displacement and possibly homelessness. The average 
income of our portfolio of the tenants who receive rental 
assistance is approximately $10,000. The average household 
income of the families who live in the USDA Rural Development 
properties is extremely low, and these tenants represent some 
of the most vulnerable members of our society.
    The way USDA Rural Development has dealt with this matter 
will result in tenants with the lowest incomes and greatest 
needs being displaced from housing that many of them have lived 
in for years.
    Second, the 14,900 existing USDA-funded properties across 
the country will face foreclosure, bankruptcy, and possibly 
default on their financial obligations.
    The third consequence of the situation is that many jobs 
across rural America will be in jeopardy as these projects fail 
and managers, contractors, and support staff are terminated.
    I am here today to ask for your help to resolve this 
situation. Thank you.
    [The statement follows:]
                  Prepared Statement of Tony Chrisman
    Good morning, Chairman Moran, Ranking Member Merkley, and 
distinguished Members of the Subcommittee. My name is Tony Chrisman and 
I am a Rural Housing Developer and Property Manager from Enterprise, 
Oregon. It is an honor to appear before you today to discuss an urgent 
situation involving the USDA Rural Development Multifamily Housing 
Rental Assistance Program.
    My companies have developed, owned, and managed affordable housing 
complexes for 26 years. We have developed over 50 affordable housing 
projects and manage an additional 50 projects representing over 3000 
households across rural Oregon and Washington. We currently employ 
approximately 200 people.
    75 percent of our housing projects have been funded through USDA 
Rural Development multifamily housing programs and receive Project 
Based Rental Assistance directly from USDA Rural Development. Rental 
Assistance is a payment made on behalf of low income tenants which pays 
part or all of their monthly rent and utilities based upon the tenants' 
income.
    I am here to bring your attention to the current crisis that has 
occurred in the USDA Rental Assistance program. This summer, we were 
alerted to the fact that the Rental Assistance Program faced a 
shortfall in funding due to new language that was included in the 
``Consolidated and Further Continuing Appropriations Act, 2015.'' We 
received a single notice from USDA Rural Development that one project 
we managed was going to run out of Rental Assistance in 30 days and 
would not be eligible for further payments for 5 months. We were very 
concerned. We began doing additional research on the balance of our 
USDA Rural Development properties to determine if other projects would 
be affected. What we discovered was alarming. Due to a change, 
apparently requested by USDA Rural Development, in the language of the 
``Consolidated and Further Continuing Appropriations Act, 2015'' Rental 
Assistance contracts could no longer be renewed as they had been in 
previous years. In addition, due to the fact that USDA RD budgeted each 
project's Rental Assistance based upon a state-wide average and not 
their actual budgets, any projects which had higher than the state-wide 
average of Rental Assistance faced a shortage.
    In August of this year, USDA Rural Development failed to provide 
Rental Assistance to many of our properties. As of October 15, our 
companies have 17 projects representing 770 low income households that 
have not received Rental Assistance for at least 1 month. The amount of 
the Rental Assistance not paid to date is $365,000. For a small 
companies such as ours, the consequences of this situation could bring 
an end to our business. We received no official notice or any 
indication from USDA Rural Development that payments would not be made 
with one exception. These payments generally represent about 80 percent 
of the total monthly revenue for each affected property.
    We have no idea when payments may resume and if payments will be 
made in arrears. Virtually no communication has been forthcoming from 
USDA Rural Development. We are left in a no win situation with tenants 
who are unable to afford their rent and USDA Rural Development 
unwilling or unable to pay rental assistance on their behalf.
    What is happening with our companies and tenants is playing out in 
other parts of the country right now. USDA RD Rental Assistance 
supports 272,322 units of affordable housing in 14,900 properties 
across the United States. We have talked to other affordable housing 
owners and managers across the country and have discovered that they 
are experiencing the same thing and payments of Rental Assistance are 
not being made. Many owners and managers of these properties have given 
the low income tenants notice that they need to pay the much higher 
rents that result from the USDA Rental Assistance not being paid on 
their behalf. Several newspapers across rural America have documented 
that low income tenants are now being asked that their portion of the 
rent increase dramatically.
    If this situation is not remedied significant impacts will occur. 
First, without regular Rental Assistance payments, most tenants cannot 
afford the full rent on their own and as a result, they face being 
displaced and possibly homeless. The average household income in our 
portfolio is less than $10,000 per year. The average household incomes 
of the families that live in USDA Rural Development properties is 
extremely low and these tenants represent some of the most vulnerable 
members of our society. The way USDA Rural Development has dealt with 
this matter will result in tenants with the lowest incomes and the 
greatest needs being displaced from housing that many of them have 
lived in for years.
    Second, the 14,900 existing USDA funded properties across the 
country will face foreclosure, bankruptcy, and will default on their 
financial obligations. In our case, since many of our projects have 
been funded with Federal Low Income Housing Tax Credits and additional 
funding sources such as State low income housing loans and commercial 
loans, serious financial outcomes will result.
    Our companies' business has primarily been to preserve older 
affordable housing projects by acquiring the properties and using a 
multitude of State and Federal funding mechanisms to recapitalize, 
rehabilitate, and preserve the properties in order to keep the valuable 
federally funded rental assistance. The state of Oregon and Washington 
have funded and invested in numerous projects specifically to preserve 
projects like these across rural areas. The shortage of Rental 
Assistance puts all of this work at risk. State and Commercial 
financing will dry up if the availability of the Rental Assistance is 
lost. Banks and Investors will stop investing in the low income housing 
tax credits that have been used to fund these properties. Losses will 
be large.
    Finally, the third consequence of this situation is that many jobs 
across rural America will be in jeopardy as these projects fail and the 
managers, contractors, and support staff will be terminated.
    It is our understanding that several things need to happen to in 
order to remedy this current situation.
    First, language limiting the ability of USDA Rural Development to 
renew contracts only once a year must be removed from next year's 
budget. The recently passed Continuing Resolution addresses this issue 
until December, but unfortunately it does not deal with the longer term 
issue. We need this language removed from future budgets.
    Second, according to industry groups, it appears that the USDA RD 
Rental Assistance Budget is not sufficient to meet the requirements of 
the program. Although the USDA has repeatedly insisted that their 
budget was sufficient, it clearly was not sufficient and USDA ran out 
of rental assistance funds this past summer for many projects. Industry 
groups believe the budget is short by approximately $220 million. USDA 
Rural Development has not been forthcoming about the exact amount of 
the shortfall.
    There are numerous other proposals that could make this program 
more effective and return the focus to managing the properties and 
supplying housing for low income rural families. However, if the 
current Rental Assistance Crisis is not fixed none of these proposals 
will matter.
    Thank you for allowing me to testify and I look forward to 
answering any questions you might have.

    Senator Moran. Mr. Chrisman, thank you very much.
    I thank all of our panel. We are going to take some time 
now and have a conversation and ask you questions and solicit 
your answers.
    I would start with you, Mr. Chrisman. You heard the 
conversation earlier between Senator Merkley and Rural 
Development, between me and Rural Development. I would indicate 
that today's hearing is the first indication that we have had 
from Rural Development that the language that was included in 
the omnibus bill, the legislation that you described, was 
insufficient to backfill the rental assistance.
    We will continue to press Rural Development for more 
clarity, because we believe they have the authority to do what 
needs to be done. It does not solve the problem permanently, 
but it certainly solves the immediate problem. We will continue 
our efforts, and I look forward to working with your Senator, 
Senator Merkley, in that regard.
    What is the authority by which tenants can be required to 
pay additional rent in this circumstance? Is that carte 
blanche? Are there restrictions? One, I understand the 
financial circumstances that most if not all of those tenants 
are in, so it is not a practical solution. But what is the 
legal ability to raise rents in the absence of the rental 
assistance?
    Mr. Chrisman. In our portfolio, our lease agreement 
specifically lays out, if Rural Development does not pay the 
tenant's portion of the rent, it is not really a rent increase. 
The rents are set by Rural Development, and then they pay a 
certain percentage of the rent. So we would just go to our 
lease agreement. When the rental assistance payments stop, we 
are allowed to raise the rent to the level that the rent is set 
at with the difference.
    Senator Moran. So you have the legal ability under your 
rental agreement to raise the rents. You do not have an ability 
to actually accomplish those increased rents being paid.
    Mr. Chrisman. The reality is most of the tenants could not 
pay them even if you raised the rent on them. So what do you 
do? We have been in the business of serving this population for 
25 years. Now we are in a situation where, no matter what 
happens, we are going to make the wrong decision. Tenant 
advocates will sue us if we start charging them the additional 
rent. The tenants, if we do evict them, because that is really 
where you are going with this, they have no other place to 
turn.
    Senator Moran. Are your rental agreements approved in 
advance by USDA?
    Mr. Chrisman. They are.
    Senator Moran. So the authority that you described, the 
legal authority that you described, an ability to raise the 
rent in the absence of rental assistance, is something that 
USDA has approved in your rental agreement?
    Mr. Chrisman. That is right.
    Senator Moran. Okay. I would tell you, Mr. Chrisman, in 
Kansas, the most common conversation I have with a Chamber of 
Commerce executive, an economic developer, a mayor, a city 
councilmember, when you are visiting a community and you want 
to talk about what is going on in the community, almost without 
exception the conversation turns to lack of housing.
    Do you avail yourself, does your company avail yourself to 
programs outside Rural Development, outside USDA? Are you 
involved in the Department of Housing and Urban Development 
(HUD) programs or others? And can you tell me, the Rural 
Development programs, why they are useful to you? What the 
problems are? Is there someplace else you could go that would 
be a better source of assistance to accomplish the goal of 
housing for low-income people across the country, in particular 
rural America?
    Mr. Chrisman. We use the HUD programs, low-income housing 
tax credit programs. But the unique characteristic of the Rural 
Development program is the portfolio of properties that were 
built in the 1970s and 1980s that have the rental assistance, 
there is just no substitute for that. These serve the lowest 
income families and the most needy people in our whole 
communities.
    I would say most of our properties are probably 25 percent 
chronically mentally ill tenants who have no alternative. They 
get a disability payment and that is their only option. So 
there is no substitute for these programs because rental 
assistance does not exist in any other format except the Rural 
Development program.
    Senator Moran. Thank you.
    My time has expired. We will have another round.
    Senator Merkley.
    Senator Merkley. I want to continue this conversation, 
because this is so important.
    During the more than 2.5 decades that you have been 
involved, has there been another situation, another year, when 
suddenly you were at the end of the fiscal year and payments 
were going to stop?
    Mr. Chrisman. This has never happened in the Rural 
Development program. There was a short period during the 
sequestration when there was a question. But in that situation, 
Rural Development was notifying us, telling us what was going 
on. We have never had a situation where we did not receive any 
notice.
    I mean, you can imagine running a business, you have lawn 
mowers and people working at the project, and you get no notice 
and you have no rent. Eighty percent of the revenue for that 
month does not come in.
    Senator Merkley. So even though there is a clause in the 
contract that says, if Rural Development stops paying, the 
tenant is responsible for the full amount of the rent, no one 
anticipated that clause would ever have to be used. In fact, no 
one would think that it could be used because these tenants 
could not possibly pay the full rent.
    Mr. Chrisman. That is right.
    Senator Merkley. So now you are in this difficult 
situation. Different owners have probably taken different 
approaches. At this point, have you notified tenants that they 
are responsible for the full rent? Are you holding out for us 
to get a successful response from Rural Development to backfill 
the hole?
    Mr. Chrisman. We have not notified the tenants. We spent a 
lot of time talking about it. But these are the people who we 
have been serving for 25 years. These are mothers of people I 
went to high school with, friends I went to high school with. I 
know a lot of the tenants. I just cannot see us doing it, 
unless it is the very darkest end.
    We thought the continuing resolution had temporarily 
resolved it, but the testimony I just heard sounds like that 
may not be the case. So some of these projects that have 
shortages, it looks like, according to Administrator Hernandez, 
may not be getting paid.
    So I am a little frustrated to hear that.
    Senator Merkley. I am so glad you are here. Because of this 
hearing, we learned for the first time today that the language 
that we worked out with bipartisan staff involved, with Rural 
Development involved, signing off on the language, that they 
have some legal concern, a legal concern that we have not heard 
the details of. We did not know until today that they had run 
into an obstacle here.
    We are going to push very hard to get to the bottom of it.
    If you were to follow the contract and ask for the full 
rent and your tenants would not then would not be able to pay 
it, then there is just no good answer. An eviction results in 
homelessness. As you put it, there is no option. We would be 
putting people into the street across rural America, because 
there are thousands of projects involved here. That is just 
unacceptable.
    You are nodding your head. I will just record that for the 
record.
    Mr. Chrisman. Yes.
    You are telling me things I have been thinking about all 
summer. It is a very frustrating situation to be in.
    Senator Merkley. There are clearly changes in the way that 
this program was administered internally that led to this as 
well. And when I say that, you refer in your testimony to the 
fact that the projects were assigned an average. Any project, 
any multifamily housing complex that has very low-income 
tenants who are below the average, then that average is going 
to result in a shortfall at the end of the year.
    Then we have the bigger issue of the missed estimate for 
what the program would cost across America. That is the $110 
million or so shortfall or $100 million shortfall that we 
referred to earlier.
    So we are going to push very, very hard to get this program 
backfilled and to resolve the issue for this coming year, so 
that we are not in this situation come August or July of next 
year. The estimates that we have show an even larger deficit.
    So I think there are mechanics that have to be fixed in the 
way that funds are assigned to individual projects, and an 
overall deficit that has to be addressed. My hope is that 
common sense will quickly prevail and that we will get to the 
bottom of this. We have been trying to. We thought we had.
    Let me just say, this is a 100-percent absolutely 
unacceptable way to treat the owners of these complexes who are 
administering these in partnership with the U.S. Government. 
But it is absolutely unacceptable that the tenants be on the 
receiving end of these missteps.
    So thank you so much for shedding a personal spotlight on 
the problem. I think it will have helped a great deal that we 
have had this conversation in public today.
    Mr. Chrisman. Yes. It is my pleasure to be here.
    Can I respond?
    Senator Moran. You may.
    Mr. Chrisman. It is hard for me to believe that the agency 
cannot calculate the amount of rental assistance. This program 
is a very stable program. I mean, I am terrible at math, but I 
think I could do it.
    The fact that they could be off by hundreds of millions of 
dollars, listening to that was just unbelievable to me.
    Senator Moran. Thank you for responding. I share the same 
sentiments. We have never been officially notified of a 
shortfall to begin with. We have never been notified that the 
language in the continuing resolution designed to temporarily 
resolve this issue is insufficient. And only, again, today did 
I learn that there is no capability of telling us what that 
number is.
    So thank you for your testimony. We are glad we had this 
hearing so that we now know this. Although I would assume we 
would begin hearing from you and others in your circumstance as 
your representatives. This would not have been something that 
would go on much longer.
    My impression is from your testimony is you were expecting 
this problem to be resolved. You have not taken the effort to 
try to collect money from tenants. You apparently had not 
notified Washington, DC, us, of a problem because you assumed 
that was being taken care of.
    Mr. Chrisman. Well, we have actually been contacting 
Washington, DC, all summer because once we found out there was 
a shortage, we were so shocked, because for all these years, 
the budgets that you get may be inaccurate, but the rental 
assistance has always been paid. So we did not really believe 
it until the first payments just stopped.
    Like I said, 17 properties, only one of them received any 
written notice or anyone at RD telling us that there is no 
rental assistance.
    Senator Moran. Tell me again, those payments stopped when?
    Mr. Chrisman. In August.
    Senator Moran. August.
    Mr. Chrisman. We have a whole bunch more properties, and 
it's our calculation they are just going to keep on stacking up 
until about 75 percent of our Rural Development portfolio will 
not be getting payments.
    Senator Moran. Thank you very much.
    Mr. Boisvert, does Wilson, Kansas, have a stoplight?
    Mr. Boisvert. No, we do not.
    Senator Moran. I just want to make sure that we were not 
out-Kansaned the gentleman from Oregon.
    Senator Moran. There has always been an excess, Mr. 
Boisvert, in the demand for RUS telecommunication loan 
programs. There has always been more demand than dollars 
available. But that is not so true anymore.
    Recently, I would say in the last 3 years, the demand for 
RUS loans no longer exceeds the supply. I wonder if you could 
explain why that is.
    My impression would be the uncertainty that your company or 
others in similar circumstances face, not knowing what the 
Universal Service Fund requirements are going to be, what 
revenue is going to be generated from that fund for your 
company and others, means that there is less demand for the 
loan program at RUS.
    Does that assumption have any validity?
    Mr. Boisvert. Mr. Chairman, yes, it does. I think we would 
see that demand correlate to the 2011 FCC order on the 
Universal Service Fund.
    As you know, when we take out RUS loans, those are long-
term loans. Those are done with a certain understanding of what 
is in place for universal service, consumer rates, all the 
things that a company would use to operate and repay its debt.
    So when the order came out, a great amount of uncertainty 
did occur with the changes that were there. As I mentioned in 
my comments, the new mechanism known as Connect America Fund, 
or CAF, there is still not one for the rate-of-return part of 
the industry, which Wilson is part of.
    So clearly, I think the demand is still there. If you look 
at rural companies, we are in probably one of three phases of 
building out our networks to bring broadband to rural Kansans 
and others across the country. They are built with debt to 
repay and costs operate. They are partially built, which is our 
case. But I have not felt comfortable completing the build. And 
there are those who have yet make that next step in the 
investment but want to and plan to, as soon as certainty does 
resume with universal service.
    Senator Moran. Maybe a way of saying what I was attempting 
to ask is not that there is less demand, but there are less 
applications for that money, waiting for certainty to arrive, 
similar to Mr. Chrisman waiting for certainty to occur.
    The point I would make, and ask you to agree or disagree, 
is I often think of this issue of the order of 2011 as an 
impediment toward a telephone company's ability to repay loans 
that already are in existence to RUS. So less revenue means 
that our ability to repay the loan is diminished. What you just 
said reminds me of another aspect of this. With that 
uncertainty or the belief that there is going to be less 
revenue coming following the order of 2011, there are areas of 
the country in which the desire to serve still exists. But the 
ability, the uncertainty of whether or not there is going to be 
the revenue, diminishes the chances.
    So initially, I thought the topic of this hearing in part 
would be about whether or not a phone company has the ability 
to repay an existing loan. There is another damaging aspect of 
FCC decisions, which is that we may not even ask for the loan 
because of either the uncertainty or the revenue stream is 
insufficient, which means a significant number--I do not know 
what it is--hundreds, thousands of people across Kansas and 
across the country will have less ability to access broadband.
    Does that make sense to you?
    Mr. Boisvert. Yes, it does, Mr. Chairman. I would agree 
with your assessment.
    Without that predictable and sufficient and sustainable 
universal service, that demand may not materialize in the form 
of taking our infrastructure loans to bring broadband to rural 
Kansans.
    Senator Moran. You indicated, in your company's 
circumstance, that has occurred on two or three exchanges in 
which you were prepared to borrow money to expand broadband but 
as a result of that order have not made that loan application?
    Mr. Boisvert. I actually have the loan but I have not drawn 
the funds, resulting in the same thing. That is correct.
    Senator Moran. Okay. Now, the order was modified, the FCC 
modified their original 2011 order. Did that make a difference 
in the types of issues that we are discussing today?
    Mr. Boisvert. Well, there have been seven orders on 
reconsideration since the original order. There was a good step 
forward in removing one of the formulas that was very 
troublesome. But as we speak, we still do not have resolution 
to that. So the work is not done.
    I know the industry and the National Telecommunications 
Cooperative Association (NTCA), which we are part of, are 
working very hard with FCC to come to a truly workable, 
sustainable Universal Service Fund that will allow this work to 
continue.
    Senator Moran. The topic of today's hearing is Rural 
Development. The concerns that you and I are talking about may 
be more directed at the FCC than Rural Development, but the 
consequences exist to Rural Development's ability to either 
have their loans repaid or the demand necessary to provide more 
money to expand broadband in rural America.
    Mr. Boisvert. There is clearly a connection, yes.
    Senator Moran. Let me turn to others. Now that we are down 
to just me, we may have a series of rounds of questions.
    I will go back to you, Brian. Is there any indication of 
when that certainty may become known? When does this problem go 
away? Or is it just with us for the foreseeable future?
    Mr. Boisvert. We hope there is an end.
    And we do thank this subcommittee and others for reaching 
out to the FCC to talk about the standalone broadband. All five 
commissioners I believe have made the commitment to resolve 
this by the end of the year. That is rapidly approaching. So I 
am still hopeful that a resolution can be made.
    But as part of the industry and the association, as we work 
toward this, it is really important that, essentially, we get 
it right. This is a long-term solution that we are seeking, not 
just trying to hit a deadline. So it really is important to us 
to stay at the table to work to make sure that all things are 
tried.
    So if there is a potential recommendation to go to a 
certain method, we want to make sure there is an opportunity 
for everybody to work that method to make sure it is 
sustainable and provides the resources that are needed for 
rural Kansans.
    Senator Moran. Do you have any sense that Rural Development 
is advocating for a position beneficial to the repayment of 
their loans and to the continued expansion of broadband 
availability with the FCC?
    Mr. Boisvert. I am not personally aware of conversations. I 
do believe they are very supportive. They have a large 
portfolio out there that could be at risk. They are a great 
organization to work with, the RUS. So I believe they, 
certainly, would like to see a successful resolution to this as 
well.
    Senator Moran. Thank you.
    Mr. Lowry, your testimony focused significantly on REDLG. I 
just want to ask you the broad question, is there any proposal, 
any suggestions of needed changes to the program? Or are you 
satisfied with the way it works and the way it is administered?
    Mr. Lowry. Overall, I think that there is satisfaction with 
the way the program is working. There is a proposal for a $1 
million limit on individual loans, which would make more loan 
funds available to more people. We think that is a positive 
change. But overall, we are satisfied with the program.
    Senator Moran. Do you know what the average loan amount is?
    Mr. Lowry. I do not, but we can get that information and 
pass it on to you.
    Senator Moran. We talked a bit and you talked about 
environmental or endangered species issues that impact the 
bottom line of a utility company. You might highlight, and I am 
reluctant to raise this topic because for a few days here I was 
known as the lesser prairie chicken Senator, but you might 
highlight for me, for my benefit and for the record, the 
consequences of the listing as a threatened species to your 
company or to utilities in Kansas or the region. That is five 
States, generally.
    Mr. Lowry. Within the context of this hearing, what it 
essentially does is undermine the good work that RUS Rural 
Development is doing. Those programs are all about making 
services to rural residents affordable. When you have a 
regulatory initiative, the lesser prairie chicken being a good 
example, that layers additional costs on the service providers, 
say an electric service provider, that impacts affordability.
    So the needle moves in one direction with RUS program; it 
moves in the other direction in a negative way with initiatives 
such as the lesser prairie chicken initiative.
    To that initiative specifically, there are proposals that 
line construction be completed underground. Underground 
construction adds, in some cases, a tenfold cost to the 
construction of electric facilities. Those costs can only be 
recovered from ratepayers.
    So again, you are taking what would otherwise be an 
affordable service and you are impacting that affordability by 
requiring compliance with regulations that have, in most cases, 
dubious benefits.
    Senator Moran. This issue of the lesser prairie chicken or 
endangered species, and now the more recent clean power plan, 
what is wrong with those whose suggestion is just have the 
utility companies raise the rates?
    Mr. Lowry. Well, we see all the time that the two primary 
drivers for an electric customer will be reliability and price. 
We know, as was said earlier in this hearing, that the cost of 
electricity is a key driver in determining where people locate 
their business. So yes, you can have the price of electricity 
go up. There will be some people, a household, who won't not 
find that objectionable. But business and industry will find it 
as a driving factor in their decision about where they locate. 
It affects their overall profitability.
    Senator Moran. I suppose, in a broad sense, today's hearing 
is about rural development. I would suggest that our ability to 
attract and retain business, manufacturing and others, to rural 
America is in part determined by utility rates. Is that fair?
    Mr. Lowry. That is a fair statement. You know, the customer 
density in rural America is much, much lower than it is in 
urban America, meaning we have fewer consumers per mile of line 
from which we can recover our costs than do our city brethren. 
So additional costs recovered from a much, much smaller pool of 
ratepayers means higher rates for those ratepayers. That is a 
big concern of ours.
    Senator Moran. A point I would make is that while you 
testify about the value of the REDLG program, which would be 
assistance to an individual, generally small business and its 
location or expansion in your consumers' territory, if your 
rates are significantly higher than other utilities, businesses 
will make decisions about where to locate.
    So your REDLG is important in the micro sense, but what 
your rates are is important in the macro sense to rural 
America.
    Mr. Lowry. You are undermining the benefit of the REDLG 
program with other policies that would increase electric costs.
    Senator Moran. Let me ask specifically the consequences to 
Rural Development and their loan portfolio. Does that loan just 
get paid? Regardless of the regulatory environment in which you 
operate, you are required to pay the loan to RUS, right?
    Mr. Lowry. Are you talking about on the electric side?
    Senator Moran. Yes, on the electric side.
    Mr. Lowry. Yes. RUS borrowers borrow money to complete 
projects and construction work plans. The clean power plan is a 
good example where you are making investments that are decades 
long investments, and they are enormously expensive. When you 
have a regulatory initiative that essentially says, for 
example, we will generate less if at all from a coal resource 
and instead we will generate more from some other resource.
    Well, at the start, you have a power plan. And if EPA, 
through the clean power plan, essentially says you cannot 
utilize that power plan, then you have to have a second power 
plan to provide service. So the ratepayer, instead of paying 
for one plant, is now paying for two.
    The loans do not go away. They are still going to be due 
and owing.
    So when you hear the term ``stranded investment'' used in 
the context of clean power plan, that is one element of 
stranded investment. You have an asset that you cannot utilize.
    Senator Moran. So RUS made a loan to a utility company 
expecting the life--they loaned the money to build a power 
plant or to improve a power plant. They expected the life of 
that plant or its improvements to be a certain amount of time. 
And potential changes that are now on the horizon would mean 
that the value of that plant is diminished. So the asset for 
which they have made the loan is diminished in its value, and 
the revenue that it will generate to repay the loan is less.
    Mr. Lowry. That is true.
    Senator Moran. Okay. And that does not affect necessarily 
the portfolio of RUS until there are defaults. Is that true?
    Mr. Lowry. Yes, that would be true. They are going to 
expect repayment, as they should. But the ability to repay is 
going to be hampered.
    Senator Moran. A utility company cannot renegotiate their 
loan with RUS based upon changing circumstances of a new clean 
power plan. Is that right?
    Mr. Lowry. Well, that probably remains to be seen. There is 
no requirement that RUS renegotiate loans. So it would be 
another example of a regulatory uncertainty.
    Senator Moran. Just for the same reason that there is 
assistance to utility companies serving rural America, that is 
because the ability to get a return necessary to build the 
plant and provide the service is less, that would mean that any 
changes in the economic circumstances surrounding that plant is 
all the more important because it already is so fragile, so 
marginal to begin with.
    We would not be making loans to rural America if it was 
easy to get a sufficient return on investment in utilities. We 
make those loans because it is difficult. And the change, 
therefore, would be the most damaging or dramatic in a rural 
setting. Does that make sense?
    Mr. Lowry. Yes, that does make sense. Again, it goes back 
to customer density. It is all about the taxpayer or, in our 
case, the ratepayer. We have fewer of those in rural America 
than our city brethren. So it is a more fragile environment.
    Senator Moran. I co-chair a caucus in the Senate with one 
of my Democrat colleagues. It is about competitiveness. It is 
about reintroducing additional manufacturing opportunities to 
the country, not just in rural America. But I would tell you, 
in so many circumstances in which you look at a reason a 
company has brought their employees home, bringing more 
manufacturing jobs back to the United States, has had a 
significant amount to with the cost of utilities. If you can 
provide the utility structure, including water, at a rate that 
is more affordable, the chances of manufacturing returning to 
the U.S. from someplace abroad is enhanced.
    Then you add that to we can never afford to have a 
competitive disadvantage in the territory that you serve.
    Mr. Lowry. Yes.
    Senator Moran. Mr. Simpson, the way I look at this, kind of 
related to this environmental issue, is that there are lots of 
rules and regulations involving the quality of water, 
rightfully so. We want clean water. I represent lots of 
communities in which there are not enough ratepayers. You 
cannot raise the water rates sufficient to raise the money 
necessary to comply with regulations.
    One comes to mind. There are 99 ratepayers in the 
community, but they have these standards they have to meet. 
They cannot raise the rates on 99 people to get the money 
necessary to accomplish the requirements, to accomplish the 
goal of that standard for clean water.
    Therefore, the programs that help a community become even 
more important, again, in rural America because you cannot 
finance it with the people who are paying their water bills 
each month.
    I assume that that is, in a sense, your mission, how we 
help people who cannot afford to do all the things that need to 
be done to provide clean water in a sufficient quantity.
    What works? What is the most important thing to you?
    Mr. Simpson. I think the Rural Utilities Service with right 
now the historically low interest rates, even with the 40-year 
term, when it is coupled with the grant portion, it can make it 
affordable.
    You are right, Mr. Chairman, a lot of these small 
communities, you are looking at a little trailer park. In my 
home State, they do not meet the capacity. Or the unpaid mayor 
you have to go find at his real job in the casino----
    Senator Moran. We have no casinos in Kansas. That is almost 
true. Not exactly.
    Mr. Simpson. They do not have the capacity and the 
resources to hire someone to operate the system. A lot of 
times, you will have a part-time person that does several 
systems.
    That is where our folks that have this vast amount of 
experience being former water operators and training with all 
the certifications can come in and fill that void for these 
communities that simply do not have the expertise and cannot 
afford it.
    But we think that Rural Development program with that grant 
component is very unique and can make it so these low-income 
communities can have affordable, clean water.
    Senator Moran. I know the National Rural Water Association 
well enough to know that I assume that your request would be 
additional dollars put into those programs. That is a standard 
reply that we would get in this subcommittee or to me as a 
member of the Senate.
    But I would ask you, are there program efficiencies, 
program management, in addition to more money, are there ways 
that we can formulate the programs to work better?
    Mr. Simpson. Yes, sir, Mr. Chairman.
    First of all, we are very appreciative to the Senate mark 
for our programs. It was very gracious.
    Senator Moran. I was fishing for a compliment. Thank you.
    Mr. Simpson. You are right. I think I have to give former 
Under Secretary and Administrator McBride credit. They have 
done something pretty smart called RD Apply, which is really 
bring in Rural Utilities Service into the modern century as far 
as IT and technology is concerned, where, literally, you can 
take a smart phone, your iPhone, a laptop, and you can access 
their application process.
    They trained our folks a couple weeks ago in Oklahoma City. 
It was honestly very easy.
    And another thing, why this is so good, you heard about 
delays from RUS and the inconsistency with some of the 
programs, the staff that got reduced during the last 5 years. 
It is transparent and accountable, too. So you know your water 
specialists, the program director, the State director, 
everybody can see this process. I think that that is a smart 
way that they are going ahead to use easy, off-the-shelf 
technology to do the program more efficiently.
    Senator Moran. Thank you.
    There is at least talk about the existing water and waste 
disposal loan program involved in a portfolio sale.
    Mr. Simpson. Yes, sir.
    Senator Moran. Anything that I should know about that? I 
would guess we will have some specific questions to address to 
you in writing.
    Mr. Simpson. Yes, sir. Let me be clear. A lot of what I am 
basing my response on, I do not have anything in writing from 
the Department. I have had some conversations. We would be 
delighted to review or comment or add our suggestions.
    Yes, there have been several ideas about how you bring the 
private sector in to complement the Rural Development mission 
with their limited loan and grant dollars. We are for that. We 
think that the guarantee program that is not very utilized, 
only made a handful of guarantees last year, the private sector 
can play an important role there, especially for communities 
that have more capacity and resources to debt service a 
private-sector loan.
    That said, we do have some concerns. There are discussions 
about doing a partial prepayment or participating loan to where 
a utility in Kansas that has this 40-year loan, they are in 
year 20 and the private sector can come in and pre-pay 50 
percent of that outstanding balance to the Treasury. I would 
imagine the private sector is going to look at that value, what 
they think it is worth, and how the Treasury is going to look 
at it, because you are cutting off that stream of payment for 
the remaining 20 years, with the interest. And then the utility 
in Kansas, for example, would still make their standard 
payment. Nothing would change. They are making a $10,000 or 
whatever it is monthly payment. But half of that would be 
diverted to the private entity, the investor.
    I cannot understand the public policy of that. It does not 
benefit the utility. It does not impact the end-user. I do not 
understand that thought process.
    We have some concerns with that. Also, we would want our 
utility bar common with rural folks and how they operate 
business to have knowledge about their loans being modified, to 
have the right to say we have to check off on it or the right 
for first refusal. If there is a concern about some of the 
loans that are 20 years old or longer, that they are paying a 
higher interest rate, you might want to look what this 
subcommittee did before as an option, the 502 guarantee 
program, when you established a separate refinancing category 
for the 502 guarantee program, which was at a cheaper subsidy 
rate to give these existing rural utility bars the opportunity 
to refinance if the direct loan rate was lower. It was a 
benefit for the business model.
    That I think would be a better policy because it would 
lower the rate for the utility so you free up some money to do 
some deferred maintenance and not pass on the cost to the user.
    So, yes, sir. We do have some concerns about the public 
policy benefit of an action like a partial prepaid loan.
    Senator Moran. Water utilities have access to funds besides 
Rural Development in what ways? The public financing of water 
infrastructure, going to the bond market and the utility 
issuing revenue bonds to be repaid from the revenue of sale of 
water and treatment of wastewater?
    Mr. Simpson. Yes, sir. A lot of them are municipalities, 
quasigovernmental entities. They have a wide variety. A lot of 
them will use the SRF, the EPA revolving loan fund. That varies 
from State to State how they administer it.
    A lot of them will use bond money. Our Kentucky entity has 
their own bank, basically. There is a wide variety of different 
programs they could use. The guarantee program, in my opinion, 
has not been utilized very often.
    Senator Moran. So the two options that a water utility in 
Kansas would have would be Rural Development and the EPA, as 
far as public sources of support?
    Mr. Simpson. Yes, sir.
    Senator Moran. Okay.
    I appreciate your comments in regard to the nature of 
Congress working in a bipartisan effort. I would use this as an 
opportunity to highlight that the Agriculture Appropriations 
Subcommittee report was passed by the full committee 28-2, the 
best of any appropriation bill that worked its way through 
subcommittee and into the full committee.
    We welcome you back to the subcommittee. I suppose it is 
significantly unusual for the circumstance to have come full 
circle and you are on that side of the table.
    Mr. Simpson. Yes, sir.
    Senator Moran. We are glad to have you, and we appreciate 
your expertise.
    I think we are about ready to conclude. I would just ask 
any of the witnesses if they have a point, an issue, that they 
wanted to make certain that they clarify, raise, something they 
want us to know before we close the hearing?
    Mr. Boisvert. Mr. Chairman, I want to thank you for this 
opportunity. I never want to lose sight, and we don't, that, in 
the end, we want to keep consumer rates reasonable and provide 
this opportunity for every rural Kansan and every rural 
American. So that is why we work as hard as we do to do the 
things we do. It is for that benefit, to keep our country 
connected. There is so much benefit to be gained from the 
rural-urban connection and very much a focus of that are 
consumer rates. Thank you.
    Senator Moran. Never wanting to have somebody have the last 
word but me, I would say, I intended to ask you this earlier, 
in the absence of Wilson Telephone Company, what difference 
does it make to the people who you serve?
    Mr. Boisvert. Well, I would like to believe we make a lot 
of difference. We are very much a part of the community. Not 
only do we provide state-of-the-art communication services, but 
we also are members of the community. We live where we work. We 
support our youth. We do scholarships.
    Getting those millennials to come back to rural Kansas is 
very much a priority. We think with some of the modern networks 
and the services that they offer and the opportunities that 
they offer, we hope this will be appealing, and once the 
younger generation goes off to college, that they will return 
back home to help on the family farms, to start new businesses, 
to create new opportunities. We think that is part of it. That 
is part of what we try to do as well.
    Senator Moran. Mr. Boisvert, is it safe to say that, in the 
absence of a company like yours and those telephone companies 
similar to yours across the country, that the services that you 
provide would not be provided or would not be provided at a 
rate that was affordable?
    Mr. Boisvert. I would agree with that. That is really how 
these companies came to be in the first place. The market is 
not there that the large companies are going to enter into. We 
are very rural, very low population density. So I do fear that 
if these companies were not there, that void would not be 
filled.
    Senator Moran. Thank you.
    Anyone else?
    I appreciate your testimony. Thank you for joining us 
today. I consider it an informative hearing, and it is because 
of your willingness to come and talk to us today.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Moran. For my colleagues on the subcommittee, any 
question that they would like to submit for the hearing record 
should be turned into our subcommittee staff within 1 week, 
which is Wednesday, October 28.
    If a question is directed to you or to Rural Development, 
we would appreciate if we could have a response back within 4 
weeks.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
                Questions Submitted to Hon. Lisa Mensah
               Questions Submitted by Senator Jerry Moran
                    section 515 rural rental housing
    Question. A 2004 USDA report (Rural Rental Housing Comprehensive 
Property Assessment and Portfolio Analysis) indicated a 20 year $2.6 
billion cost to maintain the section 515 rural rental housing 
portfolio.
    We are 10 years into that timeframe, how much progress has been 
made?
    Answer. Rural Development has been actively engaged in the 
preservation of its Section 515 portfolio, but more work needs to be 
done. As a result of the 2004 Comprehensive Property Assessment, 
Congress authorized a demonstration program through annual 
appropriations language providing RD with more flexible tools to 
encourage the revitalization of its Section 515 and Farm Labor Housing 
properties. The demonstration program is known as the Multi-Family 
Preservation and Revitalization program (MPR). Through the end of 
fiscal year 2015, RD has obligated $1.051 billion for the 
rehabilitation of 982 properties and more than 33,000 units of 
affordable housing. MPR has also facilitated a high level of 
cooperation with state housing finance authorities by leveraging 
billions of dollars in tax credits to stretch our limited appropriation 
dollars.
    In order to continue making progress in our revitalization efforts, 
RD has requested that Congress authorize the MPR program permanently. 
If the program was permanently authorized, the Agency could create 
regulations to institutionalize the program's benefits and signal to 
potential program participants that both the Executive and Legislative 
branches of the Federal government are committed to the revitalization 
of our affordable housing.
    Question. What improvements have you made in procedures or 
regulations to ensure that these housing developments are in adequate 
condition?
    Answer. MFH has made significant changes in its oversight and 
monitoring of borrower compliance with program regulations.
    Information technology advances have assisted the MFH field staff 
in conducting more focused and comprehensive physical inspections at 
properties, including the ability to obtain immediate feedback from 
borrowers and management agents on corrective action timetables. The 
use of a hand-held device to record, capture, and deliver results of 
both physical and management oversight reviews have improved turn-
around time for follow-up to ensure that corrections are made.
    MFH also uses an automated budget analysis tool that flags high 
project expenses and high rent increases; such flags cause field staff 
to analyze more closely repair and maintenance activities, and proposal 
capital improvements to be paid for through higher rents. The 
availability of field staff to be within reach of the properties 
financed by the Direct Loan programs expands the agency's capability to 
ensure the improvements planned are properly executed.
    MFH participates in the White House Physical Inspection Alignment 
Initiative, which encourages Federal housing assistance programs to 
work cooperatively in areas of overlap. Physical inspections are one 
such area, where properties financed by MFH may also have Low Income 
Housing Tax Credits or Section 8 rent assistance support. In these 
instances, the Alignment Initiative targets these joint properties to 
share physical inspection information among the affected agencies--
which serves to reduce duplication while also focusing oversight on 
properties with higher Federal investment dollars.
                    rural housing maturing mortgages
    Question. Over the next several years most of the section 515 loans 
outstanding will mature. By 2020, close to 75 percent of section 515 
loans, totaling over 400,000 units, will have reached the end of the 
loan term. Rental assistance is limited to tenants living in projects 
financed with section 514 and 515 loans. As property owners pay off the 
loans for the projects, the tenants lose eligibility for rental 
assistance. Most of these rural rental housing projects are in small 
communities and their only market is affordable housing.
    What steps has USDA taken thus far to address this issue and is 
there a long term plan to ensure that this housing continues to be 
available for the low income and elderly households?
    Answer. Rural Development is very concerned with the potential loss 
of affordable housing as our Section 515 direct loans mature, because 
that housing could be lost in the community and the rental assistance 
support would no longer be available to the families in that property. 
If that RD housing is lost, the very low income families living there 
may have no other affordable housing in which to live.
    In response, RD has provided a number of options for owners to keep 
their RD loan and protect the families living there.
  --The borrower can apply through RD's Preservation NOFA for a 
        deferral of their maturing mortgage for up to 20 years;
  --The borrower can receive priority points if they choose to apply 
        for both the deferral and additional RD funding for 
        rehabilitation of property;
  --The borrower can request a re-amortization and modification of the 
        maturing loan to extend the loan term up to 20 years;
  --If owners go through the prepayment process to allow their tenants 
        may be eligible to receive housing vouchers.
    In addition to these steps, the Department has also offered Letters 
of Priority Entitlement to tenants in maturing mortgages. Holding this 
Letter will allow the tenant to be placed at the top of the waiting 
list for any RD property in order to continue living in affordable 
housing. The Agency may be authorized to transfer the unused rental 
assistance to a new RD property in limited circumstances. The 
Department has also included in the fiscal year 2016 President's Budget 
a legislative proposal to allow Rural Development housing vouchers to 
be used by tenants in these maturing mortgage properties.
    Current voucher program appropriations language limits use to 
tenants in situations where the owner is prepaying the RD mortgage.
                     rural housing 502 direct loans
    Question. In fiscal year 2014, approximately $100 million in the 
502 direct home ownership loan program was unspent. In fiscal year 2015 
USDA obligated all the funds available.
    Please explain the steps you have taken to improve processing of 
direct homeownership loans.
    Answer. In fiscal year 2015, delivery of the 502 direct home 
ownership loan program was a high priority for USDA. That priority 
continues in fiscal year 2016, and will be reinforced with automated 
underwriting, streamlining of the credit report process, and additional 
program training. A certified packager program final rule will be 
implemented provided that prohibitory ``pilot'' language is removed 
from the final USDA fiscal year 2016 appropriations bill. This 
regulation will enhance our partnership with certified loan packagers 
and further enhance program delivery.
                  rural housing section 502 guaranteed
    Question. The President's Budget requests authority to allow RHS to 
allow direct endorsement for lenders rather than processing all 
guaranteed loans in-house.
    Please provide additional information on how this authority would 
work.
    Answer. The agency will reserve delegated underwriting authority 
for select lenders meeting established criteria. Lenders will not 
qualify for consideration unless they have strong loan performance 
characteristics as an approved program lender for a period of 2 years 
or more. Additional prerequisites will be established by the Secretary 
to further determine a lender's eligibility for delegated authority. 
For example, the lender would need to demonstrate a proven history of 
delinquency rates below the national average for all approved lenders. 
Lenders granted this authority will be required to maintain certain 
credentials and training requirements to retain such status.
    To implement delegated underwriting authority the Agency will need 
to enhance its lender monitoring and reporting capabilities in its 
Guaranteed Underwriting System. Once the agency secures funding, the 
necessary IT development will take approximately 2 years.
    Question. In fiscal year 15 RHS obligated roughly 78 percent of 
Section 502 Guaranteed, yet managed to obligate 99 percent of 502 
direct.
    Please provide background on this discrepancy.
    Answer. The observed discrepancy is more reflective of operational 
differences than performance disparity between the Direct and 
Guaranteed programs. The $24 billion program level Congress has 
established for the Single Family Housing Guaranteed Loan Program 
(SFHG) provides the program the capacity needed to accommodate 
fluctuating market demand, which can be significantly affected by the 
macro-economic environment, as in 2007. Should program funding be 
exhausted, thousands of lenders and potentially tens of thousands of 
prospective borrowers could be negatively affected. This would have a 
tremendously detrimental effect on program credibility. The lending 
capacity of this negative-subsidy program ensures that USDA can meet 
the mortgage credit needs of low and moderate income borrowers during 
periods of unexpected market volatility. It thereby provides a very 
valuable safeguard, preserving the viability of the program for future 
generations of rural Americans.
    The successful obligation of all Section 502 Direct funding, 
reflects the strong demand for the program's affordable financing 
terms, which enable low and very-low income borrowers without access to 
alternative sources of mortgage credit an opportunity for 
homeownership. This program, whose funding totals approximately 3.8 
percent of the guaranteed program, is vitally important to rural 
America.
     rural housing section 538 eligibility for housing cooperatives
    Question. USDA Rural Development has a long history of supporting 
agricultural cooperatives and cooperative businesses. Yet, there has 
been some confusion on why Rural Development does not provide financing 
for housing cooperatives. For many consumers in rural communities, 
especially seniors, a housing cooperative can be an affordable option 
to owning a home.
    It is the Committee's understanding that housing cooperatives are 
eligible for the 515 multi housing program, but not the 538 program, 
which is the more ideal program for financing.
    Can you explain why the 538 program is not accessible to the 
financing of cooperatives? Can you provide to this Committee a solution 
to this issue?
    Answer. RD has determined that under Section 538 of the Housing Act 
of 1949 (42 USC 1490p-2), loan guarantees under the Guaranteed Rural 
Rental Housing Program are not permitted for cooperative housing. An 
amendment to that section of the Act by Congress could permit an 
extension of guarantees to cooperative housing.
                           rural in character
    Question. We understand your agency is working on guidance 
regarding the definition of ``rural in character''--can you tell us 
where you are in that process, and what it means for homebuyers in 
rural communities?
    Answer. RHS is continuing to refine the agency's guidance with 
respect to the definition of ``rural in character'' in order to clarify 
the rural in character requirement in a manner that is sufficiently 
practical for application in diverse towns and counties throughout 
rural America. The agency has reviewed the matter extensively and is 
currently evaluating the data and potential eligibility criteria 
necessary to achieve this purpose.
    In response to public concern Rural in Character determinations 
were suspended. The suspension is allowing USDA Rural Development (RD) 
to review the public engagement and decisionmaking processes for `rural 
in character' determinations. We are communicating with stakeholders 
and policy-makers about how best to ensure USDA rural housing programs 
serve communities with limited access to credit and few housing 
options. The temporary suspension of new RIC-related designations will 
remain in effect until this evaluation process is completed.
rural utility service--existing water and waste disposal loan portfolio
    Question. There are reports that the Department is considering a 
possible portfolio sale, similar to the one that took place in 1987. 
Given that the Department has not requested this authority, before 
considering such an action, the Subcommittee would request the 
following information:
    Does the Department plan to discount any portion of an existing 
Water or Waste Water loan to the private sector and charge the 
difference to the mandatory account?
    Answer. USDA is considering a participation transaction that would 
offer private entities a participation interest and would not discount 
any portion of existing RUS loans. The Department is working with the 
Office of Management and Budget (OMB) and the Department of the 
Treasury (Treasury) on how to bring such a transaction to market that 
will have no impact on the program's borrowers and protects the 
taxpayers' investment in USDA's program.
    Question. Will the current borrower be allowed the same treatment 
to have their remaining balance discounted at the same level of the 
private investor?
    Answer. USDA would not discount any portion of its existing loans.
    Question. Will this impact the subsidy rate on the discretionary 
Water and Waste Water Direct loan?
    Answer. We do not anticipate any impact on the future subsidy rate.
    Question. Will the current RUS borrowers have to sign off on any 
modification or participating loan sale or prepayment?
    Answer. A participation transaction would not require sign-off from 
the program's current borrowers.
    Question. Will utility borrowers have a right for first refusal?
    Answer. The transaction would have no impact on the program's 
borrowers, who would retain all the rights and protections that they 
currently have under the terms of their loan agreements.
    Question. Is this is considered a modification; the current 
appropriation bill language does not include ``modification'' authority 
for this portfolio?
    Answer. While the transaction would constitute a Government action, 
USDA is working with OMB on determining the cost of the transaction 
under the Federal Credit Reform Act of 1990.
    Question. If this is considered a modification where the government 
takes an action to change the loan terms or conditions, wouldn't this 
be paid for by the discretionary account and require approval from 
Congress and most likely additional budget authority?
    Answer. While the transaction would constitute a Government action, 
USDA is working with OMB on determining the cost of the transaction 
under the Federal Credit Reform Act of 1990.
    Question. Why is the Department considering such a change without 
input of organizations that represent current borrowers or though 
consultations with Congress?
    Answer. USDA has reached out to the National Rural Water 
Association (NRWA) and looks forward to briefing Congressional staff at 
the appropriate time once a proposal is completed. Secretary Vilsack 
met with NRWA leadership in November 2015; NRWA supports these efforts 
to bring infrastructure funding to rural America and is committed to 
working with USDA as the transaction moves forward.
    Question. The Department has the authority to currently leverage 
loans, for example, couple a direct loan with a guarantee or private 
loan. Are you pursuing this activity?
    Answer. Through existing business practices, USDA is leveraging 
private sector investment in this portfolio through bridge loans and 
interim financing as well as with guaranteed loan authority.
    The proposed transaction discussed in previous answers incentivizes 
a forward commitment from the private sector to invest in rural water 
and waste infrastructure in rural communities with populations of more 
than 10,000, which are beyond the statutory reach of USDA's current 
water program, but are served by other USDA rural loan and grant 
programs. The target communities would also include those that became 
ineligible for USDA's water loans when their population level exceeded 
the 10,000 limit in the 2010 census.
    Question. What happens in a disaster situation like with a 
hurricane where a community might lose half of their customer base and 
couldn't pay their full note? The Federal portion has some tools 
including deferring payments that provided relief to this borrower. Can 
the payment portion to the private investors be altered or deferred at 
the time of a disaster?
    Answer. USDA would retain all of its current tools in providing 
relief to borrowers under duress. The investor would be made aware of 
these tools and would be subject to the same repayment risks as the 
Government in the transaction. Any losses would be shared by the 
investor and the Government.
       strategic economic and community development interim rule
    Question. In May, the USDA--RD published the ``Strategic Economic 
and Community Development'' Interim Rule for public comment. The 
Interim Rule implements the ``Strategic Economic and Community 
Development'' provision (Section 6025) of the Agricultural Act of 2014. 
To implement Section 6025, RD will reserve 10 percent of the funds 
appropriated to select RD programs each fiscal year to fund projects 
that support the implementation of strategic economic and community 
development plans across multi-jurisdictional areas.
    Please provide an update on the implementation process for Section 
6025, with emphasis on how RD has implemented the Community Economic 
Development team and what the next steps are.
    Answer. In fiscal year 15, CF, WEP, B&I, and RBDG did not have set 
aside funds for 6025 due to time constraints. Instead, RD developed a 
Regional Development Priority (RDP) policy that offered an opportunity 
for project proposals submitted under the aforementioned underlying 
programs which are supportive of multi-jurisdictional plan to receive 
additional points. These project proposals were reviewed first and 
foremost based on the underlying program's regulation and policies. If 
a project was deemed eligible for the underlying program, it was then 
reviewed for 6025 requirements if the applicant submitted the required 
documentation for requesting RDP points.
    RD received 47 total applications requesting RDP points broken down 
as follows:
  --By program
      --28 from CF
      --6 from WEP
      --13 from RBDG
      --0 from B&I
  --By State
      --CF: 18 from AR, 1 from IA, 2 from MN, 1 from NH, 1 from NJ, 1 
        from NJ, 2 from SC, 2 from VT
      --WEP: 2 from MN, 2 from NH, 1 from SC, 1 from VT
      --RBDG: 2 from AR, 1 from AZ, 1 from HI, 1 from MA, 1 from MD, 1 
        from MO, 1 from NC, 2 from NH, 1 from VA, 2 from VT
    RD is in the process of making final awards for fiscal year 15. 
Among those awards from the CF, WEP, and RBDG, 26 awards will be to 
projects that received RDP points as follows:
  --By program
      --16 from CF
      --3 from WEP
      --7 from RBDG
  --By State
      --CF: 15 from AR, 1 from VT
      --WEP: 1 from MN, 1 from NH, 1 from SC
      --RBDG: 1 from AR, 1 from AZ, 1 from MA, 1 from MO, 1 from NH, 1 
        from VA, 1 from VT
    During fiscal year 16, RD is working to implement Section 6025 as a 
set aside. RD's Community Economic Development (CED) Team will help 
build capacity to ensure areas of high needs have multi-jurisdictional 
plans in place. This would enable these areas to identify needs, 
economic development priorities, partners, and projects needing 
assistance which are potential pipelines for CF, WEP, B&I, and RBDG. 
Once these areas have the plans in place, they can access the 6025 set 
asides from these programs in fiscal year 16. Furthermore, the CED Team 
is reaching out to communities that have developed multijurisdictional 
plans in place to raise awareness about 6025 set asides.
    Question. The Interim Rule defines `Plan' as, ``a comprehensive 
economic development or community development strategy that outlines a 
region's vision for shaping its economy.'' Do HUD's Sustainable 
Communities Plan, USDA's Stronger Economies Together Plans, and other 
Regional Comprehensive Plans fit into that definition? More 
specifically, what is covered under the Interim Rule's definition of 
``plan''?
    Answer. RD intends the definition of ``plan'' be inclusive rather 
than exclusive, but at the same time require the plan to address 
certain minimum elements in order to be effective in improving the 
economies of the region addressed by the plan.
    The Rule defines Plan as follows: For the purposes of this subpart, 
a plan is a comprehensive economic development or community development 
strategy that outlines a region's vision for shaping its economy. This 
strategy would cover, as appropriate and necessary, a wide range of 
aspects such as natural resources, land use, transportation, and 
housing. Such plans bring together key community stakeholders to create 
a roadmap to diversify and strengthen their communities and to build a 
foundation to create the environment for regional economic prosperity.
    To be an acceptable plan for the purposes of the subpart, the plan 
must be supported by the jurisdictions affected by the plan and must 
address each of the following elements:
  --The economic conditions of the region;
  --the economic and community strengths, weaknesses, opportunities, 
        and threats for the region, to include consideration of such 
        aspects as the environmental and social conditions;
  --strategies and implementation plan that build upon the region's 
        strengths and opportunities and resolve the weaknesses and 
        threats facing the region;
  --performance measures to evaluate the successful implementation of 
        the plan; and
  --support of key community stakeholders.
    RD notes that inclusion of each of the five elements does not speak 
to the quality of the plan or to whether the plan has been adopted.
    Generally, HUD's Sustainable Communities Plans, USDA's Stronger 
Economies Together Plans, and other Regional Comprehensive Plans fit 
into that definition. Additionally, EDA's Community Economic 
Development Strategy plans generally fit into the definition of a plan 
as well. RD is actively reaching out to agencies and organizations 
which administer these plans to communicate the Section 6025 
opportunity to their stakeholders with plans in place.
    Question. In the scoring section of the Interim Rule, RD proposed 
to award two points for projects that utilize contributions from other 
Federal agencies. Are points awarded when state and local agencies 
provide similar investments? If not, why are they not calculated as 
part of the score for applications under the interim rule?
    Answer. Points are not awarded for state and local agencies because 
of the language in the authorizing statute only refers to Federal 
agencies in 6025(c)(1)(C).
    Question. Please explain how the implementation of Section 6025 
will make it easier for rural communities to access targeted resources 
to invest in long-term economic and community development efforts?
    Answer. Recognizing that rural communities have limited resources 
and myriad unique challenges to creating sustainable communities, 
Section 6025 of the 2014 Farm Bill is an opportunity to prioritize 
projects that support the implementation of a regional economic 
development plan. Rural communities who engage in regional 
collaboration plan and build strategically already increase their 
efficiencies and outcomes. As such, these communities who have a 
regional plan will further be able to utilize Section 6025 to access 
set aside funding that rewards regionalism and leverage CF, WEP, RBDG, 
and B&I programs--programs which provide resources which are 
fundamental to creating strong and sustainable communities--for the 
benefit of multiple jurisdictions.
                                 ______
                                 
               Questions Submitted by Senator John Hoeven
             rural utilities administrator brandon mcbride
    Question. The newly-created Broadband Opportunity Council which has 
been tasked with producing specific recommendations and guidance to 
increase broadband deployment recently released its report with 
recommendations that address regulatory barriers and encourage 
investment and training.
    To what extent are you following the Council's recommendations?
    Answer. The main recommendation to RUS in the report asks RUS to 
evaluate the long-standing Telecommunications Program to see if it 
could be expanded to include companies that traditionally have not 
qualified for the program.Today, the program is primarily structured 
for an Independent Local Exchange Carrier, so RUS will explore whether 
others, including cable companies, Competitive Local Exchange Carriers, 
and wireless providers could qualify under the statutory requirements.
    Question. I believe that investment in broadband connectivity is 
vital to the development of our rural communities, and that 
streamlining and eliminating duplicative programs is a step in the 
right direction towards increased access. That being said, what 
specific actions are you pursuing to break down regulatory barriers and 
increase rural broadband investment?
    Answer. In addition to the items mentioned above, RUS is working 
with sister Rural Development Agencies to explore any synergies between 
programs and make applying for broadband funding to be a one-stop-shop 
for all RD programs. In addition, we are in discussions with the FCC to 
be better prepared for the changes that they are making to the telecom 
industry and will make modifications to our financing programs that are 
in line with these changes.
    Question. As well, I think it is especially important that the 
regulatory processes initiated by the Council's recommendations are 
transparent, fair, and open. To this extent, what steps are you taking 
to improve your collaboration with the private sector and State, Local, 
and Tribal governments in the rulemaking process?
    Answer. Prior to new regulations being published, RUS conducts 
Tribal consultations to get their input and make sure that their 
concerns are addressed in any new regulation.
    In addition, RUS is holding regional workshops with the focus not 
only on the RUS financing program but also on how to use broadband 
services for rural economic development. Attendees to these events in 
Tribal representatives, local and state government, private companies 
and others.
    Question. How do you plan on leveraging public private partnerships 
to maximize the Federal government's investment in rural broadband 
services?
    Answer. RUS will work with private investors to leverage the 
amounts that are available for funding.Strong local support is required 
for a broadband service provider to succeed.
    The Broadband Opportunity Council included a proposal from the 
Rural Utility Service that would provide the Secretary of the 
Department of Agriculture with greater flexibility to approve financing 
under the Rural Utility Service's Telecommunications Infrastructure 
Loan Program for entities in areas that are determined to be 
underserved or unserved.
    Question. What steps will be taken with regard to this 
recommendation to prevent duplication or other forms of unnecessary 
overbuilding?
    Answer. The Broadband Program statute and regulations already 
address overbuilding within the eligibility requirements, and the 
Infrastructure Program statute and regulations already require a 
finding of non-duplication of facilities before a loan can be made.
                                 ______
                                 
              Questions Submitted by Senator Jeff Merkley
                  rural energy savings program (resp)
    Question. At the fiscal year 16 USDA budget hearing, Secretary 
Vilsack pledged to implement the Rural Energy Savings Program (RESP) 
that was authorized in the Farm Bill.We understand that Rural 
Development already offers an Energy Efficiency and Conservation Loan 
Program, which is similar to RESP in several respects. However, there 
are key advantages to the RESP program that we believe will cause it to 
be much more effective.
    What progress has Rural Development made to fulfill the Secretary's 
commitment to establish this program?
    Answer. The Energy Efficiency and Conservation Loan Program (EECLP) 
was inspired by efforts to enact the Rural Energy Savings Program 
(RESP). RUS has worked to identify how we might implement RESP. The key 
difference between EECLP and RESP is that EECLP offers very low 
interest rates to utilities while RESP provides for a zero interest 
rate. A zero interest rate would require budget authority to cover the 
costs of the program. EECLP loans do not require budget authority for 
the cost of the loan because of the electric program's negative subsidy 
rate. RD will continue to work with the Committee to further advance 
energy efficiency.
    Question. When do you expect regulations to be published?
    Answer. We do not have a set timeline, but we will continue to keep 
the Subcommittee informed as we move forward. We will continue to work 
with USDA staff and the Committee to determine how to best implement 
energy efficiency programs.
    Question. Please let us know if there is anything this Subcommittee 
can do to help you expedite this process.
    Answer. We will continue to keep the Subcommittee informed as we 
work to advance energy efficiency programs for rural areas.
               private investment in rural infrastructure
    Question. Secretary Vilsack has long expressed an interest in 
promoting private sector investment in rural infrastructure. It is 
believed that private sector markets neglect rural investment 
opportunities due to unfamiliarity and the relatively smaller project 
sizes. He has viewed the Water and Waste Disposal direct loan portfolio 
as a vehicle to educate the private sector on the excellent prospects 
that can be available.
    Please describe, in very specific terms, the current initiative 
that is under consideration.
    Answer. The United States faces costly upgrades to aging and 
deteriorating drinking and wastewater infrastructure.Given the stress 
on public budgets, governments are unlikely to have the capacity to 
fill this funding gap. The gap is particularly problematic for rural 
communities that often depend on Federal and state grant and loan 
programs to finance their water infrastructure projects. While larger, 
urban areas can issue public bonds to pay for major improvements, rural 
communities have limited access to these financial markets, restricting 
their ability to independently finance projects.
    USDA recognizes the need for additional investment in rural water 
infrastructure and is exploring how institutional investors (e.g. 
pension funds) could play a role in filling some of the gap. The 
challenge we face is that loan amounts needed to support rural water 
projects are often too small for institutional investors to consider 
making on a one-off basis, especially for those without prior 
experience in rural water lending.
    To incentivize institutional investors to enter the lending market 
for rural water projects, USDA is considering offering an investor a 
participation interest in a small portion of the Department's water 
loan portfolio. In exchange, the investor would make a forward 
commitment to a certain amount of new loans in support of rural water 
projects. The policy goal of such a transaction is to create an initial 
investment of scale suitable for institutional investors to consider 
entering the market.
    In fulfilling its forward commitment, the investor would target 
rural communities with populations of more than 10,000, but less than 
20,000 which are beyond the statutory reach of USDA's current water 
program, but are served by other USDA rural loan and grant programs. 
The target communities would also include those that became ineligible 
for USDA's water loans when their population level exceeded the 10,000 
limit in the 2010 decennial census.
    Question. What are the administrative burdens, and how much will 
they cost, to implement this initiative?
    Answer. There will be no material administrative burdens as a 
result of the transaction.
    Question. Will Rural Development continue to be responsible for 
servicing the loans?
    Answer. Yes.
    Question. Will Rural Development be responsible for outreach and 
promotion of the initiative, and finding new projects that might be 
funded?
    Answer. No.
    Question. What are the current and future Credit Reform costs of 
this initiative? That is, what will be required in terms of current 
budget authority and what will be the future effects on the program 
subsidy rate?
    Answer. While the transaction would constitute a Government action, 
USDA is working with OMB on determining the cost of the transaction 
under the Federal Credit Reform Act of 1990 (FCRA). USDA is planning to 
structure this transaction to have no cost under FCRA. We do not 
anticipate any impact on future subsidy rates for the water and waste 
disposal loan program.
    Question. Will private sector participants receive a discount on 
the loans involved?
    Answer. USDA would not discount any portion of its existing loans.
    Question. Will current borrowers be offered the right of first 
refusal, if their loan is being sold or participated out? If not, why 
not?
    Answer. No. At this time USDA does not anticipate offering 
borrowers the right of first refusal. The transaction would have no 
impact on the program's borrowers, who would retain all the rights and 
protections that they currently have under the terms of their loan 
agreements.
    Question. Will current borrowers retain servicing options they 
currently are entitled to?
    Answer. Yes.
    Question. Will this initiative reduce the debt burden on borrowers?
    Answer. No, borrowers will continue to be responsible for their 
current obligations.
    Question. How many water and waste projects go to poverty areas or 
areas in dire need of these services?
    Answer. In fiscal year 2015 RUS funded 340 water and waste 
projects, totaling $676 million, in persistent poverty counties and 
rural areas where twenty percent or more of its residents are living in 
poverty. These investments are part of a continuing USDA focus on 
addressing the needs of market poverty communities in rural America.
                           rental assistance
    Question. We understand that funding to renew Rental Assistance 
agreements in fiscal year 15 was exhausted in August. For those 
projects that did not get renewed, what protection did you provide to 
the tenants against unaffordable rent increases?
    Answer. Approximately 44 properties out of RD's 14,600 Multi-Family 
Housing portfolio (about 0.3 percent) were affected by the prohibition 
against a second renewal of Rental Assistance in fiscal year 15. RD's 
field staff worked with the property owners to develop ``relief plans'' 
intended to keep as much money in the property's operating account as 
possible, so that no change in tenant contribution would be necessary. 
In our discussions with borrowers, we urged them to use all the relief 
tools available, to mitigate the need for an increase in tenants' 
contribution towards rent. Forty-one owners of MFH properties elected 
to utilize the tools we offered (defer RD mortgage payment; suspend 
deposits to reserve account; use the reserve account for operating 
expenses; allow over income tenants to fill vacant units; allow for a 
borrower loan to the property).
    Question. Did any tenants suffer substantial rent increases?
    Answer. RD did not approve any rent increases as a result of the 
inability to renew these RA agreements. A few owners did notify their 
tenants that their portion of the rent payment would increase. At this 
time, we do not have quantified figures as properties report on a 
monthly basis; however, we can get that information for you.
    Question. What assistance are you providing to project owners until 
Rental Assistance agreements are renewed under the Continuing 
Resolution?
    Answer. RA funds were received under the Continuing Resolution and 
an Exception Apportionment. These funds were immediately made available 
to renew Rental Assistance agreements. As of November 4, more than $478 
million has been used to renew RA agreements. For properties that ran 
out of funding in October or earlier, their RA agreements will provide 
funds effective October 1.
    Question. When a Rental Assistance unit becomes vacant, regulations 
require that the unit be offered to the lowest income applicant on the 
waiting list. With this requirement, how do you accurately estimate 
future Rental Assistance needs?
    Answer. We believe very strongly that our mission is to serve the 
needs of the most vulnerable residents in rural communities. In doing 
so we acknowledge the difficulty in accurately estimating future rental 
assistance needs, in an effort to address the issue Rural Development 
has taken the initiative to improve the accuracy of its estimation 
process by updating the methodology RD has been using to calculate the 
dollar amounts needed on an RA Agreement.
    Question. What is the magnitude of the fiscal year 15 Rental 
Assistance shortfall?
    Answer. As indicated during the hearing, RD did not have sufficient 
funding for the RA Agreements due for renewal in September of 2015. 
There were 905 properties that requested RA that had less than a full 
month's RA payment remaining in their agreement. Consequently, the RA 
shortfall in September was $3,873,518. The shortfall was due to: more 
RA units than expected needing renewal; and an increase in per unit 
costs. The higher than expected number of renewals occurred in part due 
to the need to fund a second renewal for properties that were not 
subject to the re-renewal prohibition. The higher than expected per 
unit costs reflected inflationary increases not anticipated in 2013 
when the fiscal year 2015 budget was prepared. Harvard's Joint Center 
for Housing Studies' analysis of the consumer price index (CPI) for 
contract rents (a broad and therefore conservative measure) indicates 
that rents are climbing at an accelerating rate. Nominal rents were up 
3.5 percent during the 12 months ending September 2015, which is 
considerably higher than the 1.6 percent provided by budget guidance in 
2013.
    Question. What is the amount that is needed in fiscal year 16 to 
fund all expiring Rental Assistance contracts?
    Answer. The current appropriation of $1,389,695,000 is sufficient 
to fund all expiring Rental Assistance contracts in fiscal year 16.
    Question. What internal changes are you making to your estimation 
process to ensure more accurate budget requests in the future?
    Answer. The development of the ``Rental Assistance Obligation 
Tool'' in 2015 represents a huge step forward in the RA estimation 
process. The Obligation Tool will calculate properties' estimated needs 
based on each individual property's RA history rather than the former 
method of using a state-wide estimation process. The Tool includes an 
updated calculation methodology for forecasting that is based on:
  --The average amount of RA the property used during the most recent 
        12 months;
  --Higher weighting of the more recent months' RA use to reflect the 
        most current tenant characteristics;
  --Adjustments for any implemented and planned rent increases;
  --An inflation factor to adjust for any time lag between the estimate 
        and when funds will be needed.
    The Tool became effective October 1. We are confident that this new 
methodology will significantly increase the accuracy of our estimation 
process.
    Question. Can you assure this Subcommittee that the fiscal year 17 
budget request will not understate the need to renew expiring Rental 
Assistance agreements?
    Answer. We are confident that the new RA Obligation Tool will 
substantially reflect the most current needs of the property.
                           maturing mortgages
    Question. The number of Rural Development-financed multi-family 
housing loans maturing each year is increasing and will reach 1,100 
projects per year in 2019. When these loans are paid off, the projects 
will no longer be in USDA's affordable housing program, and will not 
have access to Rental Assistance or loan servicing options that Rural 
Development can offer.
    What is Rural Development doing to keep these projects in the 
affordable housing program?
    Answer. RD is very concerned with the potential loss of affordable 
housing as our Section 515 direct loans mature, because that housing 
may be lost in the community and the rental assistance support would no 
longer be available to the families in that property. If that RD 
housing is lost, the very low income families living there may have no 
other affordable housing in which to live.
    In response, RD has provided a number of options for owners to keep 
their RD loan and protect the families living there.
  --The borrower can apply through RD's Preservation NOFA for a 
        deferral of their maturing mortgage for up to 20 years;
  --The borrower can receive priority points if they choose to apply 
        for both the deferral and additional RD funding for 
        rehabilitation of property;
  --The borrower can request a re-amortization and modification of the 
        maturing loan to extend the loan term up to 20 years;
  --If owners go through the prepayment process, their tenants may be 
        eligible to receive housing vouchers.
  --RD has also proposed legislation in the 2016 budget to extend 
        housing voucher protection to tenants in properties with a 
        mortgage that matures and the owner is not willing to extend 
        the affordable housing feature of that property.
    Question. Do current project owners generally want to remain in the 
program or graduate out?
    Answer. We believe that most owners wish to remain in the program, 
because of the stability that the rental assistance benefit provides 
and the favorable financing available through our 515 and Preservation 
and Revitalization programs. Many of these owners also share our 
commitment to provide affordable housing to the low income residents 
that we both serve. We thank them for their continued commitment.
    Question. Have you surveyed project owners to determine what number 
would like to remain in the program and where those projects are 
located?
    Answer. RD has not performed a survey of all of the owners of 
approximately 11,500 properties with mortgages maturing through 2024. 
However, RD field staff do contact individual owners of properties with 
mortgages maturing in the next few years to learn those owners' plans 
for the property, and to explain the options the owners may have to 
keep the affordable housing in the program. RD has also had numerous 
discussions with organizations active in this issue to get a general 
sense about the industry's interest in opportunities to retain this 
critically needed affordable housing.
    Question. How are you working with owners and housing advocates to 
develop new options to retain properties in the affordable housing 
program?
    Answer. RD recognizes the importance of our non-profit partners in 
retaining our affordable housing. We have looked for ways to encourage 
non-profits to take over this housing; one option that we have used is 
to promote the use of Section 515 loans to finance the acquisition of a 
maturing mortgage property from the existing owner. The new 515 loan 
extends the availability of that housing by another 30 years.
                multi-family housing preservation pilot
    Question. Over 14,000 affordable multi-family housing projects in 
rural America have been financed using USDA loans.These projects 
include over 475,000 housing units for low and very low income rural 
households. However, the average age of these projects exceeds 25 
years.
    With projects this old, what is Rural Development doing under the 
Rural Housing Preservation Pilot to improve their physical condition 
and to mitigate issues of deferred maintenance?
    Answer. Since its authorization as a demonstration program in 2006, 
RD has been actively engaged in the preservation of its Section 515 
portfolio through its Multi-Family Preservation and Revitalization 
(MPR) program. Through the end of fiscal year 2015, RD has obligated 
$1.051 billion for the rehabilitation of 982 properties and more than 
33,000 units of affordable housing. MPR has also facilitated a high 
level of cooperation with state housing finance authorities by 
leveraging billions of dollars in tax credits to stretch our limited 
appropriation dollars.As part of the application process for MPR 
funding, RD requires the property owner to address any immediate or 
near term property physical condition issues, including deferred 
maintenance. In addition, RD underwrites the loan application to ensure 
sufficient funds will be available to long-term physical issues as they 
arise.
    In order to continue making progress in our revitalization efforts, 
RD has requested that Congress authorize the MPR program permanently. 
If the program was permanently authorized, the Agency could create 
regulations to institutionalize the program's benefits and signal to 
potential program participants that both the Executive and Legislative 
branches of the Federal government are committed to the revitalization 
of our affordable housing.
    Question. How is Rural Development working with housing advocates, 
owners, and other interested parties to develop new options to preserve 
this valuable affordable housing stock.
    Answer. RD recognizes the importance of our non-profit partners in 
retaining our affordable housing. We have looked for ways to encourage 
non-profits to take over this housing; one option that we have used is 
to promote the use of Section 515 loans to finance the acquisition of a 
maturing mortgage property from the existing owner. The new 515 loan 
extends the availability of that housing by another 30 years.
    Question. One concern we frequently hear is that Rural Development 
is unable to expedite the transfer of a property from the current owner 
to a non-profit purchaser. These transactions typically take 18 months 
or more, which places incredible burdens on the buyers in terms of 
holding together financial packages. What are you doing to streamline 
and accelerate this process?
    Answer. Stakeholders have expressed concerns about property 
transfer processing times. Based on those concerns, RD undertook a 
business process improvement to streamline the transfer process, reduce 
processing times, and increase consistency and transparency in the 
transfer process. In the spring of 2015, RD rolled out a transfer 
assessment tool. This tool was provided to stakeholders, including 
property owners, and training was provided to ease the use of the tool. 
The tool created consistency in underwriting transfer applications and 
increased transparency by ensuring all parties in the transfer have 
access to the same review tool. In addition, RD adopted several 
industry standards into its transfer policies, to ensure more 
consistent approval standards that are used by all funders in the 
transfer financial package.
    Question. What is the average time required now to execute a 
property transfer?
    Answer. Based on preliminary data, the average time to process, 
approve, and close a transfer from the date of receipt of a complete 
application package in fiscal year 2015 was 126 days. This is a 
reduction of 31 days, or nearly 20 percent, from prior years. As we 
continue to make improvements to the process, we expect transfer 
processing to continue to improve.
               single family housing direct loan program
    Question. The single family housing direct loan program is Rural 
Development's flagship program providing homeownership opportunities to 
low and very low income rural households. For years this program has 
offered the chance for successful homeownership to thousands of rural 
households who otherwise would be denied this opportunity. This has 
always been one of the most popular programs of this Subcommittee and 
ample funding is provided each year.
    Were you able to obligate all of the funds available in fiscal year 
15?
    Answer. Yes, fiscal year 2015 funds were fully utilized on 
September 21, 2015.
    Question. What changes are you putting in place for fiscal year 
2016 to ensure that the funding provided will be entirely utilized, and 
not require the extraordinary efforts that were necessary in fiscal 
year 2015?
    Answer. In fiscal year 2015, delivery of the 502 direct home 
ownership loan program was a high priority for USDA. That priority 
continues in fiscal year 2016, and will be reinforced with automated 
underwriting, streamlining of the credit report process, and additional 
program training. A certified packager program final rule will be 
implemented provided that prohibitory ``pilot'' language is removed 
from the final USDA fiscal year 2016 appropriations bill. This 
regulation will enhance our partnership with certified loan packagers 
and further enhance program delivery.
                       new poverty pilot program
    Question. Recently the Administration announced a new multi-agency 
anti-poverty initiative, the ``Rural IMPACT'' demonstration project. 
Ten rural communities were selected to receive special technical 
assistance for 6 months, to develop plans to address the problems of 
poverty in their communities.
    Please describe the Rural IMPACT initiative and what is expected to 
be accomplished.
    Answer. Recognizing that every child, no matter where she is born, 
should have an opportunity to succeed, the White House Rural Council 
launched ``Rural Impact'', a cross-agency effort to combat poverty and 
improve upward mobility in rural and tribal places. And in August, HHS 
announced a new demonstration project, Rural Integration Models for 
Parents and Children to Thrive (IMPACT), to help communities adopt a 
two-generation approach to addressing the needs of both vulnerable 
children and their parents, with the goal of increasing parents' 
employment and education and improving the health and well-being of 
their children and families. Often, programs are structured to serve 
either adults or children, rather than focusing on the entire family to 
improve outcomes. The Rural IMPACT Demonstration helps communities 
adopt a comprehensive, whole-family framework for addressing child 
poverty, such as through facilitating physical colocation of services, 
universal ``no wrong door'' intake, referral networks, shared 
measurement systems, and use of technology to deliver services.
    Question. How were the ten rural communities selected?
    Answer. A process was led by HHS that included communities 
submitting letters of interest in participation in the 
demonstration.The Demonstration is administered by HHS with support 
from the Community Action Partnership and the American Academy of 
Pediatrics, and implemented in collaboration with the U.S. Departments 
of Agriculture, Education, and Labor, Appalachian Regional Commission, 
Delta Regional Authority, and the Corporation for National and 
Community Service (CNCS).
    Question. Why do you think 6 months to develop local plans and then 
6 months to implement those plans is adequate to produce visible 
results?
    Answer. We believe that with intensive technical assistance, 
including individualized expert coaching, site visits, and peer 
learning, as well as increased capacity in the form of AmeriCorps VISTA 
volunteers, rural communities can make important program and system 
adjustments to intentionally align intensive, high-quality, adult-
focused services with intensive, high-quality, child-focused programs.
    Question. How will success be measured?
    Answer. Over the long term, key outcomes would include: increased 
enrollment in quality early childhood programs; increased high school/
GED and post-secondary credentials for parents; increased parental 
employment; and increased child and family well-being. Recognizing that 
we are limited in the outcomes we can expect within just 1 year, a 
process evaluation will empirically describe the Rural IMPACT 
intervention, its processes, the site- level activities that resulted, 
and the experiences of key individuals and teams involved.
    Question. What will this demonstration project cost and from where 
are the funds coming?
    Answer. USDA Rural Development has contributed $250,000 for 
AmeriCorps VISTA volunteers to better coordinate rural development 
programs of Federal, state and local governments in the designated 
rural areas. The remaining resources are contributions from other 
participating agencies.
                     loan portfolio credit quality
    Question. Rural Development has the difficult task of providing 
loans to rural individuals, organizations, and communities that have 
limited means and often cannot obtain commercial credit. The 
outstanding loan portfolio now exceeds $210 billion.
    Please discuss the credit quality of the portfolio, and whether or 
not delinquencies and loan losses are remaining steady or declining.
    Answer. In looking at Rural Development's portfolio in its 
entirety, one measure that is tracked is the percentage of delinquent 
principal greater than 1 year. For fiscal year-end 2012, 2013, 2014, 
and 2015, those figures were 2.19 percent, 1.91 percent, 1.96 percent 
and 2.00 percent respectively. Therefore the portfolio as a whole has 
been fairly consistent at the 2 percent range.
    Rural Development does, however, have a vast array of programs as 
represented in the portfolio reports that follow. Four years have been 
provided for comparison purposes of each program.
    Loan loss data has also remained consistent during the last 4 
years. For 2012, 2013, 2014, and through June of 2015, percentages have 
been .51 percent, .61 percent, .53 percent, and .46 percent 
respectively.
    The information is submitted for the record.
    [The information follows:]

                                                                    RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Delinquent Loans > 30 days                                Delinquent Loans > 1 Year
                                                                Amount of     ------------------------------------------------------------------------------------------------------------------
               Loan Portfolio                  # of Loans       Principal                         % Loan        Delinquent       % Delq.      # Loan      % Loan       Delinquent       % Delq.
                                                               Outstanding     # Loan Delinq.    Delinq.     Principal balance    Prin.      Delinq.     Delinq.    Principal balance    Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
  Single Family Housing.....................      307,883     $15,776,794,078          70,151        22.78      $3,860,545,020      24.47       20,612       6.69      $1,075,339,610       6.82
  Multi-Family Housing......................       25,488     $11,161,277,000            *321       **2.11        $206,782,018       1.85         *184     **1.21        $126,938,039       1.14
  Community Facility........................        6,164      $4,165,281,000             144         2.34        $180,241,446       4.33           66       1.07         $85,471,316       2.05
    Total Housing & Community Fac...........      339,535     $31,103,352,078       ***70,295     ***22.38      $4,247,568,484      13.66    ***20,678    ***6.58      $1,287,748,965       4.14
Utilities
  Water & Waste.............................       17,836     $12,004,297,000              93         0.52        $125,725,161       1.05           57       0.32         $80,159,255       0.67
  Electric..................................        3,203     $43,087,376,196               1         0.03          $1,447,861       0.00            1       0.03          $1,447,861       0.00
  Telecommunications........................        1,975      $4,656,650,125              31         1.57        $267,219,531       5.74           26       1.32        $233,892,463       5.02
    Total Utilities.........................       23,014     $59,748,323,321             125         0.54        $394,392,553       0.66           84       0.36        $315,499,579       0.53
Business and Cooperative
  Business and Industry.....................           55          29,854,000              23        41.82         $22,212,832      74.40           17      30.91         $20,987,391      70.30
  RMAP......................................          142          14,914,045              10         0.00                  $0       0.00            0       0.00                  $0       0.00
  Intermediary Relending Prog/HHS...........        1,028        $453,693,800              12         1.17          $5,253,101       1.16            5       0.49          $3,575,574       0.79
  Rural Economic Development................          352        $112,564,484               2         0.57            $400,371       0.36            0       0.00                  $0       0.00
    Total Business & Cooperative............        1,577        $611,026,329              37         2.35         $27,866,304       4.56           22       1.40         $24,562,965       4.02
Total Direct Portfolio......................      364,126     $91,462,701,728       ***70,457     ***20.81       4,669,827,341       5.11    ***20,784    ***6.14       1,627,811,509       1.78
Guaranteed Portfolio
Housing and Community Facilities
  Single Family Housing.....................      671,274     $75,683,366,487          88,532        13.19      $9,628,542,279      12.72       16,930       2.52      $1,883,300,769       2.49
  Multi-Family Housing......................          550        $668,204,431               3         0.55          $6,006,470       0.90            2       0.36          $4,278,232       0.64
  Community Facility........................          713      $1,173,174,000              21         2.95         $49,050,168       4.18            9       1.26         $22,274,686       1.90
    Total Housing & Community Fac...........      672,537     $77,524,744,918          88,556        13.17      $9,683,598,917      12.49       16,941       2.52      $1,909,853,687       2.46
Utilities
  Water & Waste.............................           69         $90,699,867               0         0.00                  $0       0.00            0       0.00                  $0       0.00
  Electric/Other............................           17        $289,496,096               0         0.00                  $0       0.00            0       0.00                  $0       0.00
    Total Utilities.........................           86        $380,195,963               0         0.00                  $0       0.00            0       0.00                  $0       0.00
Business and Cooperative
  Business and Industry.....................        3,752      $7,089,217,252             263         7.01        $549,965,422       7.76          175       4.66        $329,952,765       4.65
    Total Business & Cooperative............        3,752      $7,089,217,252             263         7.01        $549,965,422       7.76          175       4.66        $329,952,765       4.65
Total Guaranteed Portfolio..................      676,375     $84,994,158,133          88,819        13.13      10,233,564,339      12.04       17,116       2.53       2,239,806,452       2.64
Total Loan Portfolio........................    1,040,501    $176,456,859,861      ***159,276     ***15.69     $14,903,391,680       8.45    ***37,900    ***3.73      $3,867,617,961       2.19
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                    RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2013
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Delinquent Loans > 30 days                                Delinquent Loans > 1 Year
                                                                Amount of     ------------------------------------------------------------------------------------------------------------------
               Loan Portfolio                  # of Loans       Principal                         % Loan        Delinquent       % Delq.      # Loan      % Loan       Delinquent       % Delq.
                                                               Outstanding     # Loan Delinq.    Delinq.     Principal balance    Prin.      Delinq.     Delinq.    Principal balance    Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
  Single Family Housing.....................      299,935     $15,593,598,443          72,565        24.19      $4,044,744,331      25.94       24,517       8.17      $1,276,738,913       8.19
  Multi-Family Housing......................       24,973     $11,060,153,000            *279       **1.87        $182,852,919       1.65         *194     **1.30        $139,950,212       1.27
  Community Facility........................        6,121      $4,708,785,000             130         2.12        $141,414,500       3.00           75       1.23         $83,623,935       1.78
    Total Housing & Community Fac...........      331,029     $31,362,536,443       ***72,695     ***23.75      $4,369,011,750      13.93    ***24,592    ***8.04      $1,500,313,060       4.78
Utilities
  Water & Waste.............................       17,005     $12,080,703,000              66         0.39         $86,502,160       0.72           15       0.09         $27,727,916       0.23
  Electric..................................        3,086     $45,790,844,797              12         0.06         $19,663,035       0.04            1       0.03          $1,403,971       0.00
  Telecommunications........................        1,822      $4,576,769,673              30         1.65        $292,421,343       6.39           21       1.15        $146,904,096       3.21
    Total Utilities.........................       21,913     $62,448,317,470              98         0.45        $398,586,538       0.64           37       0.17        $176,035,983       0.28
Business and Cooperative
  Business and Industry.....................           46         $24,954,000              18        39.13         $18,933,059      75.87           12      26.09         $18,017,166      72.20
  RMAP......................................           85         $20,331,259               3         3.53            $119,478       0.59            0       0.00                  $0       0.00
  Intermediary Relending Prog/HHS...........        1,048        $440,390,800              15         1.43          $6,535,033       1.48            5       0.48          $2,716,201       0.62
  Rural Economic Development................          361        $123,615,495               1         0.28            $175,000       0.14            0       0.00                  $0       0.00
    Total Business & Cooperative............        1,540        $609,291,554              37         2.40         $25,762,570       4.23           17       1.10         $20,733,367       3.40
Total Direct Portfolio......................      354,482     $94,420,145,467       ***72,830     ***22.10      $4,793,360,858       5.08    ***24,646    ***7.48      $1,697,082,410       1.80
Guaranteed Portfolio
Housing and Community Facilities
  Single Family Housing.....................      775,355     $89,742,912,407          91,808        11.84     $10,210,728,503      11.38       14,048       1.81      $1,674,113,500       1.87
  Multi-Family Housing......................          615        $750,593,362               1         0.16            $294,890       0.04            0       0.00                  $0       0.00
  Community Facility........................          701      $1,242,806,021              17         2.43         $27,568,610       2.22           12       1.71         $24,730,405       1.99
    Total Housing & Community Fac...........      776,671     $91,736,311,790          91,826        11.82     $10,238,592,003      11.16       14,060       1.81      $1,698,843,905       1.85
Utilities
  Water & Waste.............................           68         $78,665,770               0         0.00                  $0       0.00            0       0.00                  $0       0.00
  Electric/Other............................           17        $273,519,135               0         0.00                  $0       0.00            0       0.00                  $0       0.00
    Total Utilities.........................           85        $352,184,905               0         0.00                  $0       0.00            0       0.00                  $0       0.00
Business and Cooperative
  Business and Industry.....................        3,516      $6,706,971,282             219         6.23        $476,680,469       7.11          143       4.07        $299,493,509       4.47
    Total Business & Cooperative............        3,516      $6,706,971,282             219         6.23        $476,680,469       7.11          143       4.07        $299,493,509       4.47
  Total Guaranteed Portfolio................      780,272     $98,795,467,977          92,045        11.80     $10,715,272,472      10.85       14,203       1.82      $1,998,337,414       2.02
Total Loan Portfolio                            1,134,754    $193,215,613,444      ***164,875     ***14.86     $15,508,633,330       8.03    ***38,849    ***3.50      $3,695,419,824       1.91
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                    RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2014
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Delinquent Loans > 30 days                                Delinquent Loans > 1 Year
                                                                Amount of     ------------------------------------------------------------------------------------------------------------------
               Loan Portfolio                  # of Loans       Principal                         % Loan        Delinquent       % Delq.      # Loan      % Loan       Delinquent       % Delq.
                                                               Outstanding     # Loan Delinq.    Delinq.     Principal balance    Prin.      Delinq.     Delinq.    Principal balance    Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
  Single Family Housing.....................      291,968     $15,415,802,962          75,432        25.84      $4,239,911,528      27.50       28,851       9.88      $1,507,234,605       9.78
  Multi-Family Housing......................       24,716     $10,914,281,000            *287       **1.94        $197,524,047       1.81          *65     **1.12        $123,347,225       1.13
  Community Facility........................        5,970      $5,049,715,000             118         1.98        $145,378,338       2.88           67       1.12         $75,895,343       1.50
    Total Housing & Community Fac...........      322,654     $31,379,798,962       ***75,550     ***25.36      $4,582,813,913      14.60    ***28,918    ***9.71      $1,706,477,173       5.44
Utilities
  Water & Waste.............................       16,676     $12,425,766,000              64         0.38         $82,595,959       0.66           20       0.12         $30,337,162       0.24
  Electric..................................        2,978     $46,431,536,087               3         0.10         $21,547,566       0.05            3       0.10         $21,547,566       0.05
  Telecommunications........................        1,525      $4,411,669,475              51         3.34        $369,748,850       8.38           30       1.97        $243,883,830       5.53
    Total Utilities.........................       21,179     $63,268,971,562             118         0.56        $473,892,375       0.75           53       0.25        $295,768,558       0.47
Business and Cooperative
  Business and Industry.....................           40         $23,569,000              17        42.50         $18,952,098      80.41           14      35.00         $18,064,832      76.65
  RMAP......................................           84         $23,914,016               4         4.76            $131,710       0.55            0       0.00                  $0       0.00
  Intermediary Relending Program............        1,061        $422,227,000              11         1.04          $3,959,006       0.94            4       0.38          $2,160,790       0.51
  Rural Economic Development................          379        $158,214,456               6         1.58          $2,745,655       1.74            0       0.00                  $0       0.00
    Total Business & Cooperative............        1,564        $627,924,472              38         2.43         $25,788,469       4.11           18       1.15         $20,225,622       3.22
Total Direct Portfolio......................      345,397     $95,276,694,996       ***75,706     ***23.61      $5,082,494,757       5.33    ***28,989    ***9.04      $2,022,471,353       2.12
Guaranteed Portfolio
Housing and Community Facilities
  Single Family Housing.....................      873,186    $102,281,768,559          97,688        11.19     $10,985,775,598      10.74       14,573       1.67      $1,736,154,464       1.70
  Multi-Family..............................          648        $785,939,681               1         0.15            $294,890       0.04            1       0.15            $294,890       0.04
  Housing Community Facility................          684      $1,247,462,398              15         2.19         $51,969,241       4.17            8       1.17         $18,610,338       1.49
    Total Housing & Community Fac...........      874,518    $104,315,170,638          97,704        11.17     $11,038,039,729      10.58       14,582       1.67      $1,755,059,692       1.68
Utilities
  Water & Waste.............................           74         $96,223,011               0         0.00                  $0       0.00            0       0.00                  $0       0.00
  Electric/Other............................           17        $247,912,430               0         0.00                  $0       0.00            0       0.00                  $0       0.00
    Total Utilities.........................           91        $344,135,441               0         0.00                  $0       0.00            0       0.00                  $0       0.00
Business and Cooperative
  Business and Industry.....................        3,331      $6,298,413,586             194         5.82        $416,411,396       6.61          117       3.51        $264,421,512       4.20
    Total Business & Cooperative............        3,331      $6,298,413,586             194         5.82        $416,411,396       6.61          117       3.51        $264,421,512       4.20
Total Guaranteed Portfolio..................      877,940    $110,957,719,665          97,898        11.15     $11,454,451,125      10.32       14,699       1.67      $2,019,481,204       1.82
Total Loan Portfolio........................    1,223,337    $206,234,414,661      ***173,604     ***14.48     $16,536,945,882       8.02    ***43,688    ***3.64      $4,041,952,557       1.96
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
*  Number of projects delinquent.
**  The percent of projects delinquent: Number of projects delinquent divided by number of projects outstanding. There are 14,771 projects outstanding as of September 30, 2014.
***  Exclude Multi-Family Housing Projects (Direct)

                               broadband
    Question. Rural Development has had the responsibility for some 
years of expanding access to high speed broadband services across rural 
America.
    How successful has Rural Development been in expanding rural access 
to high speed broadband?
    Answer. RUS has been very successful in expanding broadband service 
in rural areas.
    Over 1.9 million Rural Subscribers since 2009. Based on projections 
from the project applicants in all RUS programs, 1.9 million rural 
households, businesses, farms, factories, schools, libraries, and 
healthcare facilities are anticipated to receive new or improved 
broadband services as a result of RUS funding.
    Over $6.7 Billion since 2009. RUS has provided over $6.7 billion in 
loans and grants for wireline, wireless, and satellite broadband 
deployment through the Infrastructure Loan program, the ARRA Broadband 
Initiatives Program, and the Farm Bill Broadband Program.
    Unserved Rural Communities Receive Broadband through RUS's 
Community Connect Program. Since 2009, RUS has awarded over $77 million 
in grants to 74 unserved communities to provide broadband service at 
residences, businesses, and community centers.
    Question. The fiscal year 14 Farm Bill required changes to the USDA 
loan program. Please describe the significant program changes.
    Answer. The Farm Bill required the following changes to be 
incorporated into 7 CFR part 1738 which governs the Broadband Loan 
Program.
  --Evaluation Periods--establishes at least 2 evaluation periods each 
        year.
  --Priority--requires the Agency to prioritize applications that offer 
        service to the greatest proportion of unserved households.
  --Minimum acceptable level of broadband service--establishes a 
        minimum level for which Broadband Service is defined (4 Mbps 
        down and 1 Mbps up) and requires the Secretary to review that 
        definition at least once every 2 years.
  --Eligible Service Area--changes the current 25 percent underserved 
        requirement and replaces it with a 15 percent unserved 
        requirement. Availability of service in an applicant's service 
        territory is to be validated by the National Broadband Map and 
        any other sources the Secretary may obtain. Determining 
        Priority of Applications--existing service in an applicant's 
        service territory is to be validated by one of three resources: 
        (1) information certified by the affected community, city or 
        county, or (2) demonstrated by the state broadband map or (3) 
        as shown on the National Broadband Map.
  --Public Notice Regarding Applications--requires the Agency to 
        establish a fully searchable database that includes a notice 
        regarding each application for funding which includes the 
        applicant identity, description of proposed service area, the 
        amount and type of support requested, the status of the 
        application, the estimated number of households without 
        broadband service, and a listing of the census blocks that will 
        be served or service area map.
  --Public Notice Regarding Awardees--requires the Agency to establish 
        a fully searchable database that includes a notice of each 
        entity receiving funding, including the name of the entity, the 
        type of assistance received, the purpose of the funding, and a 
        copy of the awardees semiannual report (redacting any 
        proprietary info).
  --Semiannual Awardee Reporting--borrowers are to submit a semiannual 
        report for 3 years after the completion of the project which 
        describes the use of the assistance, the estimated number of 
        end users using or forecasted to use the new or upgraded 
        system, and the borrowers progress towards fulfilling the 
        objectives for which the assistance was provided (the number 
        and location of residents and businesses receiving new and 
        improved service, the speed of the broadband service, the 
        average price of service along with any changes to the adoption 
        rates).
  --Term--if the project is serving an unserved area, the Agency may 
        establish a limited initial deferral period or other term 
        necessary to achieve financial feasibility and long-term 
        sustainability of the project.
    Question. Have any loans been made under the new program?
    Answer. At the end of July 2015, RUS published the new regulation 
and opened up the first application window that is now required.The 
application window closed on September 30, 2015 and 15 applications 
were submitted for approximately $118 million.RUS is currently 
reviewing the applications.
    Question. What does the demand look like for the new program?
    Answer. Based on the number of applications received for only a 2-
month application window, demand for the program appears to be strong. 
RUS is also hearing from many potential applicants that they are 
working on submitting applications during the next application window.
    Question. Do you consider the BIP program a success? Why?
    Answer. We consider the BIP program very successful. BIP funded 254 
projects that are now providing broadband service to some of the 
hardest to reach rural areas. Over $2.9 billion was expended to bring 
broadband service to rural America.
    Question. Rural Development has funded a lot of ``smart grid'' 
projects.What is smart grid technology?
    Answer. Smart grid technology facilitates communications and remote 
control of electric utility systems and business and residential 
consumers. Smart grid technology allows utilities to better manage 
loads and locate outages. Smart grid technology offers consumers the 
ability to remotely control heating and air conditioning systems. For 
instance, a consumer could have their AC unit connected to a smart grid 
service provider and could remotely lower the temperature in the house 
before they get home.
                rural energy for america program (reap)
    Question. The REAP program can and is used by individual farmers 
and ranchers, and certain agricultural cooperatives, to increase the 
efficiency of their operations or generate renewable energy on farm. 
Irrigation districts apparently are not eligible to apply. However, at 
least in Oregon, when irrigation districts pipe canals they are often 
interested in doing renewable in-pipe hydropower generation and other 
types of energy efficiency improvements for their members.
    Does USDA have the ability to adjust the REAP program to allow 
irrigation districts to apply, and is this something you have 
considered doing? This could be an additional way to assist drought 
affected communities, which is something we should all be working on.
    Answer. Most irrigation districts are quasi-public districts that 
were formed under State statute and would not qualify for funding under 
REAP. A regulatory change would be required to make these entities 
eligible recipients under REAP. There are a handful of districts, 
however, that have formed irrigation cooperatives as an operating 
entity. These cooperatives could be considered eligible for REAP.
    To be eligible for REAP, the applicant must be a small business or 
an agriculture producer, and non-profits and other public entities are 
not eligible to participate in REAP.
    Question. The fiscal year 14 Farm Bill provided the REAP Program 
with $50 million in mandatory funding yearly. Please provide an update 
on how REAP is doing.
    Answer. Fiscal year 2015 Program level included $83 million of 
grant funding and $208 million of guaranteed loan funding, which came 
from two fiscal years of 2014 Farm Bill Funding and fiscal year 2014 
Appropriations.The program utilized all of the grant funding and 75 
percent of the guaranteed loan funds. The guaranteed loan funds was 
twice the amount of the previous historical record which was quite a 
feat as almost half the year was gone before guaranteed loans could be 
obligated. Unused guaranteed loan funds will be carried over into 
fiscal year 2016 and made available for lenders to access project 
financing shortly after October 1st, which will continue to make the 
program more accessible to applicants needing the funding.
    On December 29, 2014 RD published a final rule that took into 
account the 2014 Farm Bill provisions as well as comments received on 
the REAP interim rule published in 2011 and the proposed rule published 
in 2013.
    RD has developed a new suite of outreach materials and is currently 
engaged in an extensive outreach effort to potential applicants and 
lenders.
                   rural business-cooperative service
    Question. What is the status of the Biorefinery Assistance Program 
(Sec. 9003)?
    Answer. RD published an Interim Final Rule on June 24, 2015 
implementing the 2014 Farm Bill provisions. The new rule makes the 
program more accessible to facilities producing renewable chemicals and 
to facilities manufacturing renewable chemicals and other biobased 
outputs of biorefineries into end-user products. It also requires the 
Agency to ensure diversity in the types of projects approved. A cap on 
the amount of funding is provided for promoting biobased product 
manufacturing (no more than 15 percent of fiscal year 2014 and fiscal 
year 2015 mandatory funds). In addition to addressing the Farm Bill 
provisions, the Interim Final Rule makes other programmatic changes 
including an improved application process, enabling the flexibility to 
assess an application on a commercial lending framework or a project 
finance-based framework, simplifying the application scoring process, 
and improving a number of loan guarantee terms and conditions.
    RD published a Notice of Solicitation for Applications on July 6, 
2015 announcing the first application cycle with a deadline of October 
1, 2015. The NOSA requires all persons who intend to file an 
application by October 1, 2015 to submit a Letter of Intent no later 
than September 1, 2015. Application cycles are every 6 months with 
applications deadlines of October 1 and April 1, which are preceded by 
Letters of Intent by September 1 and March 1.
    RD received letters from 23 potential applicants expressing their 
intent to file an application for the application cycle ending October 
1, 2015, requesting loan totaling $900 million and project costs 
totaling $1 billion. Of these 23, six submitted applications by the 
October 1 deadline while 11 potential applicants notified RD that they 
will submit their application for the April 1, 2016 application cycle 
because their lender was unable to complete the application by the 
October 1, 2015 deadline.

10/01/2015 Application Cycle:
  --Six applications--six Biorefineries and no Biobased Product 
        Manufacturing facilities.
  --Loans requested range from $9 million to $250 million and total 
        $588 million
  --Projects costs range from $12 million to $340 million and total 
        $895 million
  --Three biorefineries will primarily produce advanced biofuels and 
        three will primarily produce biobased products including 
        renewable chemicals.
    Between fiscal years 2009 and 2014, 42 applications were received. 
Of these 142 applications, 30 applications were either withdrawn by the 
applicant/borrower, determined by RD to be ineligible, or have had 
funds deobligated. Of the remaining 12 applications, RD has issued 11 
conditional commitments,--of which two loans have gone into default and 
one loan was repaid in full--and one application is pending for which 
RD is preparing to enter into a conditional commitment in fiscal year 
2016.
    Question. How do RBS programs leverage private-public partnerships 
and outside funding?
    Answer. While the Federal budget has increasingly been strained by 
competing funding priorities, demand for RBS programs continues to 
grow. Leveraging of program funds with outside (non-Federal funds) is 
an important tool that RBS uses to stretch Federal funds in improving 
conditions in the rural American communities that RBS serves.
    RBS' success in this leveraging is enhanced by promoting 
partnerships between the public and private sectors. RBS efforts to 
leverage program funding includes Rural Development State and National 
Office outreach efforts to discuss the equity or matching requirements 
of RBS programs to stakeholders, and participation in regional and 
local listening sessions, one on one meetings with stakeholders and 
eligible entities, and interagency meetings or forums with other 
Federal and state agencies, community development organizations, and 
private foundations or investors.
    In addition, at the individual project level, leveraging additional 
funding sources demonstrates that others believe in the project, and it 
contributes to the sustainability of a project, because those who sign 
on as partners at the beginning have an incentive to continue 
supporting the project after the RBS loan or grant is fully dispersed.
    The following table summarizes RBS' success in leveraging from 
fiscal year 2009 through fiscal year 2015.

----------------------------------------------------------------------------------------------------------------
                                                       Fiscal year 2009-2014                   2015
                    Programs                     ---------------------------------------------------------------
                                                   Total Funding     Leverage       Obligations      Leverage
----------------------------------------------------------------------------------------------------------------
B&I Guaranteed Loans............................       $8,712.99       $5,743.90       $1,044.52         $460.00
REAP............................................          568.36        1,498.23          244.26          680.38
Biorefinery Assistance Program (9003)...........        1,037.68        1,198.96           80.00           70.48
RBOG............................................           23.69           18.31              (see RBDG)
VAPG............................................          108.49           47.88           44.48           50.24
RCDG............................................           42.09           15.28            6.05            2.32
IRP.............................................          140.80          873.81           18.89            9.42
REDLoans........................................          268.62        1,560.34           38.65          196.89
REDGrants.......................................           54.24          431.54            9.21           57.63
RBDG............................................          223.65          283.32           27.84           29.61
RMAP............................................           74.86           49.66            5.02         1143.71
Total RBS.......................................       11,255.46       11,721.25        1,518.92        1,600.68
----------------------------------------------------------------------------------------------------------------
NOTE: All figures are in $ millions.

    Question. What is the status of the REDLG program? Why have you not 
awarded funds since March?
    Answer. We obligated all of the available RED loan funds by the end 
of March 2015.The program is oversubscribed, and experienced a dramatic 
funding cut from 2014 to 2015. In 2014, $85.6 million in loans and $9.2 
million in grants were available and awarded.In 2015, less than half, 
or $38.6 million in loans and $9.2 million in grants were available.
    Question. How do RBS programs support local food initiatives?
    Answer. Local and regional food is the strongest food trend in 
decades and USDA and Rural Development are looking to build on this 
trend and facilitate consumer interest in reconnecting with all 
American agriculture and bridge the rural-urban divide. While limited 
by geographic borders, RD has sought to identify projects that while 
located in rural areas, can be used to support needs in urban and 
suburban areas. For example, working to link a rural produce marketing 
cooperative with an urban food retailer or market where there is a lack 
of affordable fresh produce. RD has also been active in the Know Your 
Farmer, Know Your Food initiative which emphasizes the need for a 
fundamental and critical reconnection between producers and consumers. 
RD continues to work to align existing programs with the needs of local 
and regional food systems; conducting outreach activities so that the 
linkages are understood; helping communities build local food systems 
by providing new initiatives; and engaging the American public in 
conversation about local and regional agriculture. RD has been engaged 
with other Mission Areas within USDA as well as other Federal agencies 
to collaborate and leverage resources and overcome these geographic and 
administrative issues.
    While Rural Development does not have a specific emphasis for local 
food initiatives historically, the authorities governing many programs 
within RD have supported local food activities. Examples of existing 
programs and authorities within Rural Development currently support the 
objectives of local food initiatives include: Community Facilities 
Program (CF), Rural Business Development Grant (RBDG), Value Added 
Producer Grant (VAPG), Rural Cooperative Development Grant (RCDG), 
Small Socially Disadvantage Group Grant (SDGG), Rural Cooperative 
Development Grant (RCDG), Renewable Energy for America Program (REAP), 
and the Business and Industry Loan Guarantee (B&I) program.
    These programs have funded a wide array of community and local food 
projects. Examples include the development and implementation of food 
hubs, mobile slaughter units, farm-to-school programs, farmers markets, 
food banks, food cooperatives, food innovation centers, and value added 
agricultural products. RD promotes a range of interventions that expand 
the supply of and demand for nutritious foods, including increasing the 
distribution of agricultural products, developing and equipping grocery 
stores and strengthening the producer-to-consumer relationship.
    Rural Development has actively promoted local and regionally 
produced agricultural food products. National Office staff regularly 
provide Field Office staff with information and guidance on how to 
apply programs to support this effort. Rural Development has worked to 
create an awareness of programs that can be used to support local and 
regional food projects. Further, RD has collaborated with both 
Agricultural Marketing Service and Food Safety Inspection Service to 
host webinars, produce articles and reports, and make presentations 
highlighting how programs can support local and regional food system 
efforts across Mission Areas. Staff has participated in numerous 
partner, stakeholder, and customer meetings whereprogram information is 
shared and local and regional food success stories and replicable 
models are discussed. RD's Rural Cooperatives magazine has also been 
used to highlight multiple examples of local and regional food projects 
and how RD programs were used to support them.
    Question. How do RBS programs provide opportunities for socially-
disadvantaged farmers and groups?
    Answer. RBS works to ensure that all eligible, rural residents are 
afforded access to the business, cooperative and energy program 
opportunities available through the agency.
    RBS seeks to work with and assist socially disadvantaged farmers 
and groups. The Socially Disadvantaged Groups Grant (SDGG) program 
provides funding for cooperatives, groups of cooperatives and 
cooperative development centers whose governing board is comprised of 
at least 51 percent socially-disadvantaged members and whose primary 
focus is to provide technical assistance to socially-disadvantage 
farmers and groups. Program funds are used for developing business 
plans, conducting feasibility studies, developing marketing plans and 
training. For example, World Farmers Inc. (WFI) located in Lancaster, 
Massachusetts, received a SDGG award to help a group of African 
immigrant farmers form a food cooperative for food production, 
marketing, and distribution. WFI is a nonprofit organization that 
provides technical assistance to small, socially disadvantaged and 
immigrant farmers. Client farmers are taught sustainable farming 
production, fair marketing principles, and are mentored in the creation 
and operation of independent farming enterprises. WFI partners with the 
Flats Mentor Farm, also located in Lancaster, which acts as a farming 
incubator and who provides individual farm plots for the farmers to 
work on. At the farm, hands-on training is given in the technical 
aspects of farming, including farm safety and pest, weed and irrigation 
management among other farming issues.
    The Value Added Producer Grant (VAPG) program also provides 
priority for beginning and socially-disadvantaged agricultural 
producers. The VAPG program provides planning and working capital 
grants to eligible producers for marketing value-added agricultural 
products. For example, Verdant Resources, Inc. in Duluth, Georgia used 
VAPG funds assist producers in the processing of ginger into various 
products. This VAPG project was designed to expand on an un-tapped 
locally grown market. Verdant Kitchen is processing and marketing 
products made from ginger and used VAPG funds to expand their base with 
a mass market retail campaign. They have a commercial processing 
facility in place and are working to expand the U.S. retail base for 
ginger products that currently are about 95 percent imported.
    While not having specific focus or priority for socially-
disadvantaged farmers and groups, RBS programs like the Rural 
Cooperative Development Grant, Rural Business Development Grant, 
Renewable Energy for America Program, and Delta Health Care Services 
have all been used to support and assist socially-disadvantaged 
producers and groups create or expand economic opportunities.
    Question. How does RBS support start-up businesses, and small and 
mid-sized businesses?
    Answer. As we know, entrepreneurs and small businesses are the 
engines of American innovation and our economic success. To maximize 
our competitive advantage as a nation, we must ensure that, with hard 
work, American entrepreneurs have the opportunity to find the capital, 
training, and market access they need to start and grow their 
businesses.
    The Rural Business-Cooperative Service (RBS) supports startup, 
small, and mid-sized businesses through a number of programs. For 
example, the Value Added Producer Grant (VAPG) program provides 
priority for operators of small or medium sized farms or ranches 
structured as family farms and the Rural Microentrepreneur Assistance 
Program provides assistance to businesses with 110 or fewer employees. 
These and other RBS programs assisting start-ups and small to mid-sized 
businesses include:
  --Intermediary Relending Program
  --Rural Microentrepreneur Assistance Program
  --Small Disadvantaged Groups Grant program
  --Rural Business Development Grant program
  --Rural Economic Development Loan and Grant program
  --Rural Energy for America Program
  --Value-Added Producer Grant program
  --Business and Industry Guaranteed Loan program
    Through such programs as these, RBS provides increased access to 
capital, job training, business development opportunities, strategic 
community planning, and other resources. In addition to the direct 
assistance we provide these businesses, our financial support is 
creating lasting economic development opportunities in the rural 
communities where the projects are located. Our programs, in other 
words, have made, and continue to make, a significant impact on rural 
communities. For example, since 2009, through over $10.9 billion in 
investments, RBS programs are estimated to have helped over 103,000 
rural businesses (over 60 percent of which are small businesses) start 
or expand their operations with over 440,000 jobs created or saved. In 
Fiscal Year 2015 alone, RBS programs are estimated to have helped over 
12,500 rural businesses through $1.5 billion in loans, loan guarantees, 
and grants.
    Question. How does RBS support cooperatives?
    Answer. Rural Development's Cooperative Programs has over 80 years 
of experience successfully working with the cooperative sector and 
remains the only Federal agency charged with that responsibility. 
Cooperative Programs currently works to support the 2,238 U.S. farmer, 
rancher, and fishery cooperatives who reported gross sales of $235 
billion in 2012.
    When possible, RBS staff works to deliver direct cooperative 
development assistance. RBS has been also been effective in leveraging 
investments through the Rural Cooperative Development Grant (RCDG) 
program to build cooperative development capacity throughout the 
nation. For example, the Foundation for Agriculture, Innovation and 
Rural Sustainability (FAIRS) in Richmond, Virginia provides support to 
cooperatives and producers in developing and advancing their 
agricultural, economic and social interests to enhance their quality of 
life. Virginia FAIRS has received funding from the Rural Cooperative 
Development Grant program to assist individuals, cooperatives, small 
businesses and other similar entities in rural areas to enable and 
assist cooperative and business development. For example, the Kohala 
Center, Inc. in Hawaii received a grant of $200,000 to provide 
cooperative and business development technical assistance to rural 
areas throughout Hawaii to combat the physical isolation and dependence 
on imported food and energy. Funds will be used to provide technical 
assistance to agricultural producers, emerging food hubs, and local 
food distributors and linking them to local institutional buyers.
    RBS continues to support Rural Cooperatives magazine, a bi-monthly 
USDA publication that continues to be an important communication tool 
with the cooperative community. The magazine regularly highlights 
successful cooperative operations and -examples of cooperatives using 
Rural Development in addition to discussing current issues and 
opportunities for cooperatives.
    RBS maintains a library of approximately 200 information, education 
and research publications on the cooperative business model. In 
addition, RBS remains the sole provider of statistics on U.S. 
agricultural cooperatives. An annual survey of cooperatives allows RBS 
to maintain historic data and information and supports the production 
of the Directory of Cooperatives, Annual Cooperative Statistics Report 
and The Top 100 Agricultural Cooperatives. Additionally, RBS staff will 
regularly meet with international visitors to provide information and 
discuss cooperatives in the U.S.
    In October 2015, Rural Development launched the Interagency Working 
Group on Cooperative Development (IWGCD). The IWGCD is comprised of 
representatives from Federal departments and agencies that support 
programs and services focusing on or, working with, cooperatives. The 
IWGCD will address programs affecting cooperatives and their 
development. The IWGCD will identify and engage key government, 
private, and non-profit organizations that play a role in improving the 
coordination and effectiveness of programs serving cooperative sectors. 
These partnerships and collaborations provide mechanisms to obtain 
feedback on how Federal initiatives are understood at the local level; 
keep organizations informed about Federal funding opportunities; and 
provide the IWGCD with communication channels to regional, state, and 
local programs.
                                 ______
                                 
                Questions Submitted by Senator Tom Udall
    Question. Describe the role of your department Chief Information 
Officer (CIO) in the development and oversight of the IT budget for 
your department. How is the CIO involved in the decision to make an IT 
investment, determine its scope, oversee its contract, and oversee 
continued operation and maintenance?
    Answer. The USDA CIO works closely with senior leadership both at 
the Department level and within the Bureaus and Staff Offices to 
consistently align USDA's budget, finance, acquisitions, human 
resources, and IT communities.
    In addition, the USDA CIO ensures IT budget requests are approved 
by all agencies CFOs and CIOs.
    The budget formulation process is focused on resource allocation 
decisions which may affect current and future acquisition programs. In 
order to be effective with this process, the CIO and Budget Officer 
will continue to work with senior policy officials, including the 
Secretary's Office, to identify resource needs in support of existing 
policy priorities and the Department's strategic goals and objectives. 
In addition, early engagement with the USDA Mission Areas, 
understanding their lines of business (LOBs) in order to have a 
cohesive synergy with the information technology communities and 
incorporating the CIO into the pre-planning process along with the CFO, 
and Budget Officer will ensure clear visibility into the prioritization 
of programs before any final decisions are submitted to start the 
approval of any budget formulation requests.
    Question. Describe the existing authorities, organizational 
structure, and reporting relationship of the Chief Information Officer. 
Note and explain any variance from that prescribed in the newly-enacted 
Federal Information Technology and Acquisition Reform Act of 2014 
(FITARA, PL 113-291) for the above.
    Answer. Currently the Office of the Chief Information Officer 
(OCIO) is located within USDA's Departmental Management organization 
under the Assistant Secretary for Administration. The Department's CIO 
also reports to the Deputy Secretary in the management and oversight of 
USDA's Enterprise Information Technology Investment Review Board (E-
Board) and also provides regular updates to the Secretary concerning 
USDA's IT portfolio.
    Question. What formal or informal mechanisms exist in your 
department/agency to ensure coordination and alignment within the CXO 
community (i.e., the Chief Information Officer, the Chief Acquisition 
Officer, the Chief Finance Officer, the Chief Human Capital Officer, 
and so on)?
    Answer. USDA has developed a FITARA Common Baseline Plan that 
identifies CXO roles and responsibilities, process, procedures and 
policies focused on coordination and alignment within the CXO 
community. USDA has diagramed these procedures and processes, 
identified touch points between the CIO and existing CXO processes and 
procedures and worked with the CXOs to ensure CIO involvement. The 
revised processes and procedures are being captured and placed in 
existing departmental regulations, departmental notices, policies 
memorandums, etc.
    Question. According to the Office of Personnel Management, 46 
percent of the more than 80,000 Federal IT workers are 50 years of age 
or older, and more than 10 percent are 60 or older. Just 4 percent of 
the Federal IT workforce is under 30 years of age. Does your department 
have such demographic imbalances? How is it addressing them?
    Answer. Yes. The CIO, in consultation with USDA's Chief Human 
Capital Officer (CHCO), is developing competency requirements and is 
enhancing its workforce planning framework for the recruitment and 
retention of all IT professionals.
    Question. How much of the department's budget goes to 
Demonstration, Modernization, and Enhancement of IT systems as opposed 
to supporting existing and ongoing programs and infrastructure? How has 
this changed in the last 5 years?
    Answer. Over the past 5 years USDA's IT budget has not 
significantly changed and as such the distribution of the IT budget 
between Development, Modernization, and Enhancements (DME) to 
Operations and Maintenance (O&M) has not seen a significant change. 
Based upon USDA's report to OMB via the IT Portfolio Summary DME is at 
14 percent and O&M is at 86 percent.
    Question. What are the 10 highest priority IT investment projects 
that are under development in your department? Of these, which ones are 
being developed using an ``agile'' or incremental approach, such as 
delivering working functionality in smaller increments and completing 
initial deployment to end-users in short, six-month timeframes?
    Answer. USDA considers an IT investment as high priority if it has 
one or more of the following attributes: (1) Mandated by legislation or 
Executive Order; (2) Requires a common infrastructure investment; (3) 
Considered strategic or mandatory-use investments; (4) Differ from or 
greatly impact the Department's infrastructure, enterprise architecture 
or standards guidance; and (5) Involves multiple-agency funding. 
However as priorities evolve and other factors enter the equation or 
become mission-critical, additional attributes could become important 
in our definition.

------------------------------------------------------------------------
                                                           Agile or
         Investment Name           Short Description      Incremental
                                                         Development?
------------------------------------------------------------------------
APHIS-Certification,              To ensure that the  Yes, an agile
 Accreditation, Registration,      certification,      methodology is
 Permitting, and Other Licensing   accreditation,      being leveraged.
 (CARPOL).                         registration,
                                   permitting, and
                                   other licensing
                                   strategies and
                                   operations of
                                   APHIS to make the
                                   best use of
                                   existing and
                                   emerging
                                   technologies,
                                   technology
                                   support, and end-
                                   user education.
DM-OCIO-Optimized Computing       OCE revitalizes     No, as it is not a
 Environment (OCE).                the Service         system
                                   Center Agency       development
                                   (SCA) IT            program but
                                   infrastructure.     replaces
                                   This multi-year     hardware.
                                   initiative
                                   focuses on
                                   technological
                                   enhancements on
                                   all levels of the
                                   IT architecture
                                   (e.g., network
                                   and servers) with
                                   the purpose of
                                   supporting SCA
                                   modernization
                                   projects. The
                                   successful
                                   implementation of
                                   the projects
                                   within the
                                   investment will
                                   provide a more
                                   highly secure
                                   computing
                                   environment and
                                   platform allowing
                                   USDA to monitor
                                   events and
                                   protect against
                                   potential cyber
                                   threats.
DM-OCIO-USDA Security Operations  Investment to       No agile
 Center (SOC).                     maintain USDA IT    methodology is
                                   Security            being leveraged
                                   Operations Center   at this time.
                                   (SOC) focused on
                                   achieving USDA
                                   Security
                                   Strategy: Achieve
                                   proactive
                                   security through
                                   actionable
                                   insight. A
                                   successful SOC
                                   relies upon
                                   continuous
                                   investment to
                                   ensure that its
                                   capabilities
                                   evolve in
                                   responseto the
                                   evolving cyber
                                   threat
                                   environment. A
                                   SOC is a major
                                   cornerstone of a
                                   cybersecurity
                                   program. This
                                   investment is in
                                   place to upgrade,
                                   modernize the
                                   capabilities of
                                   the USDA SOC.
FSA-0111 Common Farm Programs     The purpose of      Yes, an iterative
 Systems.                          this investment     methodology is
                                   is to support the   beingleveraged.
                                   development and
                                   maintenance of a
                                   portfolio of core
                                   Farm Program
                                   applications and
                                   services used by
                                   Farm Programs,
                                   Farm Loans and
                                   Commodity
                                   Operations as
                                   well as other
                                   USDA Agencies.
                                   These systems
                                   include Acreage
                                   Reporting &
                                   Compliance
                                   Systems, Farms
                                   Programs
                                   Management
                                   Systems, Customer
                                   Name/Address
                                   Systems
                                   (including
                                   SCIMS),
                                   Representative
                                   Link Manager
                                   System,
                                   Subsidiary
                                   Systems and
                                   Common Payment
                                   Program.
FSA-103.........................  Consolidated Farm   Yes, an iterative
                                   Loan Program        methodology is
                                   Information &       beingleveraged.
                                   Delivery Systems
                                   This investment
                                   supports FSA's
                                   Farm Loan Program
                                   (FLP) and its
                                   goal of providing
                                   capital to
                                   American farmers
                                   and ranchers by
                                   providing them
                                   with ownership,
                                   operating, and
                                   emergency loans
                                   through
                                   streamlined and
                                   modernized
                                   processes and
                                   systems.
FSIS-Public Health Information    PHIS established    Yes, an iterative
 System (PHIS).                    to develop an       methodology is
                                   effective food      beingleveraged.
                                   safety system
                                   that can collect,
                                   assess and
                                   provide
                                   information
                                   enabling a
                                   response to food
                                   safety hazards.
                                   FSIS adopted the
                                   public health-
                                   based approach
                                   that is in line
                                   with the core
                                   food safety
                                   principles of the
                                   President's Food
                                   Safety Working
                                   Group. PHIS is a
                                   modern,
                                   coordinated food
                                   safety system
                                   which helps
                                   prevents harm to
                                   consumers and
                                   uses good data
                                   and analysis for
                                   effective food
                                   safety
                                   inspections and
                                   enforcements.
NRCS-Conservation Delivery        NRCS has initiated  Yes, an agile
 Streamline Initiative (CDSI).     CDSI with the       methodology is
                                   purpose of          beingleveraged.
                                   implementing a
                                   more effective,
                                   efficient and
                                   sustainable
                                   business model
                                   for delivering
                                   conservation
                                   assistance across
                                   the Nation. This
                                   initiative has
                                   three objectives:
                                   1) Simplify
                                   Conservation
                                   Delivery for
                                   customers and
                                   employees; 2)
                                   Streamline
                                   Business
                                   Processes to
                                   increase
                                   efficiency and
                                   integration
                                   across business
                                   lines; and 3)
                                   Ensure Science-
                                   based Assistance
                                   to reinforce the
                                   delivery of
                                   technically sound
                                   products and
                                   services.
RD-Comprehensive Loan Program...  The CLP initiative  Yes, an
                                   was launched to     incremental
                                   modernize and       methodology is
                                   streamline the      beingleveraged.
                                   application
                                   delivery
                                   portfolio in
                                   order to better
                                   serve RD's
                                   citizen
                                   beneficiaries,
                                   and to provide RD
                                   employees with
                                   the technology
                                   and tools they
                                   need to pursue
                                   RD's mission. RD
                                   offers a variety
                                   of direct and
                                   guaranteed loan
                                   programs for
                                   Single Family
                                   (SF) and Multi-
                                   Family (MF)
                                   Housing,
                                   Business,
                                   Community
                                   Facilities, and
                                   Utilities
                                   programs.
RMA-13 Emerging Information       This investment     Yes, an agile
 Technology Architecture (EITA).   houses RMA's        methodology is
                                   financial,          being leveraged.
                                   insurance, risk
                                   management, and
                                   actuarial
                                   applications.
                                   This investment
                                   is essential to
                                   mission critical
                                   to the Federal
                                   Crop Insurance
                                   Corporation and
                                   the Risk
                                   Management
                                   Program.This
                                   investment
                                   supports the
                                   reengineering of
                                   all business &
                                   financial systems
                                   associated with
                                   delivery of the
                                   crop insurance
                                   program.
FNS-Supplemental Nutrition        This investment     Yes, an agile
 Assistance Program (SNAP)         consists of         methodology is
 Support.                          following systems/  being leveraged.
                                   applications: (a)
                                   Systems SNAP
                                   Quality Control
                                   System (SNAPQCS)
                                   supports FNS
                                   efforts to
                                   determine the
                                   error rate by
                                   each State, to
                                   monitor and
                                   reduce State
                                   error rates for
                                   SNAP, and
                                   minimize
                                   erroneous
                                   payments. Error
                                   rate
                                   determination is
                                   required by
                                   legislative
                                   requirements. (b)
                                   Electronic
                                   Disqualified
                                   Recipient
                                   Subsystem (e-DRS)
                                   is used to store
                                   information on
                                   disqualified
                                   recipients of
                                   SNAP benefits.
                                   The function of e-
                                   DRS is mandated
                                   by legislative
                                   requirements.
                                   Every state must
                                   ensure that
                                   disqualified
                                   recipients are
                                   not let back into
                                   the program. (c)
                                   SNAP Workflow and
                                   Information
                                   Management
                                   (SWIM)--SWIM is a
                                   new system that
                                   is currently
                                   under
                                   development. It
                                   will automate the
                                   SNAP key business
                                   functions of
                                   waiver processing
                                   and policy
                                   clarifications.
                                   The ability to
                                   submit SNAP
                                   related waiver
                                   requests, policy
                                   clarifications,
                                   manage work
                                   related to
                                   submitted
                                   requests/
                                   clarification,
                                   search for
                                   information, and
                                   report on
                                   information in a
                                   user-friendly and
                                   intuitive
                                   interface. (d)
                                   Treasury Offset
                                   Program (TOP)--is
                                   a centralized
                                   offset program,
                                   administered by
                                   the Bureau of the
                                   Fiscal Service's
                                   (Fiscal Service)
                                   Debt Management
                                   Services (DMS),
                                   to collect
                                   delinquent debts
                                   owed to Federal
                                   agencies and
                                   states. (e)
                                   Retailer File
                                   Solution (RFS)
                                   (f) SNAP Retailer
                                   Locator (g)
                                   Healthy Access
                                   Locator (h) SNAP
                                   Policy WIKI.
------------------------------------------------------------------------

    Question. To ensure that steady state investments continue to meet 
agency needs, OMB has a longstanding policy for agencies to annually 
review, evaluate, and report on their legacy IT infrastructure through 
Operational Assessments. What Operational Assessments have you 
conducted and what were the results?
    Answer. The USDA Capital Planning and Investment Control (CPIC) 
process assesses each investment's impact on mission performance, to 
identify any needed investment changes or modifications, and to revise 
the investment management process based on lessons learned. An 
Operational Analysis (OA) is performed by the Program/Project Manager 
after a year of the investment being in operations, and updated on an 
annual basis. The results from these activities determine the 
investment's efficiency and effectiveness in meeting performance and 
financial objectives. Additionally, OCIO conducts annual portfolio 
reviews on the agencies and staff offices to evaluate their portfolio 
to provide further insight into legacy IT infrastructure and IT 
systems.
    Question. What are the 10 oldest IT systems or infrastructures in 
your department? How old are they? Would it be cost-effective to 
replace them with newer IT investments?
    Answer.

------------------------------------------------------------------------
                      Investment Title                           Year
------------------------------------------------------------------------
Initiated FS-Automated Timber Sale Accounting..............         1980
FSA-107 Consolidated General Sales Manager (CGSM)..........         1982
FS-Forest Service Computer Base............................         1983
FSA-105 Conservation Systems...............................         1985
FSIS-USDA Meat & Poultry Hotline (Hotline).................         1985
FSA-0100 Commodity Management Systems......................         1987
FSA-0101 Price Support Systems.............................         1987
FSA-106 Consolidated Financial Management Information               1987
 Systems (CFMIS)...........................................
FSA-009 Cotton Management System (CMS).....................         1988
DM-OC-Ongoing IT Support...................................         1993
------------------------------------------------------------------------

    USDA manages multiple systems in program investments and tracks 
which systems are scheduled to be decommissioned as new capability 
becomes available. When USDA makes modernization decisions, we look for 
opportunities to create investments that will modernize or consolidate 
a number of related systems. The Animal and Plant Health Inspection 
Service (APHIS) CARPOL (Certificates, Accreditations, Registrations, 
Permits, and Other Licenses) system, for example, will consolidate more 
than eight separate systems that support the safe introduction and 
movement of regulated agricultural products.
    Question. How does your department's IT governance process allow 
for your department to terminate or ``off ramp'' IT investments that 
are critically over budget, over schedule, or failing to meet 
performance goals? Similarly, how does your department's IT governance 
process allow for your department to replace or ``on-ramp'' new 
solutions after terminating a failing IT investment?
    Answer. The USDA's Integrated Information Technology Governance 
Framework (IITGF) is a holistic set of processes, procedures, and 
guidelines that assist the Office of the Chief Information Officer's 
(OCIO's) customers to improve mission delivery. Through this framework 
the CIO actively engages with all key stakeholders involved in the 
governance structure consisting of an Integrated Advisory Board that 
makes recommendations on IT investments to the executive-level E-Board, 
chaired by the USDA's Deputy Secretary. Composed of the Department's 
senior leaders, the E-Board ensures that existing and proposed IT 
investments contribute to the Secretary's strategic vision and mission 
requirements, employ sound IT investment methodologies, comply with 
Departmental enterprise architecture, employ sound security measures, 
and provide the highest return on the investment or acceptable project 
risk. The E-Board provides the Secretary with recommendations for 
review and decision authority. These recommendations, based on whether 
an investment is meeting value (cost), schedule, strategic alignment, 
risk management, and performance goals, may well precipitate that an 
investment is ``off ramped'', paused, or terminated. Similarly, this 
governance structure provides the flexibility to ``on ramp'' new, 
innovative solutions that are replacing investments that have been 
paused or terminated.
    Question. What IT projects has your department decommissioned in 
the last year? What are your department's plans to decommission IT 
projects this year?
    Answer. The Department does not conduct decommissioning plans on IT 
projects. We conduct decommissioning plans at the IT system level and 
investment level. USDA has decommissioned twenty-three (23) 
investments. During USDA annual portfolio reviews, it is discussed what 
investments/projects will be decommissioned for the next OMB budget 
year submission. All investments that will be decommissioned, complete 
a Decommission Plan and get approval from the Associate Chief 
Information Officer of Information Resource Management. This process is 
built within our Integrated IT Governance Framework.
    Question. The newly-enacted Federal Information Technology and 
Acquisition Reform Act of 2014 (FITARA, PL 113-291) directs CIOs to 
conduct annual reviews of their department's IT portfolio. Please 
describe your department's efforts to identify and reduce wasteful, 
low-value or duplicative information technology (IT) investments as 
part of these portfolio reviews.
    Answer. USDA currently has been annually reviewing the USDA 
portfolio and all of the component portfolios for the past 3 years. The 
Department's enterprise information technology governance program, 
portfolio reviews, and Enterprise Architect programidentify and reduce 
wasteful, low value, or duplicate information technology investments.
    Question. In 2011, the Office of Management and Budget (OMB) issued 
a ``Cloud First'' policy that required agency Chief Information 
Officers to implement a cloud-based service whenever there was a 
secure, reliable, and cost-effective option. How many of the 
department's IT investments are cloud-based services (Infrastructure as 
a Service, Platform as a Service, Software as a Service, etc.)? What 
percentage of the department's overall IT investments are cloud-based 
services? How has this changed since 2011?
    Answer. The Department has an investment process to support 
assessment of Cloud capability. In the recent months the USDA CIO has 
promoted more adoption of Cloud solutions and movement towards a more 
innovative approach leveraging the capabilities of Cloud technologies. 
Of the current 202 investments, approximately 23 or 11 percent are 
currently leveraging a cloud-based service and an additional 26 
investments evaluated a cloud-based solution an alternative. USDA did 
not track this information in 2011, but during infiscal year 2012, 
USDA's percentage of investments that leverage a cloud-based solution 
was 13 percent of the 308 investments.
    Question. Provide short summaries of three recent IT program 
successes--projects that were delivered on time, within budget, and 
delivered the promised functionality and benefits to the end user. How 
does your department define ``success'' in IT program management? What 
``best practices'' have emerged and been adopted from these recent IT 
program successes? What have proven to be the most significant barriers 
encountered to more common or frequent IT program successes?
    Answer. The USDA OCIO defines ``successful'' IT projects or 
investments as those that 1) meet business requirements, 2) are 
delivered and maintained on schedule, 3) are delivered and maintained 
within budget, and 4) deliver the expected business value and return on 
investment. The USDA OCIO notes that many factors contribute to a 
successful project or investment, but the USDA has found that effective 
project management and governance practices are particularly crucial. 
The USDA differentiates between ``project management success'' (i.e. 
delivering in accordance with the agreed project objectives) and 
``product success'' (i.e. the amount of value the project's 
deliverables bring once the project is over). USDA believes that some 
key factors or barriers to success often contribute to the failure of a 
project, such as:
  --Lack of stakeholder/user input
  --Incomplete and/or vaguely defined requirements or specifications
  --Changing requirements or specifications
  --Lack of executive support
  --Insufficient planning
  --Underestimated time and/or resources allocated for design, 
        development, quality assurance, and/or quality control
  --Technological incompetence
  --Insufficient resources
  --Unrealistic expectations
  --Unclear objectives
  --Unrealistic timeframes
  --New or untested technology
    However, the USDA notes several factors that are crucial to the 
success of any IT project or investment, such as:
  --Clear and clearly articulated goals
  --Comprehensive, long-term, and detailed planning
  --Early definition of deliverable quality criteria
  --Active executive support with a shared vision throughout the 
        project's life
  --Carefully planned implementation
  --Concise, consistent, complete, and unambiguous business and 
        technical requirements
  --Realistic estimates and schedules
  --Early risk analysis and ongoing risk management
  --Planning for business process change management
  --Adherence to a formalized IT governance approach and framework
  --Proactive issue resolution
  --Stakeholder involvement throughout the life cycle
  --Defined and consistently executed change management to minimize 
        scope increases
  --A skilled, certified Project Manager experienced in the execution 
        of project management best practices
  --Execution of a formal system development methodology (such as the 
        Agriculture's System Development Life Cycle, AgSDLC)
  --A commitment to success
    These three successful investments are still continuing with their 
implementations and have released incremental functionality to their 
customers:
    1. Animal, Plant and Health Inspection Service (APHIS) 
Certification, Accreditation, Registration, Permitting and Other 
Licenses (CARPOL)
    a. APHIS CARPOL successfully delivered a single system, cloud-based 
platform to support permitting live dog imports that is required by a 
Congressional amendment to the Animal Welfare Act. The tool reduces the 
processing time from days to hours and will allow anyone to apply for a 
permit to bring a live dog(s) into the continental U.S. or Hawaii, for 
the purpose(s) of research, resale, or veterinary treatment.
    2. Natural Resource and Conservation Service (NRCS) Conversation 
Delivery Streamlining Initiative (CDSI)
    a. NRCS CDSI successfully released one of three modules using the 
agile methodology called Conservation Client Gateway (CCG). 
Conservation Client Gateway is a new NRCS public website that provides 
individual landowners and land users the option to request conservation 
technical and financial assistance from NRCS.
    3. OCIO Identity Credential Access Management (ICAM).
    a. OCIO ICAM successfully implemented the personal identification 
verification (PIV) initiative by securing our applications behind the 
identity access tool to enable customers to access multiple 
applications with a single credential. The implementation of the PIV 
provides for the use of multi-factor authentication, a key tool in our 
cybersecurity program.
    Question. A June 2015 Government Accountability Office (GAO) report 
found that USDA spent about $423 million since 2004 to modernize IT 
systems through Modernize and Innovate the Delivery of Agricultural 
Systems (MIDAS) before halting the program due to poor performance and 
uncertainty regarding future plans. GAO made five recommendations to 
the USDA Farm Service Agency (FSA), including establishing and 
implementing a plan for adopting recognized best practices for program 
management. Has FSA fully implemented these five recommendations? 
Please explain how USDA implemented each GAO recommendation.
    Answer. GAO provided five interrelated recommendations to improve 
the selection, planning, and control of IT projects results. FSA has 
taken immediate steps to improve IT internal controls in the areas of 
integrated capital planning, IT governance, risk management, project 
management, Cybersecurity and other IT oversight initiatives. FSA 
created an Investment Review Board, an executive level governance board 
that meets regularly to assess and prioritize IT investments. In 
addition, an external contractor has been engaged to perform an 
independent third-party assessment to determine if the current 
enterprise solution provides the necessary functionality and is the 
most cost effective modernization solution.
    Question. The Federal IT Dashboard is a website that allows the 
general public to view details of Federal information technology 
investments. This transparency tool shows that the USDA ``NFC Shared 
Services--IT Systems'' investment as rated ``red'' or high risk. Since 
August 2014, various Chief Information Officer comments published on 
the Dashboard have indicated that USDA is conducting a baseline review 
to improve this investment's cost and schedule performance. What 
actions has USDA taken to remediate the NFC Shared Services--IT Systems 
investment's troubled performance? Have these steps improved this 
investment's cost and schedule performance to a point where it can be 
rated ``green?''
    Answer. Since June 2015, the NFC Shared Service Investments has 
been rated RED due to numerous issues based on the criteria established 
by OMB which is used to rate all Major Investments. The issues include 
lack of program management artifacts, lack of EVM reporting, and DM&E 
reporting.
    On June 24, 2015, the USDA CIO and Senior Executives held a 
Portfolio Review with OCFO-NFC, which included in depth analysis of the 
NFC Shared Service Investments. In the portfolio review it was 
determined that the USDA CIO designees would travel to New Orleans to 
discuss the requirements of Earned Value Management (EVM), Capital 
Planning and Investment Control (CPIC) requirements and Information 
Technology Governance process. OCIO worked with the NFC Investment team 
to capture performance data regarding their projects and activities 
that are a part of the NFC Shared Service Investments. From 16 through 
18 September 2015, the Capital Planning & IT Governance Division 
(CPIGD) Director and CPIGD Analyst met with all NFC Senior Executives 
and the NFC Program/Project Managers (PPMs). During the meetings the 
USDA OCIO team identified the abovestated issues and developed a 
corrective action plan (CAP), which was provided to the OCFO-NFC 
Investment team. Once the OCFO-NFC Investment team accomplishes the 
corrective actions, USDA OCIO will reevaluate the NFC Shared Service 
Investments.
    Since the three days of meetings, OCFO-NFC Investment team started 
the following actions to improve their score to yellow for the November 
2015 monthly on the Federal IT Dashboard:
    1. Reporting all projects, activities, and risks within their 
business case.
    2. Updated the business case contract table.
    3. Identified and is now reporting the line of funding for all 
shared services agencies and staff offices.
    4. Provided an updated Risk Management Plan and is in the process 
of updating investment Acquisition Plan and Investment Charter.
    On October 27, 2015 the USDA OCIO EVM Manager and CPIGD Analyst 
have met with NFC Investment team to discuss how they can conduct EVM 
and rebaseline the investment. USDA OCIO scheduled a series of follow-
up meetings with OCFO-NFC team to finalize and have NFC complete this 
process, which include monthly major investments to discuss IT 
Dashboard scores and outstanding issues in order to improve the 
performance of the NFC investments and eventually achieve a green 
status.
    NFC will be undergoing a reorganization within their office to 
better serve the mission and support of their functions. A new CIO has 
now been assigned to NFC that will ensure the investment will be better 
managed. NFC will be executing a Request For Proposal (RFP) thatwill 
include an EVM clause for support and assist with them reporting EVM to 
the USDA OCIO Department. Once EVM is being reported and they have 
finalized the updates to the investment artifacts as well as continuing 
to manage, monitor, track and update their projects, activities, risks 
and performance metric they should be able to move to a green status.
                                 ______
                                 
              Questions Submitted by Senator Patrick Leahy
    Question. In many ways, Vermont highlights both the successes and 
challenges of ensuring that rural America has access to affordable and 
quality broadband service. Burlington has a vibrant start-up community 
and is home to successful online businesses like Dealer.com. 
Traditional small businesses like the Vermont Country Store have 
augmented their reach and built meaningful 21st Century brands by 
operating popular online stores. Unfortunately, I still hear too often 
from Vermonters who lack access to broadband service and the 
transformative opportunities that it brings. I worry that without 
aggressive action to spur investment in rural areas, we will leave 
these Americans even further behind as the next generation of broadband 
service is deployed.
    Do you agree that access to quality and affordable broadband is no 
longer a luxury but a necessity in rural America?
    Answer. Yes, we agree that broadband is now a necessity. Children 
in rural America as well as children everywhere must have broadband 
access to do homework and their lessons. Without easy access rural 
children will fall way behind their counterparts in urban and suburban 
areas as well as the rest of the world.
    In addition, rural America is doing more and more ecommerce and 
broadband service is necessary to facilitate this.
    Farmers now use the Internet to sell their crops and auction their 
cattle worldwide. They also use broadband to control how their trackers 
plow and when and how much to water their fields.
    The Federal Communications Commission's (FCC) 2015 broadband 
progress report found that rural America is underserved at every 
broadband speed, with 20 percent lacking access even to the minimum 
acceptable level of broadband service Congress set for the Farm Bill 
Loan Program in 2014.In contrast, the FCC's report found that 92 
percent of urban Americans have access to speeds that are more than 6 
times higher than that minimum standard.
    Question. What more can we do to close this rural/urban broadband 
divide?
    Answer. Utilizing programs like the RUS Community Connect Grant 
Program is one way to get broadband service to the neediest areas. The 
areas with no service today are some of the most rural, low density 
areas in the country. It is difficult to support a business plan in 
these areas a grant funding could be a key component. We must also work 
with existing service providers and help them understand that there are 
ways to serve these rural areas and still make a profit.
    As we have done in the past to support universal service for voice 
services, we must now refocus our efforts and support mechanisms to 
fully support the deployment of broadband service to every person in 
the country.
                                 ______
                                 
          Questions Submitted to Administrator Tony Hernandez
              Questions Submitted by Senator Patrick Leahy
                  section 515 multifamily loan program
    Question. Throughout the country, thousands of properties 
participating in the Section 515 Multifamily Loan Program are 
approaching their 40-year terms, resulting in maturing mortgages that 
will no longer guarantee rent subsidies, threatening many low-income 
tenant households with drastic rent increases. This year, the 
affordability of 60 properties across the country, totaling more than 
700 units, are threatened.
    In my home state of Vermont, there are 79 active Section 515 
properties containing 1,842 units that will expire within the next 10 
years. Meanwhile, the statewide vacancy rate rests at one percent, 
making every unit assuring affordability even more critical to our 
housing stock.
    This year, Lebanon, New Hampshire, is faced with losing 50 units of 
local affordable housing due to mortgage expiration at the end of the 
year. Twin Pines Housing Trust, a local affordable housing nonprofit 
organization serving Vermont and New Hampshire, was committed to 
continuing to serve the need for affordable housing in that area. 
Thankfully, with the help of the VT-NH State Rural Development Office, 
Twin Pines was able to successfully negotiate a purchase of the 50 
units from the property owner, ensuring perpetual affordability to its 
residents.
    I commend our Vermont-based partners for their commitment to this 
mission, but recognize that not all states and communities have 
motivated local housing providers with the necessary tools to preserve 
this critical housing stock. Looking ahead to the remaining contracts, 
there is an urgent need to address the potential loss of thousands of 
affordable housing units and provide necessary protections for low-
income populations at risk of homelessness.
    What plan does the Department currently have in place to address 
maturing mortgages in the immediate future, and over the next several 
years?
    Answer. RD is very concerned with the potential loss of affordable 
housing as our Section 515 direct loans mature, because that housing 
may be lost in the community and the rental assistance support will no 
longer be available to the families in that property. If that RD 
housing is lost, the very low income families living there may have no 
other affordable housing in which to live.
    In response, RD has provided a number of options for owners to keep 
their RD loan and protect the families living there.
  --The borrower can apply through RD's Preservation NOFA for a 
        deferral of their maturing mortgage for up to 20 years;
  --The borrower can receive priority points if they choose to apply 
        for both the deferral and additional RD funding for 
        rehabilitation of property;
  --The borrower can request a re-amortization and modification of the 
        maturing loan to extend the loan term up to 20 years;
  --If owners go through the prepayment process, their tenants may be 
        eligible to receive housing vouchers.
  --RD has also proposed legislation in the 2016 budget to extend 
        housing voucher protection to tenants in properties with a 
        mortgage that matures and the owner is not willing to extend 
        the affordable housing feature of that property.
    Question. When should housing providers and nonprofit partners 
expect to receive a plan from the Department so that they may properly 
plan for necessary purchase and sales agreements?
    Answer. Throughout 2015, RD has participated in a series of public 
meetings with all stakeholders, including housing providers and 
nonprofit partners, to inform them of our efforts to retain our 
affordable housing. These sessions have included information regarding 
the use of Section 515 funds to finance the nonprofit acquisition of 
Section 515 properties in danger of being lost through mortgage 
maturity or prepayment. Our communications with stakeholders have begun 
to generate results--for example, late in fiscal year 2015, RD provided 
a $6.7 million Section 515 loan to a nonprofit in New Hampshire to 
retain 100 units of affordable housing.
    Question. What additional resources is the Department currently 
dedicating to address the immediate needs? And, will the Department be 
including funding requests in future budgets to address this issue?
    Answer. In fiscal year 2015, RD made the decision to prioritize the 
use of Section 515 funds to finance the acquisition of Section 515 
properties at risk of leaving the program through either prepayment or 
maturity of the existing mortgage.In fiscal year 2015, RD received an 
appropriation of $28 million. Of this amount, RD used more than $11 
million to assist nonprofits in the acquisition of Section 515 
properties in California, New Hampshire, and Pennsylvania. The 
remainder was used for the Multi-family Preservation and Revitalization 
program. RD's fiscal year 2016 proposed budget includes a request for 
an additional $15 million in Section 515 funding for the preservation 
or construction of affordable housing; one of the purposes of the 
additional funding would be to retain existing affordable housing 
through the nonprofit acquisition process.
    Question. In instances when mortgages expire and properties no 
longer guarantee rentals subsidies, is the Department considering 
options that would allow residents to remain in their homes and 
maintain the affordability, similar to the enhanced vouchers utilized 
by the Department of Housing and Urban Development? If not, why?
    Answer. In addition to the steps the Department has taken to 
encourage property owners to remain in the RD portfolio through loan 
re-amortization and modification, and use of the MPR tools, the 
Department has also offered Letters of Priority Entitlement to tenants 
in maturing mortgages. Holding this Letter will allow the tenant to be 
placed at the top of the waiting list for any RD property in order to 
continue living in affordable housing. The Agency may be authorized to 
transfer the unused rental assistance to a new RDproperty in limited 
circumstances. The Department has also included in the fiscal year2016 
President's Budget a legislative proposal to allow Rural Development 
housing vouchers to be used by tenants in these maturing mortgage 
properties. Current voucher program appropriations language limits use 
to tenants in situations where the owner is prepaying the RD mortgage.

                         CONCLUSION OF HEARINGS

    Senator Moran. With that, I thank, again, everyone for 
their attendance, and bring this hearing to a conclusion.
    We are adjourned.
    [Whereupon, at 12:15 p.m., Wednesday, October 21, the 
hearings were concluded, and the subcommittee was recessed, to 
reconvene subject to the call of the Chair.]


       LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                                                   Page

Baldwin, Senator Tammy, U.S. Senator From Wisconsin, Questions 
  Submitted by.................................................     108
Blunt, Senator Roy, U.S. Senator From Missouri, Questions 
  Submitted by...................................................    35
Boisvert, Brian, Chief Executive Officer and General Manager, 
  Wilson
  Communications:
    Prepared Statement of........................................   198
    Statement of.................................................   197
    Chrisman, Tony, Vice President and Owner, Chrisman Development 
  Inc.:
    Prepared Statement...........................................   204
    Statement of.................................................   203
    Cochran, Norris, Deputy Assistant Secretary for Budget, 
  Department of Health and Human Services........................     1
Cochran, Senator Thad, U.S. Senator From Mississippi, Statement 
  by.............................................................   179
  Collins, Senator Susan M., U.S. Senator From Maine, Question 
  Submitted by...................................................    84

Daines, Senator Steve, U.S. Senator From Montana, Questions 
  Submitted by 




Feinstein, Senator Dianne, U.S. Senator From California, 
  Questions 
  Submitted by 




Hamburg, Hon. Dr. Margaret A., Commissioner, Food and Drug 
  Administration.................................................      1
    Prepared Statement...........................................      2
    Summary Statement............................................      4
Hernandez, Tony, Administrator, Rural Housing Service............    159
    Questions Submitted to.......................................    247
Hoeven, Senator John, U.S. Senator From North Dakota, Questions 
  Submitted by...................................................    223

Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions 
  Submitted by 





Lowry, Stuart, President and Chief Executive Officer, Sunflower 
  Electric Power Association					     192
    Prepared Statement of........................................    194
    Statement of.................................................    192

McBride, Brandon, Administrator, Rural Utilities Service.........    159
    Questions Submitted to.......................................    223
McConnell, Senator Mitch, U.S. Senator From Kentucky, Questions 
  Submitted by...................................................     39
Mensah, Hon. Lisa, Under Secretary for Rural Development.........    159
    Prepared Statement of......................................      164
    Questions Submitted to.....................................      218
    Summary Statement of.......................................      161
Merkley, Senator Jeff, U.S. Senator From Oregon:
    Questions Submitted by 



    Statements of Moran, Senator Jerry, U.S. Senator From Kansas:

    Opening Statements of 


    Prepared Statements of 


    Questions Submitted by 






Johansson, Dr. Robert, Acting Chief Economist....................     51
Ostroff, Hon. Dr. Stephen Ostroff, Acting Commissioner, Food and 
  Drug Administration, Department of Health and Human Services...    115
    Prepared Statement...........................................    120
    Summary Statement of.........................................    118

Rikkers, Samuel, Acting Administrator, Rural Business-Cooperative 
  Service........................................................    159
Simpson, William, Director of Legislative and Regulatory Affairs, 
  National
  Rural Water Association:
    Prepared Statement...........................................    190
    Statement of.................................................    188

Taylor, Michael, Deputy Commissioner for Foods and Veterinary 
  Medicine; Food and Drug Administration.........................    115
  Tootle, William, Director, Office of Budget, Food and Drug 
  Administration.................................................    115
  Tyler, Jay, Chief Financial Officer, Food and Drug Administration    1
Udall, Senator Tom, U.S. Senator from New Mexico, Questions 
  Submitted by...................................................    240

Vilsack, Hon. Thomas J., Secretary...............................     51
    Prepared Statement..........................................      52
    Summary Statement............................................     52

Young, Michael L., Budget Officer................................     51

SUBJECT INDEX

                              ----------                              
                                                                   Page

                       Department of Agriculture

Additional Committee Questions...................................     81
Adequacy of the Thrifty Food Plan................................    100
Agricultural Research Service....................................    104
Air Tankers......................................................     98
Animal Welfare Act...............................................    100
Antimicrobial Research...........................................     98
APHIS Overall Budget Priorities..................................     87
ARC/PLC Signups..................................................     63
Assistance to Drought Impacted Communities in California.........    101
Avian Influenza 



Big Data.........................................................     73
Bioenergy Program for Advanced Biofuels..........................     65
Biotech Review in APHIS..........................................     83
Broadband Program................................................     93
Budget:
      Reconciliation.............................................    104
    Savings.....................................................      80
Community Facilities Grants......................................     94
Conservation.....................................................     64
    Technical Assistance........................................      58
Consolidation of Food Safety Agencies............................     85
Colonias Communities.............................................     70
Crop Insurance...................................................     59
Cuba.............................................................     81
Dietary Guidelines...............................................     57
Disruption in Poultry Trade......................................     76
Electronic Access to Records.....................................     75
Environmental Concerns Within the Dietary Guidelines.............     85
Farm Service Agency Funding......................................     62
Food:
    For Progress................................................      96
    Insecurity in Military Households..........................      102
    Safety Modernization Act...................................      105
Forest Management................................................    113
Implementation of New Methods of Poultry Slaughter Inspection 



Innovation Institute for Cellulosic Nano-Materials...............     77
IT Modernization.................................................     82
Healthy Foods Financing Initiative (HFFI)........................     86
Housing Vouchers.................................................     92
Local Food Systems...............................................     64
Local and Regional Procurement...................................     95
Margin Protection Program for Dairy.............................     108
Merging Food Safety Responsibilities.............................     89
Military Families Receiving Snap Benefits........................    102
Midas Program....................................................     74
Mobile Slaughter Facilities......................................     78
Multi-Family Housing Preservation Pilot..........................     91
National:
    Organic Program Sunset Policy Change.......................      113
        Standards Board Recommendations........................      106
OIE Standards....................................................     76
Organic Research.................................................    111
Pathogen Standards...............................................     97
Pollinators......................................................     60
Port of Vancouver Grain Inspections..............................     71
Potato Wart......................................................     84
Public Law 480, Title I..........................................     78
Rental Assistance 



Rice Entering China..............................................     84
Rural:
    Child Poverty Pilot Initiative..............................      94
    Energy Savings Program.......................................     60
    Housing......................................................    105
    Outmigration.................................................     63
Safety Reports...................................................     72
School:
    Equipment Grants.............................................     68
    Meal Standards...............................................     80
Self-Help Housing Program 



Specialty Crop Pest Program......................................     99
Subcommittee Recess..............................................    114
Summer:
    Feeding Program..............................................     78
    Electronic Benefit Transfer (EBT) Demonstration Projects.....    103
      Tree and Forest Pests......................................    107
USDA:
    Assistance to California.....................................     97
    Wildlife Services............................................    107
U.S. Sheep Experiment Station....................................     86
Water of the U.S. Rule...........................................     73
Waters Infrastracture............................................     69
Wildfires in California..........................................     98
Yazoo River Basin................................................     79
                               __________

         A Review of Rural Development in 21st Century America



                                  159

Additional Committee Questions...................................  218
Broadband........................................................  235
    Access 



    And Underserved Communities..................................  178
    Opportunity Council Recommendations..........................  181
    Service in Tribal Areas......................................  179
EPA Rules........................................................  185
Loan Portfolio Credit Quality....................................  230
Maturing Mortgages...............................................  227
Multi-Family Housing Preservation Pilot..........................  228
New Poverty Pilot Program........................................  229
Partnerships.....................................................  173
Private Investment in Rural Infrastructure.....................
Program Duplication..............................................  173
Rental:
    Assistance...................................................  226
        Program..................................................  175
        2015 Shortfall...........................................  182
Rural:
    Development Visibility.......................................  169
    Energy for America Program (REAP)............................  236
    Energy Saving Program (REAP).................................  224
    Housing:
        Maturing Mortgages...................................      219
        502 Direct Loans.....................................      219
        Section 502 Guaranteed...................................  220
        Section 538 Eligibility for Housing Cooperatives.........  220
    Energy Savings Program (RESP)................................  224
    In Character.................................................  220
    Utilities Administrator Brandon McBride......................  223
    Utility Service--Existing Water and Waste Disposal Loan 
      Portfolio..................................................  221
Section:
    515 Multifamily Loan Program.................................  247
    515 Rural Rental Housing.....................................  218
Sequestrations Impact............................................  186
Single Family Housing Direct Loan Program........................  229
Strategic Economic and Community Development Interim Rule........  222
Sustantially Underserved Tribal Areas Program....................  187
Universal:
    Service......................................................  201
        Fund.....................................................  176
                               __________

                     FDA Food Supply Safety Efforts



                                  115

Additional Committee Questions...................................  146
Animal:
    Feed.........................................................  147
        Rule.....................................................  142
Antibiotics in Products..........................................  135
Budget Request...................................................  144
California Produce...............................................  133
Compliance.......................................................  128
Cucumber Salmonella Outbreak.....................................  133
Domestic and Imported Foods......................................  136
FSMA 



    And Foreign Suppliers........................................  130
    Collaboration................................................  140
    Coordination with USDA.......................................  134
    Funding......................................................  116
    Implementation Plan..........................................  128
    Spending.....................................................  144
Food:
    Illness Deaths...............................................  136
    Safety 



Foreign Inspections..............................................  131
Guidance.........................................................  130
Import Safety....................................................  148
Inspection.......................................................  128
Partnerships.....................................................  128
Preventive:
    Control Rules................................................  120
        And Trace Ability........................................  140
Produce Safety...................................................  146
Reprioritizing Funding...........................................  145
Risk Assessments for Soft-Ripening and Raw Milk Cheese...........  156
Salmonella in Peanut Butter Outbreak.............................  139
State Budget Concerns............................................  153
States Role in FSMA Implementation...............................  142
Support for Farmers..............................................  154
Vibrio Incidence.................................................  138
                               __________

                Department of Health and Human Services



                                  (1)

Additional Committee Questions...................................  33
Biosimilars......................................................  35
Budget Request...................................................   5
Dietary Guidelines 



Drug Safety Labeling.............................................  10
Ebola Emergency Appropriations...................................  13
E-Cigarettes.....................................................  15
Electronic Drug Inserts..........................................  46
Expanded Access Request..........................................  27
Imported Food Inspection.........................................  43
FDA:
    Food Safety Activities.......................................  39
    Office of Regulatory Affairs (Field Staff) Reorganization....  45
    Oversight of Antibiotic Use and Resistance...................  47
Food:
    And Drug Administration......................................   1
    Inspections..................................................  20
    Safety 



        Centers of Excellence....................................  46
        Modernization 



          Act....................................................  22
            Rules................................................  30
Generic Drugs....................................................  17
Imported Food Inspection.........................................  43
Irrigation Water Standards.......................................  25
  Maple Ingredient Labeling....................................... 11
Menu Labeling 



Mobile Medical Applications 



Right to Try Laws................................................  28
State Inspection Standards for FSMA..............................  43
Statutory Role of the Food and Drug Administration...............  12
Tobacco Deeming Regulation.......................................  14
Untitled Letters.................................................  37

                                   [all]