[House Report 105-294]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-294
_______________________________________________________________________


 
               TO REAUTHORIZE THE DAIRY INDEMNITY PROGRAM

                                _______
                                

October 2, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Smith of Oregon, from the Committee on Agriculture, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1789]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Agriculture, to whom was referred the bill 
(H.R. 1789) to reauthorize the dairy indemnity program, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                           Brief Explanation

    H.R. 1789 reauthorizes the dairy indemnity program for the 
period fiscal year 1998 through fiscal year 2002, and allows 
the use of funds appropriated for fiscal year 1998 to be used 
to pay valid claims arising during fiscal year 1997.

                            Purpose and Need

    The dairy indemnity program allows the Secretary of 
Agriculture to make indemnity payments for milk, or for the 
cows producing such milk, to dairy farmers and manufacturers of 
dairy products who have been directed to remove their products 
from commercial markets because of the presence of certain 
chemical or toxic residue in the products. H.R. 1789 would 
provide authority to the Secretary to continue such indemnity 
payments, as well as reauthorize the Secretary to make 
indemnity payments to dairy farmers who have been directed to 
remove their products from commercial markets because of the 
presence of nuclear radiation or fallout.
    In 1997 the primary reason for milk to be ordered withdrawn 
from the market was the result of Aflatoxin in feed, which can 
result in the presence of Aflatoxin residue in milk. The dairy 
indemnity program allows payments to be made only to those 
dairy farmers and manufacturers who suffer losses through no 
fault of their own; payments cannot be made to those who suffer 
losses due to their own negligence or willful failure to follow 
procedures prescribed by the Department.
    H.R. 1789 will allow the Secretary to use funds 
appropriated in fiscal year 1998 to satisfy claims arising 
during fiscal year 1997 to the extent such claims cannot be 
fully paid using fiscal year 1997 funds. H.R. 1789 also 
requires the Secretary to submit to Congress a report 
identifying and evaluating alternative methods for financing 
the dairy indemnity program within 180 days of enactment of the 
bill.
    The fiscal year 1998 agriculture appropriations conference 
report (H. Rept. 105-252, not yet acted on by the House) would 
appear to provide the necessary funding for the dairy indemnity 
program authorized in the bill. The Department of Agriculture 
supports H.R. 1789. This Committee has determined that 
reauthorization of the dairy indemnity program is in the best 
interest of America's dairy producers and processors.

                      Section-by-Section Analysis

            Section 1. Extension of Dairy Indemnity Program

    Subsection (a). Extension--Reauthorizes the Dairy Indemnity 
Program through fiscal year ``2002''. (7 U.S.C. 450l).
    Subsection (b). Treatment of Existing Claims--Amends 
section 2 of Public Law 90-484 (7 U.S.C. 450k) by adding 
language to the effect that funds appropriated as provided in 
this section for fiscal year 1998 may also be used to pay valid 
claims that arose in fiscal year 1997 to the extent that such 
claims are not fully paid with fiscal year 1997 funds.
    Subsection (c). Alternative Financing Options--This 
subsection provides that not later than 180 days after the 
enactment of this Act the Secretary shall submit to Congress a 
report identifying and evaluating alternative methods to 
finance the dairy indemnity program provided in Public Law 90-
484 (7 U.S.C. 450j).

                        Committee Consideration

                            I--Subcommittee

    On June 26, 1997, the Subcommittee on Livestock, Dairy, and 
Poultry held a hearing regarding H.R. 1789. Testimony was taken 
from a representative of the U.S. Department of Agriculture and 
from a representative of Associated Milk Producers, Inc. Both 
witnesses testified in favor of the legislation.
    Subsequently on June 26, 1997, the Subcommittee held a 
business meeting and, by voice vote, ordered that H.R. 1789 be 
forwarded to the full Committee on Agriculture without 
amendment.

                           II--Full Committee

    The Committee on Agriculture met, pursuant to notice and 
with a quorum present, on September 24, 1997 to consider H.R. 
1789 and other pending business. Chairman Smith recognized Mr. 
Stenholm, Ranking Minority Member, to provide a brief 
explanation of the bill.
    The Chairman opened the consideration of the bill, as 
favorably reported to the full Committee by the Subcommittee on 
Livestock, Dairy, and Poultry, for discussion and amendments. 
The Chairman recognized Mr. Barrett, who made a motion that the 
bill be favorably reported to the House. The motion was carried 
by a voice vote of the Committee in the presence of a majority 
quorum. The Committee then proceeded to other items of 
business.

                   Reporting the Bill--Rollcall Votes

    In compliance with clause 2(l)(2) of rule XI of the House 
of Representatives, H.R. 1789 was reported by voice vote with a 
majority quorum present. There was no request for a recorded 
vote.

                        Administration Position

    The views of the Administration on H.R. 1789, a bill to 
reauthorize the dairy indemnity program, are set forth in the 
following letter to the Chairman of the Committee on 
Agriculture:

                         Department of Agriculture,
                                   Office of the Secretary,
                                     Washington, DC, June 25, 1997.
Hon. Robert F. Smith,
Chairman, Committee on Agriculture, House of Representatives, Longworth 
        House Office Building, Washington, DC.
    Dear Bob: This is in response to the request from your 
office for the Department of Agriculture's (USDA) views on H.R. 
1789, a bill ``To reauthorize the dairy indemnity program''.
    USDA supports the enactment of H.R. 1789.
    H.R. 1789 would reauthorize the Secretary of Agriculture to 
make indemnity payments for milk or cows producing such milk to 
dairy farmers who have been directed to remove their milk, and 
to make indemnity payments to manufacturers of dairy products 
who have been directed to remove their dairy products from 
commercial markets because of residues of certain chemicals. 
The bill also would reauthorize the Secretary to make indemnity 
payments for milk or cows producing such milk to dairy farmers 
who have been directed to remove their milk from commercial 
markets because of the presence of nuclear radiation or 
fallout, or residues of certain other chemicals or toxic 
substances.
    H.R. 1789 would provide authority to the Secretary to use 
fiscal year 1998 funds to pay claims arising during fiscal year 
1997 which were not fully paid using fiscal year 1997 funds. 
Also, H.R. 1789 would require the Secretary to submit to 
Congress a report identifying and evaluating alternative 
methods for financing the program within 180 days of enactment 
of this legislation.
    A 10 year outlay history shows average payments for the 
Dairy Indemnity Program of about $200,000 per year. The program 
level varies from 1 year to the next because this is an 
emergency program and makes any estimate of funds needed for a 
fiscal year imprecise.
    The Office of Management and Budget advises that there is 
no objection to the presentation of this report from the 
standpoint of the Administration's program.
            Sincerely,
                                           Dan Glickman, Secretary.

           Budget Act Compliance (Sections 308, 403, and 424)

    The provisions of clause 2(l)(3)(B) of rule XI of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, new credit authority, 
or increased or decreased revenues or tax expenditures) are not 
considered applicable. The estimate and comparison required to 
be prepared by the Director of the Congressional Budget Office 
under clause 2(l)(3)(C) of rule XI of the Rules of the House of 
Representatives and sections 403 and 424 of the Congressional 
Budget Act of 1974 submitted to the Committee prior to the 
filing of this report are as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 1, 1997.
Hon. Robert F. Smith,
Chairman, Committee on Agriculture, House of Representatives, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1789, a bill to 
reauthorize the dairy indemnity program.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jim Langley.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 1789--A bill to reauthorize the dairy indemnity program

    Summary: H.R. 1789 would reauthorize the Dairy Indemnity 
Program (DIP) through September 30, 2002, and would require the 
Secretary of Agriculture to report to the Congress within 180 
days on alternative methods of financing the program. The 
program authorizes the Secretary to make indemnity payments to 
dairy farmers and manufacturers of dairy products who, through 
no fault of their own, were directed to remove their milk or 
dairy products from commercial markets because of toxic 
residues or the presence of nuclear radiation or fallout.
    Based on historical expenditures for dairy indemnity 
payments, CBO estimates that enacting H.R. 1789 would result in 
additional discretionary spending of about $2 million over the 
1998-2002 period, assuming appropriation of the necessary 
amounts. H.R. 1789 would not affect direct spending or 
receipts; therefore, pay-as-you-go procedures would not apply. 
The legislation contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act of 1995 
(UMRA) and would have no significant impact on the budgets of 
state, local, or tribal governments.
    Estimated cost to the Federal Government: For the purposes 
of this estimate, CBO assumes (1) that the authorization to 
make indemnity payments will require funding at roughly the 
same level as the average annual payments over the past 10 
years, and (2) that all amounts estimated to be authorized will 
be appropriated by (or near) the start of each fiscal year. The 
estimated budgetary impact of H.R. 1789 is shown in the 
following table.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                        1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Spending under current law:                                                                                     
    Budget authority \1\............................       0.1  ........  ........  ........  ........  ........
    Estimated outlays \2\...........................       0.3  ........  ........  ........  ........  ........
Proposed changes:                                                                                               
    Estimated authorization level \3\...............  ........       0.6       0.3       0.3       0.3       0.3
    Estimated outlays...............................  ........       0.6       0.3       0.3       0.3       0.3
Spending under H.R. 1789:                                                                                       
    Estimated authorization level 1,3...............       0.1       0.6       0.3       0.3       0.3       0.3
    Estimated outlays...............................       0.3       0.6       0.3       0.3       0.3       0.3
----------------------------------------------------------------------------------------------------------------
\1\ The 1997 level is the amount appropriated for that year.                                                    
\2\ Outlays reflect prior appropriations still available. Total funds available were insufficient to cover all  
  valid claims.                                                                                                 
\3\ The 1998 level includes additional funds for valid, unpaid 1997 claims, as would be authorized by H.R. 1789.

    The costs of this legislation fall within budget function 
350 (agriculture).
    Basis of estimate: The Dairy Indemnity Program (DIP) was 
originally authorized by the Economic Opportunity Act of 1964, 
and its most recent authorization expired on September 30, 
1995. Funding for a DIP is provided through discretionary 
appropriations. Payments under DIP are issued after a 
documented loss has occurred. Annual payments do not follow any 
particular pattern, ranging from no payments in 1986 to $8.2 
million in 1987 (because of a major heptachlor contamination 
incident). The majority of DIP claims in 1996 and 1997 have 
been because of aflatoxin contamination. Milk produced by dairy 
cows with feed containing aflatoxin could contain more than the 
permitted amount of aflatoxin and be removed from the market by 
a government agency. Because aflatoxin contamination may only 
occur under certain weather conditions, it is difficult to 
estimate the amount of money needed to indemnify dairy 
producers each year.
    Payments under DIP over the past 10 years have averaged 
about $200,000 per year. However, payments for 1997 claims were 
restricted because of a lack of funds. All of the $257,305 
available for 1997 was expended by February 12, 1997. As a 
result, the conference report for fiscal year 1998 
appropriations would provide $550,000 for DIP in 1998; that 
level is intended to cover both expected 1998 payments and 
valid claims made in 1997 but not yet paid because of lack of 
funds. CBO expects that the entire $550,000 estimated for 1998 
will be expended in 1998 to cover new claims and pending 1997 
claims. Adjusting the historical average for the unfunded 1997 
claims and assuming appropriation of the necessary sums, CBO 
estimates that annual DIP payments over the 1999-2002 period 
will average $250,000.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: H.R. 1789 
contains no private-sector or intergovernmental mandates as 
defined in UMRA and would have no significant impact on the 
budgets of state, local, or tribal governments.
    Estimate prepared by: Jim Langley.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds the 
Constitutional authority for this legislation in Article I, 
clause 8, section 18, that grants Congress the power to make 
all laws necessary and proper for carrying out the powers 
vested by Congress in the Government of the United States or in 
any department or officer thereof.

                          Oversight Statement

    No summary of oversight findings and recommendations made 
by the Committee on Government Reform and Oversight, as 
provided for in clause 2(l)(3)(D) of rule XI, and under clause 
4(c)(2) of rule X of the Rules of the House of Representatives, 
was available to the Committee with reference to the subject 
matter specifically addressed by H.R. 1789.

                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI, and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee on Agriculture's oversight findings and 
recommendations are reflected in the body of this report.

                        Committee Cost Estimate

    Pursuant to clause 7(a) of rule XIII of the Rules of the 
House of Representatives, the Committee report incorporates the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to sections 403 and 424 of the 
Congressional Budget Act of 1974.

                      Advisory Committee Statement

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office (CBO), contained in the CBO cost estimate for this bill 
appearing in this Committee report, pursuant to section 423 of 
the Unfunded Mandates Reform Act (Public Law 104-4).

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                         ACT OF AUGUST 13, 1968

         AN ACT To provide indemnity payments to dairy farmers.

          * * * * * * *
    Sec. 2. There is hereby authorized to be appropriated such 
sums as may be necessary to carry out the purposes of this Act. 
Funds appropriated pursuant to this section for fiscal year 
1998 to carry out this Act may also be used to pay valid claims 
arising under this Act during fiscal year 1997 to the extent 
that such claims are not fully paid using fiscal year 1997 
funds.
    Sec. 3. The authority granted under this Act shall expire 
on September 30, [1995] 2002.

                                
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