House Report 109-276 - DEFICIT REDUCTION ACT OF 2005

[House Report 109-276]
[From the U.S. Government Publishing Office]

109th Congress 1st
Session HOUSE OF REPRESENTATIVES Report
109-276
_______________________________________________________________________

DEFICIT REDUCTION ACT OF 2005

----------

R E P O R T

of the

COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES

to accompany

H.R. 4241

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201(a) OF THE
CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2006

together with

MINORITY, ADDITIONAL AND DISSENTING VIEWS

November 7, 2005.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
DEFICIT REDUCTION ACT OF 2005
109th Congress
1st Session HOUSE OF REPRESENTATIVES Report
109-276
_______________________________________________________________________

DEFICIT REDUCTION ACT OF 2005

__________

R E P O R T

of the

COMMITTEE ON THE BUDGET

HOUSE OF REPRESENTATIVES

to accompany

H.R. 4241

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201(a) OF THE
CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2006

together with

MINORITY, ADDITIONAL AND DISSENTING VIEWS

November 7, 2005.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
COMMITTEE ON THE BUDGET

JIM NUSSLE, Iowa, Chairman
JIM RYUN, Kansas JOHN M. SPRATT, Jr., South
ANDER CRENSHAW, Florida Carolina,
ADAM H. PUTNAM, Florida Ranking Minority Member
ROGER F. WICKER, Mississippi DENNIS MOORE, Kansas
KENNY C. HULSHOF, Missouri RICHARD E. NEAL, Massachusetts
JO BONNER, Alabama ROSA L. DeLAURO, Connecticut
SCOTT GARRETT, New Jersey CHET EDWARDS, Texas
J. GRESHAM BARRETT, South Carolina HAROLD E. FORD, Jr., Tennessee
THADDEUS G. McCOTTER, Michigan LOIS CAPPS, California
MARIO DIAZ-BALART, Florida BRIAN BAIRD, Washington
JEB HENSARLING, Texas JIM COOPER, Tennessee
ILEANA ROS-LEHTINEN, Florida ARTUR DAVIS, Alabama
DANIEL E. LUNGREN, California WILLIAM J. JEFFERSON, Louisiana
PETE SESSIONS, Texas THOMAS H. ALLEN, Maine
PAUL RYAN, Wisconsin ED CASE, Hawaii
MICHAEL K. SIMPSON, Idaho CYNTHIA McKINNEY, Georgia
JEB BRADLEY, New Hampshire HENRY CUELLAR, Texas
PATRICK T. McHENRY, North Carolina ALLYSON Y. SCHWARTZ, Pennsylvania
CONNIE MACK, Florida RON KIND, Wisconsin
K. MICHAEL CONAWAY, Texas
CHRIS CHOCOLA, Indiana

Professional Staff

James T. Bates, Chief of Staff
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S

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Page
Introduction..................................................... 1
Title I--Committee on Agriculture................................ 7
Title II--Committee on Education and the Workforce............... 57
Title III--Committee on Energy and Commerce...................... 366
Title IV--Committee on Financial Services........................ 586
Title V--Committee on the Judiciary.............................. 708
Title VI--Committee on Resources................................. 779
Title VII--Committee on Transportation and Infrastructure........ 910
Title VIII--Committee on Ways and Means.......................... 917
Miscellaneous House Report Requirements.......................... 1081
Legislative Text................................................. 1117
109th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 109-276

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

PROVIDING FOR RECONCILIATION PURSUANT TO SECTION 201(A) OF THE
CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2006

_______

November 7, 2005.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Nussle, from the Committee on the Budget, submitted the following

R E P O R T

together with

MINORITY, ADDITIONAL AND DISSENTING VIEWS

[To accompany H.R. 4241]

[Including cost estimate of the Congressional Budget Office]

The Committee on the Budget, to whom reconciliation
recommendations were submitted pursuant to section 201(a) of
the House Concurrent Resolution 95, the concurrent resolution
on the budget for fiscal year 2006, having considered the same,
report the bill without recommendation.

BUDGET COMMITTEE INTRODUCTION

Overview

Four months before Katrina, Congress had already committed
to addressing the growing crisis of Federal spending: The
budget resolution adopted in April (the conference report on H.
Con. Res. 95) included the first effort in nearly a decade to
restrain the government's unsustainable entitlement spending.
The worst natural disaster in the Nation's history--and the
substantial Federal resources needed to help its victims--
simply brought the fiscal challenge into a sharper and more
immediate focus.
These are the main factors driving the reconciliation bill
reported by the Committee on the Budget on 3 November 2005. The
discussion below describes the economic, historical, and fiscal
context more fully, and offers a sketch of the overall
reconciliation plan.

Pre-Katrina

To fully appreciate the significance of this measure, it is
helpful to reflect on the situation before Hurricane Katrina
struck--by about mid-August of this year. Both the U.S. economy
and the Federal budget seemed to have caught a lucky streak:

--The economy had hit its stride. Real growth in gross domestic
product [GDP] had averaged 3.7 percent for the previous
eight quarters, and most analysts were projecting a
sustained expansion.
--Jobs were growing at an average of about 194,000 a month.
--More than 4 million new payroll jobs had been added in just
more than 2 years.
--The always-important manufacturing sector had been expanding
for 27 consecutive months.
--Even the oil and gasoline price spikes of mid-summer, though
serious, were not throwing the economy off track.
--Federal tax revenue for the current year had risen 15
percent--an increase that was both unprecedented and
unpredicted--and the estimated budget deficit had declined
by $94 billion in just 6 months.

But ``luck is the residue of design,'' the great Branch
Rickey famously said; and that was true of these fiscal and
economic fortunes as well: They were the product of a plan. In
the middle of 2001, when the economy was slowing, Congress and
the President lowered tax burdens (by $1.35 trillion over 11
years) to cushion the fall, and to provide a better foundation
for growth. As it turned out, the recession that year was one
of the mildest on record; and even with the tax cuts--and the
ample spending that budget surpluses at the time allowed--the
congressional budget could project $2.4 trillion in debt
reduction by 2011.
Then the World Trade Center fell--and the U.S. was forced
to meet global terrorism head-on. The ensuing war--which
continues today--and the need to enhance security at home added
extraordinary burdens to the budget, driving it into deficit.
With sizable deficits came constant reminders of the need
for spending control, and Congress responded. The fiscal year
2005 budget level-funded total non-security discretionary
spending. The fiscal year 2006 budget actually reduced this
spending--marking the first non-security cut since President
Reagan. The resolution also budgeted for the Global War on
Terror.
In addition, this year's budget committed Congress to the
first budget ``reconciliation'' legislation since 1997,
embodied herein.

The Need for Reconciliation

The problem of government entitlement spending has long
been known. Mounting medical costs, the forthcoming retirement
of the baby-boom generation, and a permanent shift in the
Nation's demographics--one that reduces the number of workers
for each retiree even after the baby-boomers are gone--will
place unanswerable demands on Federal resources. They will
crowd out other priorities and strain not only the Federal
budget, but the Nation's economy as a whole.
Just 10 years ago, this spending (excluding interest)
represented about 49 percent of the budget; today it is 54
percent; in just 10 years, it will exceed 62 percent. Further,
overall mandatory spending is growing at a rate of about 6
percent per year. This relentless upward trend typically
outpaces both the economy's growth and the long-term average
increase in Federal revenue. Hence the problem: this spending
growth cannot be sustained without continuous cuts in other
programs, ever-increasing taxes, or more debt financing--none
of which is acceptable.
Reconciliation is the budgetary process designed to address
entitlements. Generally speaking, it works as follows:

--In any given year, the budget resolution may give
``instructions'' to select authorizing committees to
achieve savings in entitlement programs in their respective
jurisdictions. The committees involved may be any deemed
suitable by the budget resolution, and the amounts of
savings are whatever the resolution considers necessary.
--The authorizing committees involved then develop revisions in
programs under their jurisdictions pursuant to these
instructions. In short, these program revisions
``reconcile'' projected spending to the savings amounts
required. The policy decisions are entirely up to the
authorizing committees: The budget resolution instructions
involve only the required savings amounts; they do not
prescribe the programs affected or the policies to be
developed.
--The authorizing committees then submit their policy changes
to the Budget Committee, which binds them, without
amendment, into a single bill, and reports it to the floor.
--Once passed, the measure goes into a conference with a
corresponding bill from the Senate--where reconciliation is
exempt from filibuster--and the two bodies develop a final
conference report.

Reconciliation not only controls spending, but also tends,
in the process, to drive much-needed reform of entitlement
programs--some of which have not been revised or updated in
decades.

The Effect of Katrina

Although the growing demands of entitlement spending are
well known, and reform long overdue, they develop and worsen
gradually, and hence often fail to command the urgent and
continuing attention they deserve. Katrina changed that: It
forced Congress to recognize that overall spending had to be
restrained starting now. It also caused Congress to raise the
ante: committees were asked to increase their savings targets,
relative to those set forth in the budget resolution, to begin
offsetting the tens of billions of dollars that have been, and
will be, spent for hurricane recovery.
Thus this reconciliation bill has two broad policy goals,
one long-term, and one near: It starts the reform of government
entitlements in ways that will make them more effective, more
efficient, and less costly; and it recognizes that hurricane
recovery is important enough to warrant diverting resources to
it that otherwise would have been spent elsewhere. Both apply
to the definition of ``setting priorities and making
choices''--more simply called ``budgeting.''

Components of the Measure

The bill reported by the Budget Committee provides $53.9
billion of savings over 5 years. As noted, these savings have
three principal goals:

--To provide a down-payment toward hurricane recovery and
reconstruction costs. Congress already has provided nearly
$65 billion in recovery funding, and more funding is
expected in the near future.
--To begin a longer-term effort at slowing the growth of
entitlement spending.
--To stimulate reform of entitlement programs.

Eight House authorizing committees have hereby contributed
to the savings effort, by modifying the authorizing laws for
programs in their respective jurisdictions. Those committees,
and their savings amounts, are as follows:

DEFICIT REDUCTION ACT SAVINGS BY COMMITTEE
[Outlays in millions of dollars]
------------------------------------------------------------------------
Savings
Committee 2006-10
------------------------------------------------------------------------
Agriculture.................................................. -3,649
Education and the Workforce.................................. -20,422
Energy and Commerce.......................................... -17,066
Financial Services........................................... -470
Judiciary.................................................... -428
Resources.................................................... -3,678
Transportation and Infrastructure............................ -156
Ways and Means............................................... -8,047
----------
Total savings.......................................... -53,916
------------------------------------------------------------------------
Note: Savings are expressed in negative numbers to reflect their effect
on the deficit.

The specific provisions that achieve these savings are
described hereinafter, in the reports submitted by the
respective authorizing committees.

Conclusion

It is sometimes said that budgeting is intrinsic to
governing. After all, a budget is the one legislative vehicle
through which Congress looks at the whole picture, weighs
priorities against one another, and sets its agenda. Congress
has many priorities, one of which--since August--has been
recovering from the devastation of Katrina; and Congress will
fulfill its obligations. But the term ``priorities'' is
meaningless without limits--in this case, limits on the growth
of Federal entitlement spending. If it is true that to govern
is to choose, then Congress has chosen--through this
reconciliation bill--to govern.
House of Representatives,
Committee on Agriculture,
Washington, DC, November 1, 2005.
Hon. Jim Nussle,
Chairman, Committee on the Budget,
Cannon Office Building, Washington, DC.
Dear Mr. Chairman: I am transmitting herewith the
recommendations of the Committee on Agriculture with respect to
the reconciliation bill for fiscal year 2006, provided for
under House Concurrent Resolution 95, the Concurrent Resolution
on the Budget for Fiscal Year 2006.
The enclosed recommendations were adopted by this Committee
in a business meeting on October 28, 2005, in the presence of a
quorum. Enclosed please find a hard copy of the Committee's
recommendations on Title I--Agriculture; Section-by-Section
Analysis; Purpose and Need; Committee Consideration; and the
remainder of the contents of the report filed pursuant to Rule
XI of the Rules of the House, including a set of Minority
Views.
With best wishes, I am
Sincerely,
Bob Goodlatte,
Chairman.
TITLE I--AGRICULTURAL PROGRAMS

PURPOSE AND NEED

The Concurrent Resolution on the Budget for Fiscal Year
2006, H. Con. Res. 95, directs the Committee on Agriculture to
report changes in laws within its jurisdiction to reduce the
level of direct spending for the Committee by $173,000,000 in
outlays for fiscal year 2006 and $3,000,000,000 in outlays for
the period of fiscal years 2006 through 2010.
The nation is facing significant budget pressures and the
House is working hard to address them. It is unrealistic to
think that we can meet the pressing challenges without reducing
federal spending. Mandatory spending today takes up almost 55%
of the total federal budget; if left on its current path, in a
decade it will consume 60% of the federal budget. $3 billion
represents only 1% of mandatory spending within the
jurisdiction of this Committee.
While all federal safety net programs, including
agriculture, need to be sustainable, the burden of addressing
the nation's budget pressures needs to be equitably shared in
order to be effective. The provisions passed by the House
Committee on Agriculture represent a broad and very balanced
response to this Committee's reconciliation instructions.
Commodity, conservation, rural development, and research
programs, and the food stamp program, all bear some burden but
none take a disproportionate cut.
With respect to agricultural commodity programs, the
provisions passed by this Committee primarily impact only the
direct payments producers receive under Title I of the Farm
Security and Rural Investment Act of 2002. The total amount of
direct payments to each eligible producer is reduced by 1
percent per year in 2006 through 2009, and the percentage of
advance direct payments for which producers are eligible in
fiscal years 2006 and 2007 is reduced from 50% to 40%. In
addition, $282 million worth of savings is achieved by
repealing the special marketing loan provisions for cotton
known as ``Step-2.'' Step-2 payments were designed to keep U.S.
upland cotton competitive on the world market. However, Brazil
successfully argued to a WTO panel that the program is
inconsistent with U.S. WTO obligations regarding export
subsidies as specified under the Subsidies and Countervailing
Measures Agreement.
In several areas, such as conservation, rural development,
research and energy, the Committee eliminates funding for
programs that were authorized under the Farm Security and Rural
Investment Act (the 2002 Farm Bill) but have since been subject
to limits and rescissions. These Congressional diversions of
mandatory funds have essentially nullified the programs.
In fiscal year 2005 alone, nearly $1.3 billion of mandatory
funding for programs that were authorized by the Farm Security
and Rural Investment Act of 2002 was eliminated. And since the
2002 Farm Bill, for example, funding for the rural strategic
investment grants program was rescinded in each of fiscal years
2003 through 2006. As a result, $100 million was diverted from
the program. The rural strategic investment grants program was
supposed to provide rural communities with resources to develop
strategic planning processes and implement innovative community
development strategies.
Likewise, mandatory funding for the agricultural management
assistance program, the broadband access program, the value-
added agricultural product grants program, the rural business
investment program, the rural firefighters and emergency
personnel grants, and the renewable energy program has been
diverted. So it is by eliminating funding for the rural
strategic investment grants program and similarly affected
programs that this Committee can avoid making destructive cuts
to programs that are both operating and important to producers
and rural communities. We are, in effect, reclaiming these
funds to help meet the Committee's priorities.
Next, this Committee achieved reductions in food stamp
program spending by making slight adjustments to the food stamp
eligibility requirements. The Committee enhanced the
categorical eligibility provision related to eligibility for
the Temporary Assistance for Needy Families (TANF) program in
the Food Stamp Act. Under section 1601, persons who are
eligible for cash benefit assistance under TANF will be
eligible, categorically, for food stamp benefits. Current law
provides that individuals receiving TANF assistance of any kind
are categorically eligible for food stamp benefits. Recipients
who no longer have categorical eligibility status under the
amended provision would have the opportunity to be reviewed for
food stamp program eligibility independent of their status as a
TANF beneficiary. By refining the eligibility requirements,
this proposal ensures that this nation's most needy will
continue to receive the food stamp assistance.
Another adjustment this Committee passed relates to the
eligibility of non-citizens for food stamp benefits. Under
current law, permanent, non-citizen residents of the U.S. are
eligible for food stamps after five years of residency. Thus,
the current rule represents a drastic deviation from the
previous requirement--a record of 40 quarters of work in order
to become eligible. This Committee strikes a balance between
these disparate historical eligibility requirements by revising
the law to require 7 years of residency instead, and notes that
a non-citizen may apply for U.S. citizenship status after 5
years of residency and as such would not be further restricted
from food stamp eligibility.
The reductions in the food stamp program account for about
one-half of one percent of the total food stamp budget: $844
million over five years. Put another way, this accounts for a
reduction of about half a penny for every dollar spent on the
food stamp program. And while the food stamp program comprises
nearly 60 percent of this Committee's mandatory spending, it
receives less than 25 percent of the total savings under the
package.
Finally, the marginal reductions in the remainder of the
provisions keep in tact the safety net for the beneficiaries
for which the programs were intended. This holds firm the
promise we made to our producers in 2002 and ensures that the
nation's most needy will continue to receive federal
assistance.
In total, the reductions in commodity programs constitute
$1.007 billion worth of savings in the total proposal.
Conservation programs account for $760 million in savings.
Reductions in research programs contribute $620 million, and
rural development program reductions contribute $446 million.
Lastly, changes in food stamp program eligibility save an
additional $844 million over five years. Together, these
reductions produce a savings of $3.7 billion over 5 years.
Putting together a reconciliation package, like writing a
farm bill, requires weighing the diverse interests of
production agriculture, conservation, research, rural
development and nutrition interests. Because this Committee
took a broad and balanced approach, we were able to achieve
more than the $3 billion the budget resolution requires of us
and continue the long standing tradition that agriculture has
always been willing to do its part to ensure the fiscal well-
being of our nation.

SECTION-BY-SECTION ANALYSIS

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS

(a) Provides that this title will be known as the
``Agricultural Reconciliation Act of 2005.''
(b) Provides a table of contents for this title.

Subtitle A--Commodity Programs

SEC. 1101. PERCENTAGE REDUCTION IN AMOUNT OF DIRECT PAYMENTS FOR
COVERED COMMODITIES AND PEANUTS

(a) Reduces the total amount of the direct payment to be
paid to producers of covered commodities by 1% for each of
fiscal years 2006 through 2009.
(b) Reduces the total amount of the direct payment to be
paid to producers of peanuts by 1% for each of fiscal years
2006 through 2009.

SEC. 1102. REDUCTION IN PERCENTAGE OF DIRECT PAYMENT AMOUNT AUTHORIZED
TO BE PAID IN ADVANCE

(a) Reduces the percentage of advance direct payments for
which producers of covered commodities are eligible in fiscal
years 2006 and 2007 from 50% to 40%.
(b) Reduces the percentage of advance direct payments for
which producers of peanuts are eligible in fiscal years 2006
and 2007 from 50% to 40%.

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS

(a) Repeals the special marketing loan provisions for
upland cotton known as ``Step 2.''
(b) Makes a conforming amendment to Federal Agriculture
Improvement and Reform Act of 1996.
(c) Designates that the amendments made by this section
will become effective on August 1, 2006.

Subtitle B--Conservation

SEC. 1201. LIMITATIONS ON USE OF COMMODITY CREDIT CORPORATION FUNDS TO
CARRY OUT WATERSHED REHABILITATION PROGRAM

(a) Reduces funding for the watershed rehabilitation
program by $15 million.
(b) Removes the requirement that funds for the watershed
rehabilitation program remain available to the Secretary until
such funds are expended.
(c) Rescinds funds that are previously made available and
that are unobligated as of September 30, 2006.

SEC. 1202. CONSERVATION SECURITY PROGRAM

(a) Limits the funding for the conservation security
program to $2,213,000,000 for fiscal years 2006 through 2010.
Increases the funding for the conservation security program to
$5,729,000,000 for the period of fiscal years 2006 through
2015.
(b) Extends the authorization for the conservation security
program through 2011.

SEC. 1203. LIMITATIONS ON USE OF COMMODITY CREDIT CORPORATION FUNDS TO
CARRY OUT AGRICULTURAL MANAGEMENT ASSISTANCE
PROGRAM

Eliminates funding for agricultural management assistance
program in 2007.

Subtitle C--Energy

SEC. 1301. TERMINATION OF USE OF COMMODITY CREDIT CORPORATION FUNDS TO
CARRY OUT RENEWABLE ENERGY SYSTEMS AND ENERGY
EFFICIENCY IMPROVEMENTS PROGRAM

Eliminates funding for loans and grants under the renewable
energy systems and energy efficiency improvements program.

Subtitle D--Rural Development

SEC. 1401. ENHANCED ACCESS TO BROADBAND TELECOMMUNICATIONS SERVICES IN
RURAL AREAS

(a) Eliminates funding for enhanced broadband access in
fiscal year 2007.
(b) Prohibits funding for this program from remaining
available until expended.
(c) Rescinds all funding that is available and unobligated
as of September 30, 2006.

SEC. 1402. VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT PROGRAM
GRANTS

(a) Eliminates funding for value-added agricultural product
grants in fiscal year 2007.
(b) Prohibits funding for this program from remaining
available until expended.
(c) Rescinds all funding that is available and unobligated
as of September 30, 2006.

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM

(a) Eliminates funding for the rural business investment
program in fiscal year 2007.
(b) Prohibits funding for this program from remaining
available until expended.
(c) Rescinds all funding that is available and unobligated
as of September 30, 2006.

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS

(a) Eliminates funding for rural business strategic
investment grants in fiscal year 2007.
(b) Rescinds all funding that is available and unobligated
as of September 30, 2006.

SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS

(a) Eliminates funding for rural firefighter and emergency
personnel grants in fiscal year 2007.
(b) Prohibits funding for this program from remaining
available until expended.
(c) Rescinds all funding that is available and unobligated
as of September 30, 2006.

Subtitle E--Research

SEC. 1501. INITIATIVE FOR FUTURE FOOD AND AGRICULTURE SYSTEMS

(a) Eliminates funding for the Initiative for Future
Agriculture and Food Systems in fiscal years 2007, 2008, and
2009. Provides $200,000,000 of funding in 2010 and in
subsequent fiscal years.
(b) Limits availability of fiscal year 2006 funds to the
one year period beginning on October 1, 2005, while maintaining
the two-year period of availability for funds made available in
other fiscal years.

Subtitle F--Nutrition

SEC. 1601. ELIGIBLE HOUSEHOLDS

(a) Amends the Food Stamp Act to restrict categorical
eligibility status. Provides that only persons who are
recipients of cash benefits from the Temporary Assistance for
Needy Families (TANF) program will be categorically eligible
for food stamp program benefits.
(b) Reauthorizations most provisions in the Food Stamp Act
through 2011.

SEC. 1602. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD
ASSISTANCE PROGRAM

(1) Authorizes the purchase of $140,000,000 worth of
commodities per year through 2011.
(2) Authorizes the purchase of an additional $12,000,000
worth of commodities 2006.
(3) Designates that the additional commodities for 2006 are
to be distributed to States affected by Hurricanes Katrina and
Rita.

SEC. 1603. RESIDENCY REQUIREMENT

Amends the ``Welfare Reform'' law to require that
noncitizens reside in the U.S. for 7 years before becoming
eligible for food stamp benefits.

SEC. 1604. DISASTER FOOD STAMP PROGRAM

Authorizes the Secretary of Agriculture to pay to State
agencies 100% of the administrative costs incurred in the
delivery of food stamp benefits to households under the
disaster food stamp program initiated in response to Hurricanes
Katrina and Rita.

COMMITTEE CONSIDERATION

II. Full Committee Consideration

The Committee on Agriculture met, pursuant to notice, with
a quorum present, on October 28, 2005, to consider its
recommendations to the Budget Committee as provided in the
Budget Resolution Instructions contained in the H. Con. Res.
95, the Concurrent Resolution on the Budget for Fiscal Year
2006.
Chairman Goodlatte called the meeting to order and made an
opening statement as did Ranking Member Peterson. Without
objection, the Chairman's Mark to the Budget Committee for
Title I--Agriculture, with respect to the Reconciliation Bill
for Fiscal Year 2006 was placed before the Committee and open
for amendment at any point. Counsel and staff were then
recognized to give a brief summary of the recommendations.
Mr. Holden was then recognized to offer and explain an
amendment to eliminate FY 2006 limitations on funding or
operation of certain agriculture programs and activities.
Discussion occurred and by a roll call vote of 19 yeas, 25
nays, and 2 not voting, the amendment failed. See Roll Call
Vote #1.
Mr. Melancon was recognized to offer and explain an
amendment to provide assistance to citrus, nursery, vegetable,
and fruit crops impacted by Hurricane Katrina or Hurricane
Rita. Chairman Goodlatte voiced opposition to the amendment and
after a brief discussion by a roll call vote of 19 yeas, 25
nays, and 2 not voting, the amendment failed. See Roll Call
Vote #2.
Mr. Peterson was then recognized to offer and explain an
amendment to provide emergency food and farm disaster
assistance. The Chairman voiced opposition to the amendment and
after a brief discussion by a roll call vote of 19 yeas, 25
nays, and 2 not voting, the amendment failed. See Roll Call
Vote #3.
There being no further amendments, Mr. Pombo moved to
favorably report the Chairman's Mark for Title I--Agriculture,
to the Committee on the Budget for insertion in the
Reconciliation Bill. Discussion occurred and by a roll call
vote of 24 yeas, 20 nays, and 2 not voting, the recommendations
were adopted. See Roll Call #4.
Chairman Goodlatte then advised Members that pursuant to
the rules of the House of Representatives that Members have 2
calendar days to file such views with the Committee. Ranking
Member Peterson indicated that he intended to submit additional
views.
Without objection, staff was given permission to make any
necessary clerical, technical or conforming changes to reflect
the intent of the Committee.
Chairman Goodlatte thanked all the Members and adjourned
the meeting subject to the call of the chair.

Reporting the Bill--Rollcall Votes

In compliance with clause 3(b) of rule XIII of the House of
Representatives, the Committee sets forth the record of the
following rollcall votes taken with respect to consideration of
the recommendations regarding the Reconciliation Bill for
Fiscal Year 2006:

ROLLCALL NO. 1

Summary: Amendment to eliminate FY 2006 limitations on
funding or operation of certain agriculture programs and
activities.
Offered by: Mr. Holden.
Results: Failed by a vote of 19 yeas/25 nays/2 not voting.

YEAS

1. Peterson 11. Cuellar
2. Holden 12. Melancon
3. McIntyre 13. Costa
4. Etheridge 14. Salazar
5. Case 15. Barrow
6. Cardoza 16. Pomeroy
7. Scott 17. Larsen
8. Marshall 18. Davis
9. Herseth 19. Chandler
10. Butterfield

NAYS

1. Goodlatte 19. Boustany
2. Boehner 20. Schwarz
3. Pombo 21. Kuhl
4. Everett 22. Foxx
5. Lucas 23. Conaway
6. Moran 24. Fortenberry
7. Jenkins 25. Schmidt
8. Gutknecht
9. Hayes
10. Johnson
11. Osborne
12. Pence
13. Graves
14. Bonner
15. Rogers
16. King
17. Musgrave
18. Neugebauer

NOT VOTING

1. Baca
2. Boswell

ROLLCALL NO. 2

Summary: Amendment to provide assistance to citrus,
nursery, vegetable, and fruit crops impacted by Hurricane
Katrina or Hurricane Rita.
Offered by: Mr. Melancon.
Results: Failed by a vote of 19 yeas/25 nays/2 not voting.

YEAS

NAYS

1. Goodlatte 18. Neugebauer
2. Boehner 19. Boustany
3. Pombo 20. Schwarz
4. Everett 21. Kuhl
5. Lucas 22. Foxx
6. Moran 23. Conaway
7. Jenkins 24. Fortenberry
8. Gutknecht 25. Schmidt
9. Hayes
10. Johnson
11. Osborne
12. Pence
13. Graves
14. Bonner
15. Rogers
16. King
17. Musgrave

NOT VOTING

1. Baca
2. Boswell

ROLLCALL NO. 3

Summary: Amendment to provide emergency food and farm
disaster assistance.
Offered by: Mr. Peterson.
Results: Failed by a vote of 19 yeas/25 nays/2 not voting.

YEAS

NAYS

NOT VOTING

1. Baca
2. Boswell

ROLLCALL NO. 4

Summary: Motion to favorably report the Chairman's Mark for
Title I--Agriculture, to the Budget Committee for insertion in
the Reconciliation Bill.
Offered by: Mr. Pombo.
Results: Adopted by a vote 24 yeas/20 nays/2 not voting.

YEAS

1. Goodlatte 13. Bonner
2. Boehner 14. Rogers
3. Pombo 15. King
4. Everett 16. Musgrave
5. Lucas 17. Neugebauer
6. Moran 18. Boustany
7. Jenkins 19. Schwarz
8. Gutknecht 20. Kuhl
9. Hayes 21. Foxx
10. Osborne 22. Conaway
11. Pence 23. Fortenberry
12. Graves 24. Schmidt

NAYS

NOT VOTING

1. Baca
2. Boswell

Committee Oversight Findings

Pursuant to clause 3(c)(1) of rule XIII 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.

Performance Goals and Objectives

With respect to the requirement of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to
reduce the level of direct spending by the Committee on
Agriculture for the period fiscal year 2006 thru 2010.

Constitutional Authority Statement

Pursuant to clause 3(d)(1) of rule XIII 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 Constitution of the United States or
in any department or officer thereof.

Budget Act Compliance (Sections 308, 402, and 423)

The provisions of clause 3(c)(2) of rule XIII 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 3(c)(3) of rule XIII of the Rules of the House of
Representatives and sections 402 and 423 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 31, 2005.
Hon. Bob Goodlatte,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for the Agricultural
Reconciliation Act of 2005.
CBO understands that the Committee on the Budget will be
responsible for interpreting how these proposals compare with
the reconciliation instructions in the budget resolution.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Jim Langley
(for farm programs) and Kathleen FitzGerald (for Food Stamps).
Sincerely,
Donald B. Marron
(For Douglas Holtz-Eakin, Director).
Enclosure.

Agricultural Reconciliation Act of 2005

Summary: The Agricultural Reconciliation Act of 2005 would
amend laws governing commodity, conservation, energy, rural
development, research, and nutrition programs over the 2006-
2010 period. CBO estimates that enacting this legislation would
reduce direct spending by $567 million in fiscal year 2006, by
about $3.1 billion over the 2006-2010 period, and by about $4.3
billion over the 2006-2015 period, relative to CBO's March 2005
baseline projections (see Table 1). Enacting the legislation
would not affect federal revenues.
The estimated savings from this legislation would be
affected by provisions in the conference agreement on the
agriculture appropriation bill for fiscal year 2006 (H.R.
2744). Upon enactment of that conference agreement (which
passed the House on October 28), the savings from this
legislation would increase by $528 million--to $3.7 billion
over the 2006-2010 period and $4.8 billion over the 2006-2015
period (see Memorandum at the bottom of Table 1). These
additional savings are associated with the Initiative for
Future Agriculture and Food Systems and several rural
development programs, which are discussed in more detail later
in this estimate.
This reconciliation legislation would reduce direct
payments made by the Commodity Credit Corporation's (CCC's)
price and income support program. It also contains a provision
that would end that reduction if legislation were enacted to
extend direct payments beyond crop year 2009. Because that
limitation would take effect only upon enactment of other
legislation, it is not reflected in CBO's cost estimate, which
assumes that the reduction in direct payments continues
indefinitely. The House Budget Committee has directed CBO to
consider this limitation to be effective, thus terminating the
reduction after crop year 2009. That assumption reduces
estimated savings from the legislation, starting in fiscal year
2010. Under that assumption, and assuming enactment of the
conference agreement on the agriculture appropriation bill,
enacting this reconciliation legislation would reduce direct
spending by $567 million in fiscal year 2006, by $3.65 billion
over the 2006-2010 period, and by $4.6 billion over the 2006-
2015 period (see Table 2).
The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
(UMRA). Some of its provisions would reduce federal funding for
assistance to state and local governments.
Estimated Cost to the Federal Government: CBO's estimate of
the budgetary impact of this legislation is shown in Table 1.
Table 2 reflects the scorekeeping direction from the House
Budget Committee. It differs from Table 1 with regard to
projected savings from the commodity program in 2010 and
subsequent years, and assumes that the conference agreement on
H.R. 2744 is enacted. The costs of this legislation fall within
budget functions 300 (natural resources), 350 (agriculture),
450 (community and regional development), and 600 (nutrition).
Basis of estimate: This estimate assumes that the bill will
be enacted in December 2005.
Commodity Program
Subtitle A would reduce the Department of Agriculture's
direct payments to agricultural producers by 1 percent for the
2006 and 2007 crops, reduce advance direct payments by 10
percent in 2006 and 2007, and eliminate the upland cotton Step
2 payments.
CBO's estimate of the budgetary impact of these amendments
to the agricultural commodity program is detailed in Table 3.

TABLE 1.--SUMMARY OF CBO'S ESTIMATE OF THE BUDGETARY IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2010 2006-2015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Commodity Program:
Estimated Budget Authority.......................... -553 -164 -108 -105 -103 -105 -102 -104 -104 -104 -1,033 -1,552
Estimated Outlays................................... -553 -164 -108 -105 -103 -105 -102 -104 -104 -104 -1,033 -1,552
Conservation Programs:
Estimated Budget Authority.......................... -85 -135 -105 -138 -191 -135 -80 -49 -56 -56 -654 -1,030
Estimated Outlays................................... 0 -162 -126 -150 -197 -143 -84 -52 -58 -57 -635 -1,029
Energy Program:
Estimated Budget Authority.......................... 0 -23 0 0 0 0 0 0 0 0 -23 -23
Estimated Outlays................................... 0 -9 -9 -5 0 0 0 0 0 0 -23 -23
Rural Development Programs:
Estimated Budget Authority.......................... -185 -60 0 0 0 0 0 0 0 0 -245 -245
Estimated Outlays................................... 0 -58 -84 -52 -10 -6 -5 0 0 0 -204 -215
Research, Extension, and Education Grants:
Estimated Budget Authority.......................... 0 -200 -200 -200 0 0 0 0 0 0 -600 -600
Estimated Outlays................................... 0 -30 -100 -160 -170 -100 -40 0 0 0 -460 -600
Food Stamp Program:
Estimated Budget Authority.......................... -14 -186 -191 -199 -202 -103 0 0 0 0 -794 -896
Estimated Outlays................................... -14 -186 -191 -199 -202 -103 0 0 0 0 -794 -896
Total Changes:
Estimated Budget Authority.......................... -837 -768 -604 -642 -497 -343 -182 -153 -160 -160 -3,350 -4,346
Estimated Outlays................................... -567 -609 -618 -671 -682 -457 -231 -156 -162 -161 -3,149 -4,314
Memorandum:

Total Changes Assuming Enactment of H.R. 2744:
Estimated Budget Authority.......................... -1,206 -928 -604 -642 -497 -343 -182 -153 -160 -160 -3,877 -4,875
Estimated Outlays................................... -567 -776 -798 -797 -736 -464 -226 -156 -162 -161 -3,677 -4,843
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes.--Table 2 displays the estimated cost of the legislation consistent with the scorekeeping direction from the House Budget Committee.
Details may not sum to total because of rounding.

TABLE 2.--SUMMARY OF THE BUDGETARY IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 REFLECTING SCOREKEEPING DIRECTION FROM THE HOUSE BUDGET COMMITTEE AND ENACTMENT OF THE CONFERENCE
AGREEMENT ON AGRICULTURE APPROPRIATIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
---------------------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2010 2006-2015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Commodity Program \1\:
Estimated Budget Authority.......................... -553 -164 -108 -105 -76 -52 -49 -51 -51 -51 -1,006 -1,260
Estimated Outlays................................... -553 -164 -108 -105 -76 -52 -49 -51 -51 -51 -1,006 -1,260
Conservation Programs:
Estimated Budget Authority.......................... -210 -135 -105 -138 -191 -135 -80 -49 -56 -56 -779 -1,155
Estimated Outlays................................... 0 -237 -151 -166 -206 -143 -84 -52 -58 -57 -760 -1,154
Energy Program:
Estimated Budget Authority.......................... 0 -23 0 0 0 0 0 0 0 0 -23 -23
Estimated Outlays................................... 0 -9 -9 -5 0 0 0 0 0 0 -23 -23
Rural Development Programs:
Estimated Budget Authority.......................... -429 -60 0 0 0 0 0 0 0 0 -489 -489
Estimated Outlays................................... 0 -126 -183 -114 -23 -13 0 0 0 0 -446 -459
Research, Extension, and Education Grants:
Estimated Budget Authority.......................... 0 -360 -200 -200 0 0 0 0 0 0 -760 -760
Estimated Outlays................................... 0 -54 -156 -208 -202 -100 -40 0 0 0 -620 -760
Food Stamp Programs:
Estimated Budget Authority.......................... -14 -186 -191 -199 -204 -103 0 0 0 0 -794 -896
Estimated Outlays................................... -14 -186 -191 -199 -204 -103 0 0 0 0 -794 -896
Total Changes:
Estimated Budget Authority.......................... -1,206 -928 -604 -642 -470 -290 -129 -100 -107 -107 -3,852 -4,585
Estimated Outlays................................... -567 -776 -798 -797 -710 -411 -173 -103 -109 -108 -3,650 -4,554
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The House Budget Committee has directed CBO to estimate the costs of the legislation assuming that subsequent legislation will extend the authority to make direct payments beyond crop year
2009.
Details may not sum to totals because of rounding.

TABLE 3.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR THE COMMODITY PROGRAM
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
-----------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Reduction of Direct Payments \1\:
Estimated Budget Authority................................ -26 -53 -53 -53 -53 -53 -53 -53 -53 -53
Estimated Outlays......................................... -26 -53 -53 -53 -53 -53 -53 -53 -53 -53
Limit on Advance Direct Payments:
Estimated Budget Authority................................ -513 0 0 0 0 0 0 0 0 0
Estimated Outlays......................................... -513 0 0 0 0 0 0 0 0 0
Cotton Competitiveness Provisions:
Estimated Budget Authority................................ -14 -111 -55 -52 -50 -52 -49 -51 -51 -51
Estimated Outlays......................................... -14 -111 -55 -52 -50 -52 -49 -51 -51 -51
Total Changes:................................................
Estimated Budget Authority................................ -553 -164 -108 -105 -103 -105 -102 -104 -104 -104
Estimated Outlays......................................... -553 -164 -108 -105 -103 -105 -102 -104 -104 -104
Memorandum:

Commodity Program Outlays Under CBO's March 2005 Baseline..... 19,289 16,669 14,687 14,962 14,662 14,339 13,962 13,862 13,840 12,865
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Using the assumptions specified by the House Budget Committee, savings for the 1 percent reduction in direct payments would be $26 million in 2006,
$211 million over the 2006-2010 period, and zero after 2010.

Section 1101--Reduction of Direct Payments. Section 1101
would require a 1 percent reduction in direct payments for the
2006 and 2007 crops of feed grains, oilseeds, wheat, cotton,
rice, and peanuts. The legislation also specifies that no
reduction occur for the 2010 and subsequent crop years, if
future legislation were to authorize direct payments for those
crop years. Current law authorizes the CCC price and income
support program, including direct payments to applicable crops,
through 2007. The Balanced Budget and Emergency Deficit Control
Act of 1985 specifies that such expiring programs should be
assumed to continue to operate as they exist upon scheduled
expiration. Therefore, the CBO baseline assumes that the price
and income support program continues indefinitely beyond its
expiration date of 2007. Hence, our estimate assumes the 1
percent reduction would apply to the 2010 and subsequent crops.
Relative to CBO's baseline projections, enacting this
section would reduce direct spending for the CCC price and
income support program by $26 million in 2006, $238 million
over the 2006-2010 period, and $503 million over the 2006-2015
period, CBO estimates. The House Budget Committee has directed
CBO to assume that the 1 percent reduction in direct payments
would end with the 2009 crop, reflecting a provision in the
legislation that would be contingent on enactment of
legislation to extend direct payments beyond that year. (CBO's
cost estimates do not ordinarily incorporate contingencies that
depend on enactment of future legislation.). Under the House
Budget Committee's assumptions, this section would reduce
direct spending by $26 million in 2006, $211 million over the
2006-2010 period, and $211 million over the 2006-2015 period.
Section 1102--Advance Direct Payments. The 2002 farm act
(Public Law 107-171) authorizes the Secretary of Agriculture to
offer eligible producers up to a 50 percent advance payment on
their annual direct payment for feed grains, oilseeds, wheat,
cotton, rice, and peanuts. Producers may request advance
payments beginning on December 1 of the calendar year before
the crop is harvested until the final payment is made in
October of the calendar year in which the crop is harvested.
Section 1102 would limit those annual advance payments to no
more than 40 percent of the direct payments for the 2006 and
2007 crop years.
This section would not affect the total value of direct
payments that producers are eligible to receive for each crop
year, only the timing of the payment. By shifting payments from
each year to the following year, this provision would have the
effect of reducing outlays in 2006 and shifting some outlays
beyond 2015. CBO estimates that limiting advance direct
payments would reduce spending by $513 million in 2006, with no
change in total payments in each subsequent fiscal year through
2015.
Section 1103--Cotton Competitiveness Provisions. Section
1103 would eliminate cotton user marketing certificates, more
commonly known as the Step 2 payments, effective beginning on
August 1, 2006. First authorized in 1990, Step 2 is a provision
of the marketing assistance loan program unique to upland
cotton. It provides for cash or in-kind payments to eligible
domestic users and exporters of U.S.-grown upland cotton
whenever U.S. cotton prices are higher than world market cotton
prices.
CBO estimates that eliminating Step 2, effective August 1,
2006, would reduce CCC spending for the cotton program by $14
million in 2006, $282 million over the 2006-2010 period, and
$536 million over the 2006-2015 period. Those savings are less
than CBO's baseline estimates for Step 2 payments over the
2006-2015 period ($1.2 billion) because Step 2 payments also
affect the demand for and price of upland cotton.
CBO estimates that eliminating Step 2 would reduce U.S.
cotton exports by about 2.5 percent and domestic mill use by a
smaller amount (because mill use is a smaller component of
total use). We estimate that such a decrease in demand would
reduce domestic cotton prices by $0.0075 to $0.0200 per pound,
which is 50 percent to 60 percent of the estimated forgone Step
2 payment rate. The payment rate for countercyclical payments
is determined, in part, by average U.S. cotton prices; the
lower the prices, the higher the countercyclical payments. CBO
estimates that lower U.S. prices due to elimination of Step 2
would lead to an increase in countercyclical payments of $484
million over the 2006-2015 period. Eliminating Step 2 would
also slightly increase world cotton prices. The world price is
used to determine repayment rates for upland cotton marketing
loans and loan deficiency payments. We estimate that higher
world prices would reduce the cost of cotton marketing loans by
$17 million over the 2006-2015 period.
Conservation
Subtitle B would amend the Watershed Rehabilitation
Program, the Conservation Security Program (CSP), and the
Agricultural Management Assistance Program (AMAP). Authority
for CSP would be extended through 2011 but total spending
authority would be reduced. Under the assumptions underlying
CBO's March 2005 baseline projections, we estimate that
extending CSP through 2011 would result in outlays of $1.6
billion over the 2008-2015 period. Pursuant to the Balanced
Budget and Emergency Deficit Control Act of 1985, such
extensions are assumed in the baseline projections and have no
cost relative to those projections. CBO's estimates of the
budgetary effects of the amendments to conservation programs
are detailed in Table 4.
Section 1201--Watershed Rehabilitation Program. The
Watershed Rehabilitation Program provides assistance to
communities to rehabilitate aging local dams. The Natural
Resources Conservation Service (NRCS) provides technical and
financial assistance for the planning, design, and
implementation of rehabilitation projects that may include
upgrading or removing the dams. Section 1201 would limit the
availability of CCC funds for 2007 to $50 million, and would
rescind all balances from prior years unobligated as of
September 30, 2006. CBO estimates that these provisions would
reduce spending for watershed rehabilitation by $100 million
over the 2006-2010 period.

TABLE 4.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR CONSERVATION PROGRAMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Watershed Rehabilitation Program:
Estimated Budget Authority \1\............................ -85 -15 0 0 0 0 0 0 0 0
Estimated Outlays......................................... 0 -60 -20 -13 -7 0 0 0 0 0
Conservation Security Program:
Estimated Budget Authority................................ 0 -100 -95 -128 -181 -135 -80 -49 -56 -56
Estimated Outlays......................................... 0 -100 -95 -128 -181 -135 -80 -49 -56 -56
Agricultural Management Assistance Program:
Estimated Budget Authority................................ 0 -20 -10 -10 -10 0 0 0 0 0
Estimated Outlays......................................... 0 -2 -11 -9 -9 -8 -4 -3 -2 -1
Total Changes:
Estimated Budget Authority................................ -85 -135 -105 -138 -191 -135 -80 -49 -56 -56
Estimated Outlays......................................... 0 -162 -126 -150 -197 -143 -84 -52 -58 -57
Memorandum:

Outlays for Conservation Programs.........................
Under CBO's March 2005 Baseline........................... 3,652 4,006 4,224 4,894 4,829 4,771 4,817 4,779 4,748 4,781
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ If enacted, the conference agreement on H.R. 2744 would prevent the Department of Agriculture from obligating funds--in fiscal year 2006--previously
provided for the Watershed Rehabilitation Program. As a result, more funds would be available for obligation at the end of 2006--and thus subject to
the rescission in this reconciliation legislation. Therefore, upon enactment of H.R. 2744, the reconciliation provision would save $125 million more
over the 2006-2010 and 2006-2015 periods than shown above.

Section 1202--Conservation Security Program. The CSP, first
authorized in the 2002 farm act, provides financial and
technical assistance to promote conservation and improvement of
soil, water, air, plant and animal life, and land currently
used for agricultural production. Producers enroll in 5- to-15-
year contracts in exchange for cost-share assistance and annual
payments. Under current law, total spending on CSP contracts is
limited to $6.037 billion over the 2005-2014 period. Fiscal
year 2015 is not covered by that limit; CBO's baseline includes
$835 million in outlays for 2015.
Section 1202 would restrict CSP spending to $2.213 billion
over the 2006-2010 period and $5.729 billion over the 2006-2015
period. CBO estimates that imposing those spending caps would
reduce spending on the CSP program by $504 million over the
2006-2010 period and $880 million over the 2006-2015 period.
Section 1203--Agricultural Management Assistance Program
(AMAP). This program, authorized by the Agriculture Risk
Protection Act of 2000, provides $20 million in 2007 and $10
million each subsequent year for financial assistance to
producers in 15 states where participation in the federal crop
insurance program has historically been low. Section 1203 would
prohibit obligations for AMAP over the 2007-2010 period. CBO
estimates that this provision would reduce conservation
spending by $31 million over the 2006-2010 period and by $49
million over the 2006-2015 period.
Energy
The renewable energy systems and energy efficiency
improvements program provides a combination of loans and grants
to farmers to purchase renewable energy systems or to make
energy-efficiency improvements. Section 1301 would eliminate
funding for the program in 2007. CBO estimates that action
would reduce direct spending by $23 million over the 2006-2010
period (see Table 5).

TABLE 5.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR ENERGY PROGRAMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
---------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Renewable Energy Systems and Energy-Efficiency
Improvements Program:
Estimated Budget Authority...................... 0 -23 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -9 -9 -5 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Rural Development
The legislation would eliminate fiscal year 2007 funding
and rescind unobligated balances for the Rural Community Grants
(firefighter assistance) program, the broadband loans component
of the Distance Learning, Telemedicine, and the Broadband
program, and the Value-Added Marketing program. In addition,
the bill would rescind the unobligated balances of both the
Rural Strategic Investment and the Rural Business Investment
programs. (The rescissions would take effect on September 30,
2006, and would apply to balances available on that date.) In
sum, CBO estimates the provisions would reduce direct spending
by $204 million over the 2006-2010 period and by $215 million
over the 2006-2015 period (see Table 6).

TABLE 6.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR RURAL DEVELOPMENT PROGRAMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
---------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Rural Firefighers and Emergency Personnel Grants:
Estimated Budget Authority...................... 0 -10 0 0 0 0 0 0 0 0
Estimated Outlays:.............................. 0 -1 -4 -5 0 0 0 0 0 0
Enhanced Access to Broadband:
Estimated Budget Authority...................... -60 -10 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -1 -7 -11 -10 -6 -5 0 0 0
Value-Added Marketing Program:
Estimated Budget Authority...................... -30 -40 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -28 -35 -7 0 0 0 0 0 0
Rural Business Investment Program:
Estimated Budget Authority...................... -45 0 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -23 -18 -4 0 0 0 0 0 0
Rural Business Strategic Investment Grants:
Estimated Budget Authority...................... -50 0 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -5 -20 -25 0 0 0 0 0 0
Total Changes \1\:
Estimated Budget Authority...................... -185 -60 0 0 0 0 0 0 0 0
Estimated Outlays............................... 0 -58 -84 -52 -10 -6 -5 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ If enacted, the conference agreement on H.R. 2744 would prevent the Department of Agriculture from obligating funds--in fiscal year 2006--previously
provided for these rural development programs. As a result, more funds would be available for obligation at the end of 2006--and thus subject to the
rescission in this reconciliation legislation. Therefore, upon enactment of H.R. 2744, the reconciliation provision would save $242 million more over
the 2006-2010 period and $244 million more over the 2006-2015 period than shown above.

Research
The Initiative for Future Agriculture and Food Systems is a
competitive grant program designed to support research,
extension and education activities for U.S. agriculture. The
Agricultural Research, Extension, and Education Reform Act of
1998 created the initiative and provided mandatory funding for
it. The program was reauthorized in the Farm Security and Rural
Investment Act of 2002 with mandatory funding of $160 million
in 2006 and $200 million in subsequent years. The bill would
eliminate funding available to the program over the 2007-2009
period. Funding would remain at $200 million in 2010 and
subsequent years. CBO estimates that this provision would
reduce mandatory spending by $460 million over the 2006-2010
period and $600 million over the 2006-2015 period (see Table
7).

TABLE 7.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR THE INITIATIVE FOR FUTURE AGRICULTURE AND FOOD SYSTEMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Initiative for Future Agriculture and Food Systems:
Estimated Budget Authority \1\.................. 0 -200 -200 -200 0 0 0 0 0 0
Estimated Outlays............................... 0 -30 -100 -160 -170 -100 -40 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ If enacted, the conference agreement on H.R. 2744 would prevent the Department of Agriculture from obligating funds--in fiscal year 2006--previously
provided for the Initiative for Future Agriculture and Food Systems. As a result, more funds would be available for obligation at the end of 2006--and
thus subject to the rescission in this reconciliation legislation. Therefore, upon enactment of H.R. 2744, the reconciliation provision would save
$160 million more over the 2006-2010 and 2006-2015 periods than shown above.

Nutrition
Subtitle F would extend and modify the Food Stamp program.
The 2002 farm act authorized the Food Stamp program through
2007. This legislation would extend that authority through
2011. Under the assumptions underlying CBO's March 2005
baseline projections, we estimate that extending the program
through 2011 would result in additional outlays of $137 billion
over the 2008-2011 period. Pursuant to the Balanced Budget and
Emergency Deficit Control Act of 1985, this extension is
assumed in the baseline projection and has no cost relative to
that projection. Other provisions in the subtitle would reduce
spending for the Food Stamp program and would increase spending
for the Emergency Food Assistance program (see Table 8).

TABLE 8.--IMPACT OF THE AGRICULTURAL RECONCILIATION ACT OF 2005 ON SPENDING FOR NUTRITION PROGRAMS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Eligible Households:
Estimated Budget Authority................................ -40 -127 -132 -136 -139 -71 0 0 0 0
Estimated Outlays......................................... -40 -127 -132 -136 -139 -71 0 0 0 0
Residency Requirement:
Estimated Budget Authority................................ -25 -60 -60 -65 -65 -33 0 0 0 0
Estimated Outlays......................................... -25 -60 -60 -65 -65 -33 0 0 0 0
Food Stamp Interaction Effects:
Estimated Budget Authority................................ 1 1 1 1 1 1 0 0 0 0
Estimated Outlays......................................... 1 1 1 1 1 1 0 0 0 0
Emergency Food Assistance Program:
Estimated Budget Authority................................ 12 0 0 0 0 0 0 0 0 0
Estimated Outlays......................................... 12 0 0 0 0 0 0 0 0 0
Disaster Food Stamp Program:
Estimated Budget Authority................................ 38 0 0 0 0 0 0 0 0 0
Estimated Outlays......................................... 38 0 0 0 0 0 0 0 0 0
Total:
Estimated Budget Authority................................ -14 -186 -191 -199 -202 -103 0 0 0 0
Estimated Outlays......................................... -14 -186 -191 -199 -202 -103 0 0 0 0
Memorandum:

Spending for Food Stamp Program Under CBO's March 2005 33,445 33,054 33,275 33,882 34,638 35,542 36,474 37,301 38,273 39,277
Baseline
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Food Stamp Eligibility. Subtitle F would change eligibility
for the Food Stamp program in two ways: by restricting
categorical eligibility; and by extending the residency
requirement for legal permanent residents.
Section 1601--Eligible Households. Under current law,
households that receive or are eligible to receive any type of
benefit from the TANF program are among those considered
categorically eligible for food stamps. This includes non-cash
benefits such as job placement services. Categorically eligible
households are not subject to the same income and asset tests
as other participants. This provision would restrict
categorical eligibility to only those households receiving cash
assistance. Based on information from the Food Stamp Quality
Control (QC) Data, CBO estimates that about 225,000 people who
are categorically eligible based on non-cash benefits would not
be able to meet the income and asset tests for the program. On
average, those individuals would lose about $45 a month in food
stamp benefits in 2007.
In addition, school-age children in these households would
no longer be automatically eligible for free school meals. (All
children in Food Stamp households are categorically eligible
for free school lunches and breakfasts.) Based on income
information from the QC data, we expect that most of these
children would nevertheless be eligible for reduced-price meals
based on their family income; about 40,000 children would lose
their eligibility. On average, benefits for these students
would decline by about $185 a year.
This provision would be in effect upon enactment in 2006
and expire on September 30, 2010. CBO assumes that, in 2011,
newly eligible individuals would gradually join the program
over the course of the year.
Section 1603--Residency Requirement. The 2002 farm act made
legal permanent residents who have resided in the United States
for at least five years eligible for food stamps. (Legal
permanent residents under the age of 18 or who are disabled are
eligible without a waiting period.) This provision would extend
the residency requirement to seven years during the 2006-2010
period. CBO estimates that about 70,000 people would no longer
be eligible for benefits, based on fiscal year 1996 QC data
adjusted for changes in Food Stamp rules and recent immigration
statistics. Food Stamp outlays would be lowered by $275 million
over the 2006-2010 period and by $308 million over the 2006-
2015 period. In 2011, when the waiting period would drop back
to five years, CBO expects that newly eligible participants
would come back onto the program over the course of the year.
Interaction effects. Taken alone, CBO estimates that
restricting categorical eligibility would reduce Food Stamp
outlays by $546 million and child nutrition outlays by $28
million over the 2006-2010 period. These estimated savings
would decline slightly after taking into account the proposal
to extend the waiting period for legal permanent residents.
(CBO estimates that a small share of categorically eligible
participants are legal permanent residents who would lose
benefits under the new waiting-period requirements.) As a
result, the gross savings cited above would be reduced by an
estimated $1 million per year over the 2006-2010 period.
Section 1602--Availability of Commodities for the Emergency
Food Assistance Program. Section 1602 would reauthorize $140
million for the purchase of commodities for the Emergency Food
Assistance Program through 2011. This provision does not have
an estimated budget impact because the extension is already
assumed in the baseline. But the legislation would provide an
additional $12 million in fiscal year 2006 for commodities to
be distributed to states that were under a major disaster
declaration as a result of Hurricanes Katrina and Rita, and to
states adjacent to those states. CBO estimates that this
provision would increase outlays by $12 million in 2006.
Section 1604--Disaster Food Stamp Program. States pay 50
percent of the administrative costs associated with the Food
Stamp program. Under the legislation, states would be
reimbursed for the full cost of certain administrative expenses
for disaster food stamp benefits issued after Hurricanes
Katrina and Rita. Data from the Food and Nutrition Service show
that 1.1 million households were certified for disaster
benefits, including supplements for current food stamp
recipients, after the hurricanes. CBO estimates that the
increase in the federal share of administrative costs would be
$38 million in fiscal year 2006.
Intergovernmental and private-sector impact: The
legislation contains no intergovernmental or private-sector
mandates as defined in UMRA. Some of its provisions would
reduce federal funding for assistance to state and local
governments.
Estimate prepared by: Federal Costs: Jim Langley, David
Hull, and Greg Hitz (Commodity Program and Research); Gregory
Waring (Rural Development); and Kathleen FitzGerald
(Nutrition). Impact on State, Local, and Tribal Governments:
Marjorie Miller and Leo Lex. Impact on the Private Sector:
Craig Cammarata.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e) 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):

FARM SECURITY AND RURAL INVESTMENT ACT OF 2002

* * * * * * *

TITLE I--COMMODITY PROGRAMS

Subtitle A--Direct Payments and Counter-Cyclical Payments

* * * * * * *

SEC. 1103. AVAILABILITY OF DIRECT PAYMENTS.

(a) * * *

* * * * * * *

(c) Payment Amount.--[The amount] Except as provided in
subsection (e), the amount of the direct payment to be paid to
the producers on a farm for a covered commodity for a crop year
shall be equal to the product of the following:
(1) * * *

* * * * * * *

(d) Time for Payment.--
(1) * * *
(2) Advance payments.--At the option of the producers
on a farm, up to 50 percent of the direct payment for a
covered commodity for any of the 2003 through [2007
crop years] 2005 crop years and up to 40 percent of the
direct payment for a covered commodity for each of the
2006 and 2007 crop years shall be paid to the producers
in advance. The producers shall select the month within
which the advance payment for a crop year will be made.
The month selected may be any month during the period
beginning on December 1 of the calendar year before the
calendar year in which the crop of the covered
commodity is harvested through the month within which
the direct payment would otherwise be made. The
producers may change the selected month for a
subsequent advance payment by providing advance notice
to the Secretary.

* * * * * * *

(e) Direct Payment Amount Reduction.--Notwithstanding
subsection (c), for the 2006 and 2007 crop years (and the 2008
and 2009 crop years if direct payments are provided under this
section for those crop years), the Secretary shall reduce the
total amount of the direct payment to be paid to the producers
on a farm for a covered commodity for the crop year concerned
by an amount equal to 1 percent of the direct payment amount
otherwise determined for that farm for that covered commodity
for that crop year. No reduction shall be made under the
authority of this subsection if direct payments are made for
the 2010 or any subsequent crop year of a covered commodity.

* * * * * * *

Subtitle B--Marketing Assistance Loans and Loan Deficiency Payments

* * * * * * *

SEC. 1207. [SPECIAL MARKETING LOAN PROVISIONS FOR UPLAND COTTON.]
UPLAND COTTON IMPORT QUOTAS.

[(a) Cotton User Marketing Certificates.--
[(1) Issuance.--During the period beginning on the
date of the enactment of this Act through July 31,
2008, the Secretary shall issue marketing certificates
or cash payments, at the option of the recipient, to
domestic users and exporters for documented purchases
by domestic users and sales for export by exporters
made in the week following a consecutive 4-week period
in which--
[(A) the Friday through Thursday average
price quotation for the lowest-priced United
States growth, as quoted for Middling (M) 1\3/
32\-inch cotton, delivered C.I.F. Northern
Europe exceeds the Northern Europe price by
more than 1.25 cents per pound; and
[(B) the prevailing world market price for
upland cotton (adjusted to United States
quality and location) does not exceed 134
percent of the loan rate for upland cotton
established under section 1202.
[(2) Value of certificates or payments.--The value of
the marketing certificates or cash payments shall be
based on the amount of the difference (reduced by 1.25
cents per pound) in the prices during the fourth week
of the consecutive 4-week period multiplied by the
quantity of upland cotton included in the documented
sales.
[(3) Administration of marketing certificates.--
[(A) Redemption, marketing, or exchange.--The
Secretary shall establish procedures for
redeeming marketing certificates for cash or
marketing or exchange of the certificates for
agricultural commodities owned by the Commodity
Credit Corporation or pledged to the Commodity
Credit Corporation as collateral for a loan in
such manner, and at such price levels, as the
Secretary determines will best effectuate the
purposes of cotton user marketing certificates,
including enhancing the competitiveness and
marketability of United States cotton. Any
price restrictions that would otherwise apply
to the disposition of agricultural commodities
by the Commodity Credit Corporation shall not
apply to the redemption of certificates under
this subsection.
[(B) Designation of commodities and
products.--To the extent practicable, the
Secretary shall permit owners of certificates
to designate the commodities and products,
including storage sites, the owners would
prefer to receive in exchange for certificates
[(C) Transfers.--Marketing certificates
issued to domestic users and exporters of
upland cotton may be transferred to other
persons in accordance with regulations issued
by the Secretary.
[(4) Delayed application of threshold.--Through July
31, 2006, the Secretary shall make the calculations
under paragraphs (1)(A) and (2) without regard to the
1.25 cent threshold provided under those paragraphs.]
[(b)] (a) Special Import Quota.--
(1) Establishment.--
(A) * * *
(B) Program requirements.--Except as provided
in subparagraph (C), whenever the Secretary
determines and announces that for any
consecutive 4-week period, the Friday through
Thursday average price quotation for the
lowest-priced United States growth, as quoted
for Middling (M) 1\3/32\-inch cotton, delivered
C.I.F. Northern Europe[, adjusted for the value
of any certificate issued under subsection
(a),] exceeds the Northern Europe price by more
than 1.25 cents per pound, there shall
immediately be in effect a special import
quota.
(C) Tight domestic supply.--During any month
for which the Secretary estimates the season-
ending United States upland cotton stocks-to-
use ratio, as determined under subparagraph
(D), to be below 16 percent, the Secretary, in
making the determination under subparagraph
(B), shall not adjust the Friday through
Thursday average price quotation for the
lowest-priced United States growth, as quoted
for Middling (M) 1\3/32\-inch cotton, delivered
C.I.F. Northern Europe[, for the value of any
certificates issued under subsection (a)].

* * * * * * *

(4) Overlap.--A special quota period may be
established that overlaps any existing quota period if
required by paragraph (1), except that a special quota
period may not be established under this subsection if
a quota period has been established under [subsection
(c)] subsection (b).
[(c)] (b) Limited Global Import Quota for Upland Cotton.--
(1) * * *
(2) No overlap.--Notwithstanding paragraph (1), a
quota period may not be established that overlaps an
existing quota period or a special quota period
established under [subsection (b)] subsection (a).

* * * * * * *

Subtitle C--Peanuts

* * * * * * *

SEC. 1303. AVAILABILITY OF DIRECT PAYMENTS FOR PEANUTS.

(a) * * *

* * * * * * *

(d) Payment Amount for Subsequent Crop Years.--[The amount]
Except as provided in subsection (f), the amount of the direct
payment to be paid to the producers on a farm for the 2003
through 2007 crops of peanuts shall be equal to the product of
the following:
(1) * * *

* * * * * * *

(e) Time for Payment.--
(1) * * *
(2) Advance payments.--At the option of the producers
on a farm, up to 50 percent of the direct payment for
any of the 2003 through [2007 crop years] 2005 crop
years and up to 40 percent of the direct payment for
each of the 2006 and 2007 crop years shall be paid to
the producers in advance. The producers shall select
the month within which the advance payment for a crop
year will be made. The month selected may be any month
during the period beginning on December 1 of the
calendar year before the calendar year in which the
crop is harvested through the month within which the
direct payment would otherwise be made. The producers
may change the selected month for a subsequent advance
payment by providing advance notice to the Secretary.
(f) Direct Payment Amount Reduction.--Notwithstanding
subsection (d), for the 2006 and 2007 crops of peanuts (and the
2008 and 2009 crops of peanuts if direct payments are provided
under this section for those crops), the Secretary shall reduce
the total amount of the direct payment to be paid to the
producers on a farm for that crop of peanuts by an amount equal
to 1 percent of the direct payment amount otherwise determined
for that farm for that crop of peanuts. No reduction shall be
made under the authority of this subsection if direct payments
are made for the 2010 or any subsequent crop of peanuts.

* * * * * * *

TITLE VI--RURAL DEVELOPMENT

* * * * * * *

Subtitle E--Miscellaneous

* * * * * * *

SEC. 6405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANT PROGRAM.

(a) * * *

* * * * * * *

(c) Funding.--Of the funds of the Commodity Credit
Corporation, the Secretary shall make available to carry out
this section $10,000,000 for each of fiscal years 2003 through
[2007, to remain available until expended] 2006.

* * * * * * *

TITLE IX--ENERGY

* * * * * * *

SEC. 9006. RENEWABLE ENERGY SYSTEMS AND ENERGY EFFICIENCY IMPROVEMENTS.

(a) * * *

* * * * * * *

(f) Funding.--Of the funds of the Commodity Credit
Corporation, the Secretary shall make available to carry out
this section $23,000,000 for each of fiscal years 2003 through
[2007] 2006.

* * * * * * *

----------

SECTION 136 OF THE FEDERAL AGRICULTURE IMPROVEMENT AND REFORM ACT OF
1996

[SEC. 136. SPECIAL MARKETING LOAN PROVISIONS FOR UPLAND COTTON.

[(a) Cotton User Marketing Certificates.--
[(1) Issuance.--During the period ending July 31,
2003, the Secretary shall issue marketing certificates
or cash payments, at the option of the recipient, to
domestic users and exporters for documented purchases
by domestic users and sales for export by exporters
made in the week following a consecutive 4-week period
in which--
[(A) the Friday through Thursday average
price quotation for the lowest-priced United
States growth, as quoted for Middling (M) 1\3/
32\-inch cotton, delivered C.I.F. Northern
Europe exceeds the Northern Europe price by
more than 1.25 cents per pound; and
[(B) the prevailing world market price for
upland cotton (adjusted to United States
quality and location) does not exceed 134
percent of the loan rate for upland cotton
established under section 132.
[(2) Value of certificates or payments.--The value of
the marketing certificates or cash payments shall be
based on the amount of the difference (reduced by 1.25
cents per pound) in the prices during the 4th week of
the consecutive 4-week period multiplied by the
quantity of upland cotton included in the documented
sales.
[(3) Administration of marketing certificates.--
[(A) Redemption, marketing, or exchange.--The
Secretary shall establish procedures for
redeeming marketing certificates for cash or
marketing or exchange of the certificates for
agricultural commodities owned by the Commodity
Credit Corporation or pledged to the Commodity
Credit Corporation as collateral for a loan in
such manner, and at such price levels, as the
Secretary determines will best effectuate the
purposes of cotton user marketing certificates,
including enhancing the competitiveness and
marketability of United States cotton. Any
price restrictions that would otherwise apply
to the disposition of agricultural commodities
by the Commodity Credit Corporation shall not
apply to the redemption of certificates under
this subsection.
[(B) Designation of commodities and
products.--To the extent practicable, the
Secretary shall permit owners of certificates
to designate the commodities and products,
including storage sites, the owners would
prefer to receive in exchange for certificates.
[(C) Transfers.--Marketing certificates
issued to domestic users and exporters of
upland cotton may be transferred to other
persons in accordance with regulations issued
by the Secretary.
[(b) Special Import Quota.--
[(1) Establishment.--
[(A) In general.--The President shall carry
out an import quota program during the period
ending July 31, 2003, as provided in this
subsection.
[(B) Program requirements.--Except as
provided in subparagraph (C), whenever the
Secretary determines and announces that for any
consecutive 4-week period, the Friday through
Thursday average price quotation for the
lowest-priced United States growth, as quoted
for Middling (M) 1\3/32\-inch cotton, delivered
C.I.F. Northern Europe, adjusted for the value
of any certificate issued under subsection (a),
exceeds the Northern Europe price by more than
1.25 cents per pound, there shall immediately
be in effect a special import quota.
[(C) Tight domestic supply.--During any month
for which the Secretary estimates the season-
ending United States upland cotton stocks-to-
use ratio, as determined under subparagraph
(D), to be below 16 percent, the Secretary, in
making the determination under subparagraph
(B), shall not adjust the Friday through
Thursday average price quotation for the
lowest-priced United States growth, as quoted
for Middling (M) 1\3/32\-inch cotton, delivered
C.I.F. Northern Europe, for the value of any
certificates issued under subsection (a).
[(D) Season-ending united states stocks-to-
use ratio.--For the purposes of making
estimates under subparagraph (C), the Secretary
shall, on a monthly basis, estimate and report
the season-ending United States upland cotton
stocks-to-use ratio, excluding projected raw
cotton imports but including the quantity of
raw cotton that has been imported into the
United States during the marketing year.
[(2) Quantity.--The quota shall be equal to 1 week's
consumption of upland cotton by domestic mills at the
seasonally adjusted average rate of the most recent 3
months for which data are available.
[(3) Application.--The quota shall apply to upland
cotton purchased not later than 90 days after the date
of the Secretary's announcement under paragraph (1) and
entered into the United States not later than 180 days
after the date.
[(4) Overlap.--A special quota period may be
established that overlaps any existing quota period if
required by paragraph (1), except that a special quota
period may not be established under this subsection if
a quota period has been established under subsection
(c).
[(5) Preferential tariff treatment.--The quantity
under a special import quota shall be considered to be
an in-quota quantity for purposes of--
[(A) section 213(d) of the Caribbean Basin
Economic Recovery Act (19 U.S.C. 2703(d));
[(B) section 204 of the Andean Trade
Preference Act (19 U.S.C. 3203);
[(C) section 503(d) of the Trade Act of 1974
(19 U.S.C. 2463(d)); and
[(D) General Note 3(a)(iv) to the Harmonized
Tariff Schedule.
[(6) Definition.--In this subsection, the term
``special import quota'' means a quantity of imports
that is not subject to the over-quota tariff rate of a
tariff-rate quota.
[(7) Limitation.--The quantity of cotton entered into
the United States during any marketing year under the
special import quota established under this subsection
may not exceed the equivalent of 5 week's consumption
of upland cotton by domestic mills at the seasonally
adjusted average rate of the 3 months immediately
preceding the first special import quota established in
any marketing year.
[(c) Limited Global Import Quota for Upland Cotton.--
[(1) In general.--The President shall carry out an
import quota program that provides that whenever the
Secretary determines and announces that the average
price of the base quality of upland cotton, as
determined by the Secretary, in the designated spot
markets for a month exceeded 130 percent of the average
price of such quality of cotton in the markets for the
preceding 36 months, notwithstanding any other
provision of law, there shall immediately be in effect
a limited global import quota subject to the following
conditions:
[(A) Quantity.--The quantity of the quota
shall be equal to 21 days of domestic mill
consumption of upland cotton at the seasonally
adjusted average rate of the most recent 3
months for which data are available.
[(B) Quantity if prior quota.--If a quota has
been established under this subsection during
the preceding 12 months, the quantity of the
quota next established under this subsection
shall be the smaller of 21 days of domestic
mill consumption calculated under subparagraph
(A) or the quantity required to increase the
supply to 130 percent of the demand.
[(C) Preferential tariff treatment.--The
quantity under a limited global import quota
shall be considered to be an in-quota quantity
for purposes of--
[(i) section 213(d) of the Caribbean
Basin Economic Recovery Act (19 U.S.C.
2703(d));
[(ii) section 204 of the Andean Trade
Preference Act (19 U.S.C. 3203);
[(iii) section 503(d) of the Trade
Act of 1974 (19 U.S.C. 2463(d)); and
[(iv) General Note 3(a)(iv) to the
Harmonized Tariff Schedule.
[(D) Definitions.--In this subsection:
[(i) Supply.--The term ``supply''
means, using the latest official data
of the Bureau of the Census, the
Department of Agriculture, and the
Department of the Treasury--
[(I) the carry-over of upland
cotton at the beginning of the
marketing year (adjusted to
480-pound bales) in which the
quota is established;
[(II) production of the
current crop; and
[(III) imports to the latest
date available during the
marketing year.
[(ii) Demand.--The term ``demand''
means--
[(I) the average seasonally
adjusted annual rate of
domestic mill consumption
during the most recent 3 months
for which data are available;
and
[(II) the larger of--
[(aa) average exports
of upland cotton during
the preceding 6
marketing years; or
[(bb) cumulative
exports of upland
cotton plus outstanding
export sales for the
marketing year in which
the quota is
established.
[(iii) Limited global import quota.--
The term ``limited global import
quota'' means a quantity of imports
that is not subject to the over-quota
tariff rate of a tariff-rate quota.
[(E) Quota entry period.--When a quota is
established under this subsection, cotton may
be entered under the quota during the 90-day
period beginning on the date the quota is
established by the Secretary.
[(2) No overlap.--Notwithstanding paragraph (1), a
quota period may not be established that overlaps an
existing quota period or a special quota period
established under subsection (b).]
----------

SECTION 14 OF THE WATERSHED PROTECTION AND FLOOD PREVENTION ACT

SEC. 14. REHABILITATION OF STRUCTURAL MEASURES NEAR, AT, OR PAST THEIR
EVALUATED LIFE EXPECTANCY.

(a) * * *

* * * * * * *

(h) Funding.--
(1) Funds of commodity credit corporation.--In
carrying out this section, of the funds of the
Commodity Credit Corporation, the Secretary shall make
available[, to remain available until expended]--
(A) * * *

* * * * * * *

(E) [$65,000,000] $50,000,000 for fiscal year
2007; and

* * * * * * *

----------

FOOD SECURITY ACT OF 1985

* * * * * * *

TITLE XII--CONSERVATION

* * * * * * *

Subtitle D--Agricultural Resources Conservation Program

* * * * * * *

CHAPTER 2--CONSERVATION SECURITY AND FARMLAND PROTECTION

Subchapter A--Conservation Security Program

* * * * * * *

SEC. 1238A. CONSERVATION SECURITY PROGRAM.

(a) In General.--The Secretary shall establish and, for each
of fiscal years 2003 through [2007] 2011, carry out a
conservation security program to assist producers of
agricultural operations in promoting, as is applicable with
respect to land to be enrolled in the program, conservation and
improvement of the quality of soil, water, air, energy, plant
and animal life, and any other conservation purposes, as
determined by the Secretary.

* * * * * * *

Subtitle E--Funding and Administration

SEC. 1241. COMMODITY CREDIT CORPORATION.

(a) In General.--[For] Except as otherwise provided in this
subsection, for each of fiscal years 2002 through 2007, the
Secretary shall use the funds, facilities, and authorities of
the Commodity Credit Corporation to carry out the following
programs under subtitle D (including the provision of technical
assistance):
(1) * * *

* * * * * * *

(3) The conservation security program under
subchapter A of chapter 2, using [not more than
$6,037,000,000 for the period of fiscal years 2005
through 2014.] not more than--
(A) $2,213,000,000 for the period of fiscal
years 2006 through 2010; and
(B) $5,729,000,000 for the period of fiscal
years 2006 through 2015.

* * * * * * *

----------

SECTION 524 OF THE FEDERAL CROP INSURANCE ACT

SEC. 524. EDUCATION AND RISK MANAGEMENT ASSISTANCE.

(a) * * *
(b) Agricultural Management Assistance.--
(1) * * *

* * * * * * *

(4) Commodity credit corporation.--
(A) * * *
(B) Funding.--
(i) In general.--Except as provided
in clauses (ii) and (iii), the
Commodity Credit Corporation shall make
available to carry out this subsection
not less than $10,000,000 for each
fiscal year, except fiscal years 2007
through 2010.
(ii) Exception.--For each of fiscal
years 2003 through [2007] 2006, the
Commodity Credit Corporation shall make
available to carry out this subsection
$20,000,000.
(iii) Certain uses.--Of the amounts
made available to carry out this
subsection for each of fiscal years
2004 through [2007] 2006 the Commodity
Credit Corporation shall use not less
than--
(I) * * *

* * * * * * *

----------

SECTION 601 OF THE RURAL ELECTRIFICATION ACT OF 1936

SEC. 601. ACCESS TO BROADBAND TELECOMMUNICATIONS SERVICES IN RURAL
AREAS.

(a) * * *

* * * * * * *

(j) Funding.--
(1) In general.--Notwithstanding any other provision
of law, of the funds of the Commodity Credit
Corporation, the Secretary shall make available to
carry out this section--
(A) $20,000,000 for each of fiscal years 2002
through 2005[, to remain available until
expended]; and
(B) $10,000,000 [for each of fiscal years
2006 and 2007, to remain available until
expended] for fiscal year 2006.

* * * * * * *

----------

SECTION 231 OF THE AGRICULTURAL RISK PROTECTION ACT OF 2000

SEC. 231. VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT GRANTS.

(a) * * *
(b) Grant Program.--
(1) * * *

* * * * * * *

(4) Funding.--Not later than 30 days after the date
of enactment of this paragraph, on October 1, 2002, and
on each October 1 thereafter through [October 1, 2006]
October 1, 2005, of the funds of the Commodity Credit
Corporation, the Secretary shall make available to
carry out this subsection $40,000,000[, to remain
available until expended].

* * * * * * *

----------

CONSOLIDATED FARM AND RURAL DEVELOPMENT ACT

* * * * * * *

TITLE III--AGRICULTURAL CREDIT

* * * * * * *

Subtitle H--Rural Business Investment Program

* * * * * * *

SEC. 384S. FUNDING.

[(a) In General.--]Notwithstanding any other provision of
law, of the funds of the Commodity Credit Corporation, the
Secretary shall make available--
(1) such sums as may be necessary through fiscal year
2006 for the cost of guaranteeing $280,000,000 of
debentures under this subtitle; and
(2) $44,000,000 to make grants under this subtitle.
[(b) Availability of Funds.--Funds transferred under
subsection (a) shall remain available until expended.]

* * * * * * *

Subtitle I--Rural Strategic Investment Program

* * * * * * *

SEC. 385E. RURAL STRATEGIC INVESTMENT PROGRAM.

(a) In General.--If the Secretary approves a national
strategic investment plan submitted by the National Board, of
the funds of the Commodity Credit Corporation, the Secretary
shall transfer to the National Board $100,000,000[, to remain
available until expended,] for the Board to use to make
planning grants and innovation grants to Regional Boards and to
otherwise carry out this subtitle.

* * * * * * *

----------

SECTION 401 OF THE AGRICULTURAL RESEARCH, EXTENSION, AND EDUCATION
REFORM ACT OF 1998

SEC. 401. INITIATIVE FOR FUTURE AGRICULTURE AND FOOD SYSTEMS.

* * * * * * *

(b) Funding.--
(1) * * *

* * * * * * *

(3) Other funding.--Out of funds in the Commodity
Credit Corporation, the Secretary shall transfer to the
Account--
(A) * * *

* * * * * * *

(D) on October 1, [2006] 2009, and each
October 1 thereafter, $200,000,000.

* * * * * * *

(f) Administration.--
(1) * * *

* * * * * * *

[(6) Availability of funds.--Funds for grants under
this section shall be available to the Secretary for
obligation for a 2-year period.]
(6) Availability of funds.--
(A) Two-year availability.--Except as
provided in subparagraph (B), funds for grants
under this section shall be available to the
Secretary for obligation for a 2-year period
beginning on the date of the transfer of the
funds under subsection (b).
(B) Exception for fiscal year 2006
transfer.--In the case of the funds required to
be transferred by subsection (b)(3)(C), the
funds shall be available to the Secretary for
obligation for the 1-year period beginning on
October 1, 2005.

* * * * * * *

----------

FOOD STAMP ACT OF 1977

* * * * * * *

ELIGIBLE HOUSEHOLDS

Sec. 5. (a) Participation in the food stamp program shall be
limited to those households whose incomes and other financial
resources, held singly or in joint ownership, are determined to
be a substantial limiting factor in permitting them to obtain a
more nutritious diet. Notwithstanding any other provisions of
this Act except sections 6(b), 6(d)(2), and 6(g) and section
3(i)(4), households in which each member [receives benefits] in
fiscal years 2006 through 2010 receives cash assistance, and in
any other fiscal year receives benefits, under a State program
funded under part A of title IV of the Social Security Act (42
U.S.C. 601 et seq.), supplemental security income benefits
under title XVI of the Social Security Act, or aid to the aged,
blind, or disabled under title I, X, XIV, or XVI of the Social
Security Act, shall be eligible to participate in the food
stamp program. Except for sections 6, 16(e)(1), and section
3(i)(4), households in which each member receives benefits
under a State or local general assistance program that complies
with standards established by the Secretary for ensuring that
the program is based on income criteria comparable to or more
restrictive than those under subsection (c)(2), and not limited
to one-time emergency payments that cannot be provided for more
than one consecutive month, shall be eligible to participate in
the food stamp program. Assistance under this program shall be
furnished to all eligible households who make application for
such participation.

* * * * * * *

(j) Notwithstanding subsections (a) through (i), a State
agency shall consider a household member who receives
supplemental security income benefits under title XVI of the
Social Security Act (42 U.S.C. 1382 et seq.), aid to the aged,
blind, or disabled under title I, II, X, XIV, or XVI of such
Act (42 U.S.C. 301 et seq.), or who [receives benefits] in
fiscal years 2006 through 2010 receives cash assistance, and in
any other fiscal year receives benefits, under a State program
funded under part A of title IV of the Act (42 U.S.C. 601 et
seq.) to have satisfied the resource limitations prescribed
under subsection (g).

* * * * * * *

ADMINISTRATION

Sec. 11. (a) * * *

* * * * * * *

(t) Grants for Simple Application and Eligibility
Determination Systems and Improved Access to Benefits.--
(1) In general.--For each of fiscal years 2003
through [2007] 2011, the Secretary shall use not more
than $5,000,000 of funds made available under section
18(a)(1) to make grants to pay 100 percent of the costs
of eligible entities approved by the Secretary to carry
out projects to develop and implement--
(A) * * *

* * * * * * *

ADMINISTRATIVE COST-SHARING AND QUALITY CONTROL

Sec. 16. (a) * * *

* * * * * * *

(h) Funding of Employment and Training Programs.--
(1) In general.--
(A) Amounts.--To carry out employment and
training programs, the Secretary shall reserve
for allocation to State agencies, to remain
available until expended, from funds made
available for each fiscal year under section
18(a)(1) the amount of--
(i) * * *

* * * * * * *

(vii) for each of fiscal years 2002
through [2007] 2011, $90,000,000.

* * * * * * *

(E) Additional allocations for states that
ensure availability of work opportunities.--
(i) In general.--In addition to the
allocations under subparagraph (A),
from funds made available under section
18(a)(1), the Secretary shall allocate
not more than $20,000,000 for each of
fiscal years 2002 through [2007] 2011
to reimburse a State agency that is
eligible under clause (ii) for the
costs incurred in serving food stamp
recipients who--
(I) * * *

* * * * * * *

(k) Reductions in Payments for Administrative Costs.--
(1) * * *

* * * * * * *

(3) Reduction in payment.--
(A) In general.--Notwithstanding any other
provision of this section, effective for each
of fiscal years 1999 through [2007] 2011, the
Secretary shall reduce, for each fiscal year,
the amount paid under subsection (a) to each
State by an amount equal to the amount
determined for the food stamp program under
paragraph (2)(B). The Secretary shall, to the
extent practicable, make the reductions
required by this paragraph on a quarterly
basis.
(B) Application.--If the Secretary of Health
and Human Services does not make the
determinations required by paragraph (2) by
September 30, 1999--
(i) * * *
(ii) for each subsequent fiscal year
through fiscal year [2007] 2011,
subparagraph (A) applies.

* * * * * * *

RESEARCH, DEMONSTRATION, AND EVALUATIONS

Sec. 17. (a) * * *
(b)(1)(A) * * *
(B) Project requirements.--
(i) * * *

* * * * * * *

(vi) Cash payment pilot projects.--
Any pilot or experimental project
implemented under this paragraph and
operating as of October 1, 1981,
involving the payment of the value of
allotments in the form of cash to
eligible households all of whose
members are either age sixty-five or
over or entitled to supplemental
security income benefits under title
XVI of the Social Security Act shall be
continued through October 1, [2007]
2011, if the State so requests.

* * * * * * *

AUTHORIZATION FOR APPROPRIATIONS

Sec. 18. (a)(1) To carry out this Act, there are authorized
to be appropriated such sums as are necessary for each of the
fiscal years 2003 through [2007] 2011. Not to exceed one-fourth
of 1 per centum of the previous year's appropriation is
authorized in each such fiscal year to carry out the provisions
of section 17 of this Act, subject to paragraph (3).

* * * * * * *

SEC. 19. CONSOLIDATED BLOCK GRANTS FOR PUERTO RICO AND AMERICAN SAMOA.

(a) Payments to Governmental Entities.--
(1) * * *
(2) Block grants.--
(A) Amount of block grants.--From the sums
appropriated under this Act, the Secretary
shall, subject to this section, pay to
governmental entities to pay the expenditures
for nutrition assistance programs for needy
persons as described in subparagraphs (B) and
(C)--
(i) for fiscal year 2003,
$1,401,000,000; and
(ii) for each of fiscal years 2004
through [2007] 2011, the amount
specified in clause (i), as adjusted by
the percentage by which the thrifty
food plan has been adjusted under
section 3(o)(4) between June 30, 2002,
and June 30 of the immediately
preceding fiscal year.

* * * * * * *

SEC. 27. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD ASSISTANCE
PROGRAM.

(a) Purchase of Commodities.--From amounts made available to
carry out this Act, for each of fiscal years 2002 through
[2007,] 2005 and for each of the fiscal years 2007 through 2011
the Secretary shall purchase $140,000,000, and for fiscal year
2006 the Secretary shall purchase $152,000,000, of a variety of
nutritious and useful commodities of the types that the
Secretary has the authority to acquire through the Commodity
Credit Corporation or under section 32 of the Act entitled ``An
Act to amend the Agricultural Adjustment Act, and for other
purposes'', approved August 24, 1935 (7 U.S.C. 612c), and
distribute the commodities to States for distribution in
accordance with section 214 of the Emergency Food Assistance
Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note). Of the funds
used to purchase commodities in accordance with this subsection
for fiscal year 2006, $12,000,000 shall be used to purchase
commodities for distribution to States that received a
Presidential designation of a major disaster under the Robert
T. Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5121-5206) as a result of Hurricane Katrina or Hurricane
Rita and States contiguous to those States.

* * * * * * *

----------

SECTION 402 OF THE PERSONAL RESPONSIBILITY AND WORK OPPORTUNITY
RECONCILIATION ACT OF 1996

SEC. 402. LIMITED ELIGIBILITY OF QUALIFIED ALIENS FOR CERTAIN FEDERAL
PROGRAMS.

(a) Limited Eligibility for Specified Federal Programs.--
(1) * * *
(2) Exceptions.--
(A) * * *

* * * * * * *

(L) Food stamp exception for certain
qualified aliens.--With respect to eligibility
for benefits for the specified Federal program
described in paragraph (3)(B), paragraph (1)
shall not apply to any qualified alien who has
resided in the United States with a status
within the meaning of the term ``qualified
alien'' for a period of [5 years or more] 7
years or more effective until September 30,
2010, and for a period of 5 years or more
effective beginning on October 1, 2010,
beginning on the date of the alien's entry into
the United States.

* * * * * * *

MINORITY VIEWS

The budget process this year has been a disaster from the
start. We recognize the importance of having our fiscal house
in order and the pressing need for balanced federal budgets. If
the current budget process actually moved us in the direction
of balanced budgets, perhaps this bill's intent would be better
understood. Instead, the budget resolution actually increases
the national debt more than if Congress did nothing. The
Committee is being forced to amend the 2002 Farm Bill that has
been fiscally responsible, saving $11 billion since 2002, and
that those living in rural and agricultural communities believe
is working well.
Despite the savings achieved by this popular law, we were
directed to reduce Farm Bill funding at the worst possible
time. Farm income is suffering as commodity prices have
declined rapidly. Skyrocketing energy costs have squeezed
profit margins into losses on the farm. Weather-related
disasters including hurricanes, droughts and floods have shrunk
harvests and dampened futures. Many farmers have told us that
given the rising price of fuel and other inputs and the low
prices for their products, they probably won't be able to plant
in the coming year.
This budget bill suffers from missed opportunities and
misplaced priorities. The premise that agricultural programs
should suffer in this budget process that increases the deficit
is flawed, and the approach taken to make these cuts in this
bill is unacceptable. Below, we have listed many of the major
objections to the bill, which passed with no Democratic
support.

DISASTER ASSISTANCE

This Committee has shirked its responsibility to provide
emergency food and farm disaster assistance to areas ravaged by
hurricane, flood, drought and other damaging natural conditions
across the nation. It defeated, on a party line vote, an
amendment that would have provided nationwide relief that is
similar to what we have provided in previous years when
disasters have affected our communities. Farmers and ranchers
nationwide must now wait until Congress considers a separate
proposal to provide assistance. This hesitation by the
Committee, when presented with the opportunity to act quickly,
underscores the need for a permanent disaster program so that
producers and their lenders will have assurances that their
needs will be met if disaster strikes.

RURAL DEVELOPMENT

Out-migration has weakened the rural fabric and has left
our communities and their hospitals, churches and schools more
dependent on farmers' and ranchers' economic prospects. Rural
areas are turning to USDA's rural development programs to
support essential public facilities and services, provide
economic development resources, and offer technical assistance
and information in rural communities. However, this budget
measure reduces funding for many of these programs. For
example, it eliminates all funding for first responder training
for rural firefighter emergency personnel on critical topics,
such as how to respond to hazardous materials and bioagents in
rural areas. The changes in this budget proposal will limit
these programs and hurt rural communities that are already
struggling to maintain their local infrastructure, protect its
citizens, and provide jobs to keep young people living in their
communities.

ENERGY

This budget will cut baseline funding for energy programs,
as producers and small businesses are facing some of the
highest energy prices that have ever been experienced. Fuel
costs have jumped 21%, while the price of other inputs such as
fertilizer have risen 15%. High prices at the gasoline pump are
particularly painful for Americans living in rural communities
because they often must drive long distances every day to get
to work, drop their kids off at school, access healthcare and
pick up essentials such as prescription drugs. Americans in
rural communities should not have to hold their breath as they
fill up their gas tanks, wondering if they can afford a trip to
the grocery store after facing higher prices at the pump.

CONSERVATION

Right now, the USDA has to turn away three-fourths of
farmers who want to participate in conservation programs, and
now is not the time to limit these programs further. When
Congress passed the 2002 Farm Bill, compromises were made, and
a balance between our responsibilities to commodity, rural
development, nutrition, energy and conservation programs was
reached. The proposed changes to conservation programs are
disproportionately high, which will make it harder to negotiate
a good faith agreement in the next farm bill.

NUTRITION PROGRAMS

As we have seen in the aftermath of this year's hurricanes,
the most immediate and pressing needs of those who have lost
everything are for food and shelter. It is the wrong message at
the wrong time to change the Food Stamp program, especially
when that program was the one example of excellence in the
federal government's response to the Gulf region hurricanes.
Recognizing this, the Committee did include reimbursement
to states for the full cost of certain administrative expenses
for disaster Food Stamp benefits issued after Hurricanes
Katrina and Rita. Since the hurricanes, about 1.1 million
households have received disaster-related nutrition benefits.
The legislation also provides an additional $12 million in
fiscal year 2006 for food to be distributed to states that were
under a major disaster declaration as a result of Hurricanes
Katrina and Rita and to adjacent states.
However, despite the critical needs that those disaster
provisions addressed, the bill also makes significant
reductions to other parts of the Food Stamp program. One
provision would eliminate the eligibility of about 225,000
people who would otherwise qualify for Food Stamps because they
are eligible for non-cash benefits, such as job placement
services, under the Temporary Assistance for Needy Families
(TANF) program. In addition, about 40,000 school-age children
in these affected households may lose their eligibility for
free school meals.
Another provision in the bill would increase the waiting
period for legal permanent residents to receive Food Stamps
from five years to seven years. This change would go into
effect next year, making about 70,000 people ineligible to
receive more benefits.
The budget process is not the place for a debate about Food
Stamps. For now, the fact remains--that demand for nutrition
programs in our nation has never been greater. On the day of
the Committee's markup, USDA's Economic Research Service
released a timely report, Household Food Security in the United
States, 2004. It noted, ``The prevalence of food insecurity
rose from 11.2 percent of households in 2003 to 11.9 percent in
2004 and the prevalence of food insecurity with hunger rose
from 3.5 percent to 3.9 percent.'' As the need for nutrition
programs continues to grow, it is not right to shortchange
these programs through the budget process.

IMPACT ON BASELINE

As a practical matter, several provisions of this
reconciliation proposal will create problems when the Committee
seeks the budget resources necessary to fund the next farm
bill.
The Congressional Budget Office (CBO) has provided two cost
estimates for the section of the legislation that reduces
direct payments to producers, one is according to CBO's normal
scorekeeping methodology and the other is directed scorekeeping
by the House Committee on the Budget.
Specifically, the provision that reduces direct payments is
applied to the 2006 through 2009 crop years, but not to the
2010 crop year. The CBO estimate of the budget effect of this
provision extends through fiscal year 2015, which would reduce
the long-term baseline for the program. So, the Budget
Committee's directed scoring instructs CBO to assume that the
one percent reduction in direct payments ends with the 2009
crop year, resulting in a reduction of $211 million over the
FY2006-10 and the FY2006-15 periods.
The net effect of this budget scorekeeping gimmickry is
that the Agriculture Committee is now beholden to the Budget
Committee and its non-binding ``promise'' to restore nearly
$300 million in funding for agriculture for the next farm bill.
Similarly, we are concerned that the effect of the language
passed by the Committee is to eliminate $734 million of funding
that is available for the following sections of the 2002 Farm
Bill: Section 2501 (Ag Management Assistance), Section 6029
(Rural Business Investment), Section 6030 (Rural Strategic
Investment Grants), Section 6103 (Broadband Loans), Section
6401 (Value-Added Grants), Section 6405 (Rural Firefighters),
and Section 2505 (Small Watershed Rehabilitation Program). The
bill's provisions will eliminate budget resources for these
programs in the next farm bill.
The action by the Committee has left us shortchanged in
funding for the commodity, conservation, rural development and
energy titles of the next farm bill by more than $1 billion,
and it has also taken away the Committee's flexibility to use
these funds for other farm bill priorities.

OTHER CUTS TO AGRICULTURE PROGRAMS

The 2002 Farm Bill has been under attack ever since its
passage. Due to the flawed budget scheme enacted by the
majority, the Appropriations Committee has been forced to cut
mandatory spending from the 2002 Farm Bill by $3.5 billion over
the FY2004-2006 period. This action has been necessary to hide
the fact that they have shortchanged the needs of American
agriculture and the rural areas we represent. This comes at a
time when we face nearly a $4 billion backlog in conservation
programs alone and all of the rural development and energy
title programs are also oversubscribed.
An amendment that would have restored a portion of the $1.5
billion in cuts that the appropriators made to farm bill
programs in fiscal year 2006 was defeated on a party-line vote,
so the promises that we made in the 2002 Farm Bill were once
again ignored.

OTHER CONSIDERATIONS

Agriculture Committee Members need to remember that any
changes that we make to the Farm Bill now may hurt us later.
The Farm Bureau pointed this out, saying, ``If we take cuts in
agricultural programs now, we're going to decrease the leverage
that our (trade) negotiators have to make sure that we're
playing in a fairer trading world.''
Despite this, Agriculture Secretary Johanns has suggested
that agriculture programs must accept this budget process, as
he has told farmers across the country that we must tighten our
belts and make sacrifices. He noted that farmers want to do
their part to help the deficit.
While the Secretary's remarks are misleading, since this
budget process doesn't help the deficit, farmers have always
done their part in deficit reduction. And, if a balanced budget
and deficit reduction are the goals, we should put aside this
entire budget. In fact, according to the Congressional Budget
Office's 2005 Baseline Projections, the deficit should decline
by more than 50 percent from 2004 to 2009 if we do nothing at
all. Instead, this budget process will increase the deficit by
$167 billion over five years.
This budget process suffers from bad timing and bad
priorities. It will have devastating impacts on rural
Americans, underfunding a wide range of programs that are
critical to sustaining rural communities. This bill doesn't
just reopen the Farm Bill--it dismantles the promise that
Congress and the President made with farmers and rural
Americans. We strongly oppose this budget process and will
continue to fight to protect the promise made to rural America
in the 2002 Farm Bill.
Note: The attached tables, provided by Congressional
Research Service, show the provided and actual mandatory
funding under the Farm Security and Rural Investment Act of
2002 for conservation, rural development and energy programs as
modified by appropriations acts.

Collin C. Peterson.
Dennis Cardoza.
Jim Marshall.
G.K. Butterfield.
Charlie Melancon.
John T. Salazar.
Earl Pomeroy.
Rick Larsen.
Ben Chandler.
Tim Holden.
Bob Etheridge.
Ed Case.
David Scott.
Stephanie Herseth.
Henry Cuellar.
Jim Costa.
Leonard L. Boswell.
Lincoln Davis.
Mike McIntyre.

Committee on Education and the Workforce,
House of Representatives,
Washington, DC, October 28, 2005.
Hon. Jim Nussle,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
Dear Chairman Nussle: The House Education & the Workforce
Committee has met its instruction to achieve net savings of
$18.1 billion as part of the budget reconciliation process,
generating savings on behalf of taxpayers and making funds
available for critical education assistance. We've done so
while achieving our policy goals of expanding college access
for low- and middle-income students and strengthening our
worker pension system.
I'm proud that our Committee put forward a fiscally
responsible package of reforms that reduce program waste and
inefficiency and place higher education and pension systems on
more stable financial foundations to ensure their long-term
viability for students, workers, retirees, and taxpayers. The
Committee's reconciliation package also includes funds targeted
to provide education relief to the victims of Hurricanes
Katrina and Rita.
Pursuant to the reconciliation directives contained in the
Conference Report on House Concurrent Resolution 95, the budget
resolution for fiscal year 2006, I am pleased to transmit
reconciliation recommendations for programs within the
jurisdiction of the Committee. The recommendations contained in
the first part of this transmission regarding welfare programs
were considered and approved in Full Committee markup on
October 19 and 20, 2005. The recommendations contained in the
second part amending ERISA regarding pension protection were
considered and approved on October 26, 2005. The
recommendations for the third part amending the Higher
Education Act were considered and approved on October 26, 2005.
I am also including the ``Family Education Reimbursement
Act of 2005'' which was considered by the Committee on October
27, 2005, and not reported to the Committee on the Budget.
Although the bill was not reported, our Committee has been
instructed to provide education hurricane relief, and I
strongly believe this is the best policy for providing
educational services on behalf of schools and families in
response to Hurricanes Katrina and Rita. Enclosed please also
find additional material on this proposal including summary
information and an editorial, ``Education End-Run'' (Wall
Street Journal, October 27, 2005), submitted for the record
during Committee proceedings on the measure.
Pursuant to your letter of June 24, 2005 and subsequent
letter of September 14, 2005, a copy of the legislation,
report, including the Committee Views together with Summary,
Section by Section Analysis and other items necessary to comply
with House Rules, and Minority Views are enclosed. An estimate
prepared by the Congressional Budget Office and documents
prepared by the Office of Legislative Counsel, including the
Ramseyer, will be forthcoming. I hope these proposals will be
of assistance to your committee in meeting the budget
reconciliation targets. If you have questions or comments,
please do not hesitate to call me.
Sincerely,
John A. Boehner,
Chairman.
----------

Committee on Education and the Workforce,
House of Representatives,
Washington, DC, October 31, 2005.
Hon. Jim Nussle,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
Dear Chairman Nussle: Pursuant to the reconciliation
directives contained in the Conference Report on House
Concurrent Resolution 95, enclosed is a letter from the
Director of the Congressional Budget Office regarding this
Committee's reconciliation recommendations for fiscal year
2006. You will also find enclosed Minority Views of the same on
each of the three parts reported from the Committee to the
Committee on the Budget. Finally, enclosed is a letter to you
from Reps. Tom Osborne, Judy Biggert, and Todd Platts regarding
the Family Education Reimbursement Act.
Thank you for your attention to this matter.
Sincerely,
John A. Boehner,
Chairman.
----------

Introduction

In the 109th Congress, the Education & the Workforce
Committee has focused on an ambitious agenda aimed at enhancing
security, freedom, and prosperity for American families in a
changing economy. The issues addressed by the Committee this
year are those that touch the daily lives of every American,
from preschool to retirement. From expanding college access for
low- and middle-income students to reforming outdated pension
laws to protect taxpayers and workers, the Committee has worked
with Republicans and Democrats, as well as the Bush
Administration, to address issues critical for the future of
the nation.
Just as important, the Committee has focused on examining
very closely how taxpayers' money is spent. Congress has a
responsibility to ensure that taxpayers' money is spent wisely
and to cut wasteful spending on programs that have outlived
their usefulness or failed to fulfill their promise. Indeed,
out-of-control federal spending is a threat to all Americans,
from students and families to workers and retirees.
In early 2005, the House and Senate reached a budget
agreement to help curb the runaway cost of government. Making
fiscal discipline a top priority has taken on an even greater
importance this year because of the devastation caused by
Hurricanes Katrina and Rita in the Gulf Coast. Congress should
cut federal spending to help offset the ongoing hurricane
recovery and rebuilding effort, and the Committee has worked to
help put forward a responsible budget that demonstrates
Congress's resolve to stop out-of-control spending.
As part of that effort, Education & the Workforce Committee
Chairman John Boehner (R-OH), along with other Committee
Republicans, on October 7 introduced the Setting Priorities in
Spending Act (H.R. 4018) to repeal and eliminate 14 federal
programs that have proven inefficient, duplicative, or simply
unnecessary--an important first step in this process. These
programs cost taxpayers approximately $247 million last year
alone.
The bill supports the efforts of House Republicans and
appropriators to cut discretionary spending as part of the
Labor/HHS/Education appropriations bill. The House passed its
version of the appropriations bill on June 10, 2005, and it
eliminated funding for each of the 14 programs targeted for
repeal in the Setting Priorities in Spending Act.
Despite their dubious merits, Congress has continued to
fund these programs year after year, and it's time to eliminate
them once and for all. Too many other federal programs are
funded year after year regardless of whether they're fulfilling
their purpose. President Bush was right when he said Congress
should cut spending to help pay for hurricane relief, and the
House and Senate must show their resolve and make the difficult
choices that are in the best interest of not just Gulf Coast
residents, but the American taxpayers as well.
As part of the budget process, the Education & the
Workforce Committee has been tasked with finding $18.1 billion
in savings from the mandatory spending programs within the
Committee's jurisdiction. Chairman Boehner has consistently
said the Committee intends to be part of the solution, not part
of the problem, and that it would act to help put forward a
responsible budget that cuts wasteful spending and makes
federal programs more efficient and effective.
As part of the reconciliation process, the Education & the
Workforce Committee has developed proposals on both higher
education and on pensions that will generate savings to the
federal government and provide the Pension Benefit Guaranty
Corporation with additional resources. Both of these proposals
will make federal programs more efficient and more effective on
behalf of students, families, workers, retirees, and American
taxpayers.

REFORMING AND STRENGTHENING THE HIGHER EDUCATION ACT

Since 1965, the federal government has invested hundreds of
billions of dollars in higher education on the premise that all
students, regardless of financial circumstance, should have the
opportunity to pursue postsecondary education. Four decades
later, taxpayers are spending more than ever before on higher
education, yet the goal of higher education access remains
elusive to far too many American students.
There is no question that an investment in higher education
pays dividends for the future. An educated workforce drives
economic growth. Scientific breakthroughs keep America on the
cutting edge of technological advancement. Children whose
parents are college educated are more likely to pursue
postsecondary education themselves, continuing the cycle of
success and prosperity. Yet despite the clear imperative for an
effective and efficient investment in higher education,
billions of taxpayer dollars are being wasted through
inefficiency and unwise public policy.
After more than a decade of tuition increases that have far
outpaced the rate of inflation and growth in family incomes, it
has become clear that blindly increasing federal student aid is
doing nothing to solve the challenge of skyrocketing college
costs.
Indeed, the vast increases in federal student aid have
coincided with these tuition increases, calling into question
whether the current federal investments in higher education may
actually be a contributing factor to the college cost explosion
that is squeezing the budgets of hard working low-and middle-
income American families.
Taxpayers are carrying a tremendous higher education cost
burden on many fronts. In addition to the more than $70 billion
in direct student aid paid for by taxpayers in FY 2005,
American families are subsidizing aid to institutions,
research, and numerous federal programs outside the Higher
Education Act that award funding to colleges and universities.
Moreover, higher education consumes a significant portion of
the taxes paid at the state level, and even after all of this,
families with children enrolled in college are paying more than
ever before for their own tuition bills. The Committee believes
the federal investment in higher education will continue to be
a critical component of the future success of our nation only
so long as it is made wisely and in the best interests of
students, families, and taxpayers.
To that end, the Committee has developed comprehensive
reforms that will expand college access for low- and middle-
income students while simultaneously generating savings for
taxpayers by eliminating program waste and inefficiency,
trimming excess subsidies paid to lenders, and placing the aid
programs on a more stable financial foundation to ensure their
long-term viability and success for future generations of
American students.
Specifically, the proposal includes a number of reforms to
generate savings, including putting an end to the practices
that have allowed some lenders to profit from excess subsidies
on government-backed student loans, providing student loan
borrowers a choice between a variable and a fixed interest rate
when borrowers consolidate multiple loans into a single monthly
payment, strengthening risk-sharing within the loan programs on
behalf of taxpayers, implementing a financially sound interest
rate structure, and encouraging more efficient and effective
default prevention and protection systems.
These reforms are accompanied by proposals to strengthen
student aid programs and expand student benefits. The proposal
would reduce student loan fees, expand student loan borrowing
opportunities, protect borrowers' credit, ease the financial
aid process, and provide greater flexibility within the loan
programs.
The Congressional Budget Office estimates these reforms
would save $14.5 billion over five years, eliminating waste on
behalf of taxpayers while strengthening and expanding student
benefits. Taken together, these reforms will help place the
federal student aid programs on a strong financial foundation
to ensure their stability now and into the future, protecting
both students and taxpayers.

RESPONSIBLE PBGC PREMIUMS

After nearly a dozen hearings over two years on the future
of the defined benefit pension system, it became clear to the
Committee that a piecemeal approach to reform would not improve
the overall health of the defined benefit pension system.
Rather, a broader effort that addresses all outdated federal
pension rules in a comprehensive package is the most
responsible and effective way to ensure workers and retirees
can count on their pension benefits and help put the Pension
Benefit Guaranty Corporation (PBGC) on more sound financial
footing.
On June 30, 2005, the Committee passed the Pension
Protection Act (H.R. 2830), comprehensive reform legislation
that would strengthen the defined benefit pension system and
protect the interests of workers, retirees, and taxpayers. Not
only would the Pension Protection Act put in place new funding
requirements to ensure employers properly fund their plans and
provide workers with meaningful disclosure about the financial
status of their pension plans, but it also would help to
protect taxpayers from a possible multi-billion dollar bailout
of the PBGC.
When worker pension plans are terminated and the financial
burden is placed on the federal government, workers, retirees,
and taxpayers all stand to lose. And as more companies file for
bankruptcy and increase the chance of additional employee
pension plans being turned over to the PBGC, it has never been
more apparent that the health of the nation's worker pension
system is a bottom line concern for American taxpayers.
Because of more and more pension plan terminations, the
PBGC now has an operating deficit that exceeds $23 billion,
making the prospect of a taxpayer bailout of the PBGC loom
larger with each plan it takes over. This fact has been taken
into serious consideration as the Committee works to meet its
budget reconciliation instruction.
Two important steps are essential to improving the
financial condition of the PBGC and ensuring its long-term
solvency: (1) reforming the funding rules to ensure pensions
are more adequately and consistently funded; and (2) increasing
premiums paid by employers to the PBGC in a responsible
fashion.
It is important to note that ensuring employers fund their
plans properly will prove more helpful to the overall defined
benefit system than additional premiums paid to the PBGC. Quite
simply, raising premiums alone will not solve the problem.
However, Congress has not raised premiums since 1991, so a
reasonable increase is both prudent and necessary. These
premiums are the chief source of funding for the agency. No tax
dollars are used to keep the PBGC afloat. Increasing premiums
would help strengthen the PBGC's financial condition in the
short-term.
The Committee's proposal to put the PBGC on a more secure
financial foundation is two-pronged. First, it would phase in
responsible increases in the flat-rate premiums paid to the
agency each year. Second, it would establish employer-paid
termination premiums.
If Congress passes comprehensive pension reform that is
signed into law by President Bush before the end of the year,
those comprehensive reforms would take precedence. It is the
strong view of the Committee that the benefits of comprehensive
reform, which include proposals to strengthen the PBGC, far
outweigh the benefits of increases in premiums alone.
The reconciliation proposal would increase premiums from
$19 to $30 annually beginning in 2006 and give the PBGC the
discretion to increase these premiums up to 20 percent per year
thereafter. Should the PBGC prove it is necessary to raise
premiums and exercise this discretion, the proposal reserves
for Congress the right to disapprove the increase in a straight
up-or-down vote each year. The Congressional Budget Office
estimates this plan would provide the PBGC an additional $5.2
billion in additional financial resources over five years.
Next, the Committee proposes to establish a $1,250 per
participant premium on companies that have gone through
bankruptcy and terminated their pension plans. These
termination premiums would be paid for three consecutive years
once a company emerges from bankruptcy. The Congressional
Budget Office estimates this plan would provide the PBGC an
additional $1 billion in financial resources over five years.
Although the PBGC has enough resources to make benefit
payments for the near future, the long-term outlook for the
agency is anything but certain. With some $450 billion in
pension plan underfunding among financially weak companies
looming on the horizon, the PBGC's debt could deepen even
further. The Committee's action on employer premiums is only a
small part of the larger effort to place the traditional
pension system on more solid ground--but it is nonetheless an
important one, for workers, retirees, and taxpayers alike.
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 31, 2005.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for the reconciliation
recommendations of the House Committee on Education and the
Workforce.
CBO understands that the Committee on the Budget will be
responsible for interpreting how these proposals compare with
the reconciliation instructions in the budget resolution.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Sheila
Dacey (for TANF and Child Care), Deborah Kalcevic (for
education), and Geoffrey Gerhardt (for pensions).
Sincerely,
Douglas Holtz-Eakin, Director.
Enclosure.

Reconciliation recommendations of the House Committee on Education and
the Workforce

Summary: The legislation would make numerous changes to the
Temporary Assistance for Needy Families (TANF) program, a child
care grant program, and federal higher education programs, as
well as changes to the premiums charged by the Pension Benefit
Guaranty Corporation (PBGC). CBO estimates that enacting the
legislation would reduce federal outlays by $7.7 billion in
2006, $20.4 billion over the 2006-2010 period, and $43.7
billion over the 2006-2015 period.
Changes in higher education programs would account for the
largest portion of the savings ($14.3 billion over the first
five years and $20.5 billion over the 10-year period, mostly as
the result of diminished subsidy costs for the student loan
programs). CBO estimates that the net savings from the changes
in PBGC premiums and reimbursements, which are recorded as
offsets to spending, would be $6.2 billion over the 2006-2010
period and $23.3 billion over 2006-2015 period.
The legislation also would authorize appropriations for
child care, a new fatherhood grant program, administrative
activities related to student aid, and loan forgiveness for
certain types of workers. Subject to appropriation of the
specified amounts, CBO estimates that spending for the first
three activities would total $14.7 billion over the 2006-2010
period. CBO has not completed an estimate of the costs of
expanding the loan-forgiveness program.
The legislation contains no intergovernmental mandates as
defined by the Unfunded Mandates Reform Act (UMRA); any costs
to state, local, or tribal governments would result from
complying with conditions of federal assistance. The
legislation would significantly affect the way states
administer the TANF program, but because of the flexibility in
the program as a whole, the new requirements would not be
intergovernmental mandates as defined in UMRA.
Subtitle C contains private-sector mandates on single-
employer sponsors of defined-benefit pension plans. CBO
estimates that the direct cost of those new requirements would
exceed the annual threshold specified in UMRA ($123 million in
2005, adjusted annually for inflation) in each of the first
five years the mandates would be effective. Subtitles A and B
do not contain any private-sector mandates as defined in UMRA.
Major provisions: Subtitle A would establish new standards
for the participation of TANF recipients in work activities and
reauthorize funding for a child care grant program.
Provisions addressing the higher education programs (in
subtitle B, part 1) that have significant budgetary effects
include:
Changing the formulas for calculating
borrower interest rates and lender yields;
Eliminating the separate formula for lender
yields for loans supported with certain tax-exempt
funding;
Changing the insurance provided to lenders
and the fees charged by lenders;
Reducing borrower origination fees and
requiring guaranty agencies to pay the government a 1
percent insurance premium that is often not required
under current law;
Eliminating mandatory funding for federal
administrative costs for financial assistance programs;
Increasing the loan limits for first-year,
second-year, and graduate students;
Cancelling the repayment of student loans
for certain types of teachers; and
Reducing the share of collections on
defaulted loans that guaranty agencies would retain.
Part 2 of subtitle B would extend certain forms of relief
to students and schools affected by Hurricanes Katrina and
Rita.
The major provisions affecting the PBGC (subtitle C) would
increase premiums paid by sponsors of defined-benefit, single-
employer pension plans, and would impose a new charge on former
plan sponsors if the PBGC takes over their pension plans as a
result of bankruptcy or forced termination.
Estimated cost to the Federal Government: The estimated
impact of the legislation on direct spending is shown in Table
1. The costs and savings from this legislation would fall
within budget functions 500 (education, training, and social
services) and 600 (income security).

TABLE 1.--DIRECT SPENDING EFFECTS OF THE RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON EDUCATION AND THE WORKFORCE
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2010 2006-2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subtitle B: Higher
Education:
Part 1--Amendments to
Higher Education Act of
1965:
Estimated Budget -8,230 -2,580 -1,980 -1,600 -1,245 -1,115 -1,175 -1,240 -1,305 -1,330 -15,635 -21,800
Authority..........
Estimated Outlays... -7,525 -2,100 -1,910 -1,605 -1,330 -1,155 -1,165 -1,230 -1,290 -1,355 -14,470 -20,665
Part 2--Higher Education
Relief:
Estimated Budget 210 0 0 0 0 0 0 0 0 0 210 210
Authority..........
Estimated Outlays... 210 0 0 0 0 0 0 0 0 0 210 210
Subtotal, Subtitle B:
Estimated Budget -8,020 -2,580 -1,980 -1,600 -1,245 -1,115 -1,175 -1,240 -1,305 -1,330 -15,425 -21,590
Authority..........
Estimated Outlays... -7,315 -2,100 -1,910 -1,605 -1,330 -1,155 -1,165 -1,230 -1,290 -1,355 -14,260 -20,455
Subtitle C: Pension Benefit
Guaranty Corporation
Premiums:
Estimated Budget 0 0 0 0 0 0 0 0 0 0 0 0
Authority..............
Estimated Outlays....... -363 -729 -1,186 -1,678 -2,206 -2,837 -3,641 -3,585 -2,814 -4,214 -6,162 -23,252
Total Changes:
Estimated Budget -8,020 -2,580 -1,980 -1,600 -1,245 -1,115 -1,175 -1,240 -1,305 -1,330 -15,425 -21,590
Authority..........
Estimated Outlays... -7,678 -2,829 -3,096 -3,283 -3,536 -3,992 -4,806 -4,815 -4,104 -5,569 -20,422 -43,707
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Subtitle A would have no significant effect on direct spending. The legislation also would authorize spending subject to appropriation for some
grant programs, for administrative costs for student aid, and for expansion of programs for student loan forgiveness.
* = Less than $500,000.

Basis of estimate: For this estimate, CBO assumes the
legislation will be enacted in December 2005.

Subtitle A: TANF and child care (direct spending effects)

Section 102 would require states to have an increasing
percentage of TANF recipients participate in work activities
while receiving cash assistance. It would maintain current
penalties for the failure to meet those requirements. Those
penalties can total up to 5 percent of the TANF block grant
amount for the first failure to meet work requirements and
increase with each subsequent failure. Under current law,
funding for TANF block grants expires on December 31, 2005;
those grants are assumed to be extended in the baseline,
pursuant to the Balanced Budget and Emergency Deficit Control
Act.) CBO expects that states would generally be able to either
meet the requirements or avoid them by moving families to
separate state programs or by some other means. Therefore, we
estimate that any penalties for failing to meet the new
requirements would total less than $500,000 annually. (The
effects of this subtitle on discretionary spending are
discussed later in this estimate.)

Subtitle B: Higher education (direct spending effects)

Subtitle B contains some provisions that would reduce
direct spending and others that would increase costs. On net,
these changes would reduce outlays by $7.3 billion in 2006,
$14.3 billion during the 2006-2010 period, and $20.5 billion
over the 2006-2015 period. Most of those savings represent
estimated changes in the subsidy costs of student loans,
calculated on a present value basis. (Subtitle B would also
affect discretionary spending, but CBO has not completed an
estimate of the potential discretionary costs of implementing
this subtitle.)
Major Provisions Reducing Spending. Subtitle B would make
changes to the government's student loan programs, affecting
payments to lenders and guaranty agencies, fees paid by
lenders, and mandatory funding for administrative costs, that
would reduce spending significantly. These reductions would
total $7.9 billion in 2006, $18.4 billion over the 2006-2010
period, and $33.6 billion over the 2006-2015 period (see Table
2).

TABLE 2.--DIRECT SPENDING EFFECTS OF SUBTITLE B, PART 1: AMENDMENTS TO THE HIGHER EDUCATION ACT
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2010 2006-2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Provisions Reducing
Spending:
Changes in Borrower
Interest Rates and
Lender Yields:
Estimated Budget -6,490 -1,580 -1,495 -1,460 -1,485 -1,510 -1,555 -1,600 -1,635 -1,675 -12,510 -20,485
Authority..........
Estimated Outlays... -5,925 -1,330 -1,340 -1,290 -1,295 -1,320 -1,355 -1,390 -1,425 -1,470 -11,180 -18,140
Changes to Certain Loans
Financed with Tax-
Exempt Bonds:
Estimated Budget -980 -265 -265 -270 -270 -275 -280 -290 -290 -290 -2,050 -3,475
Authority..........
Estimated Outlays... -850 -235 -235 -235 -240 -245 -245 -250 -255 -265 -1,795 -3,055
Changes in Lender Fees:
Estimated Budget -610 -355 -375 -395 -410 -430 -445 -465 -485 -495 -2,145 -4,465
Authority..........
Estimated Outlays... -520 -275 -325 -345 -360 -375 -390 -405 -425 -445 -1,825 -3,865
Changes in Lender
Insurance:
Estimated Budget -425 -145 -150 -160 -165 -170 -180 -185 -195 -200 -1,045 -1,975
Authority..........
Estimated Outlays... -385 -115 -130 -140 -145 -150 -155 -160 -170 -175 -915 -1,725
Changes in Mandatory
Administrative Costs:
Estimated Budget -13 -646 -665 -684 -705 -724 -744 -766 -789 -812 -2,713 -6,548
Authority..........
Estimated Outlays... 17 -345 -549 -640 -689 -709 -730 -750 -773 -795 -2,206 -5,963
Changes in Guaranty
Agencies' Share of
Collections:
Estimated Budget -300 -60 -65 -65 -70 -70 -75 -80 -80 -80 -560 -945
Authority..........
Estimated Outlays... -270 -50 -55 -60 -60 -60 -65 -70 -70 -70 -495 -830
Subtotal:
Estimated Budget -8,818 -3,051 -3,015 -3034 -3,105 -3,179 -3,279 -3,386 -3,474 -3,552 -21,023 -37,893
Authority..........
Estimated Outlays... -7,933 -2,350 -2,634 -2,710 -2,789 -2,859 -2,940 -3,025 -3,118 -3,220 -18,416 -33,578
Major Provisions Increasing
Spending:
Changes in Borrower
Origination Fees and
Insurance Premiums:
Estimated Budget -10 265 685 1,045 1,420 1,590 1,610 1,625 1,635 1,660 3,425 11,545
Authority..........
Estimated Outlays... -90 70 450 750 1,070 1,275 1,335 1,345 1,350 1,360 2,250 8,915
Increased Loan Limits:
Estimated Budget 0 315 540 555 580 600 620 640 660 685 1,990 5,795
Authority..........
Estimated Outlays... 0 185 410 485 505 525 540 560 580 595 1,585 4,385
Subtotal:
Estimated Budget 10 580 1,225 1,600 2,000 2,190 2,230 2,265 2,295 2,345 5,415 16,740
Authority..........
Estimated Outlays... -90 255 860 1,235 1,575 1,800 1,875 1,905 1,930 1,955 3,835 13,300
Other Provisions With
Measurable Effects:
Estimated Budget 245 74 31 36 51 64 66 71 66 71 437 775
Authority..............
Estimated Outlays....... 192 79 56 31 51 64 69 69 69 74 409 754
Interaction Effects:
Estimated Budget 333 -183 -221 -202 -191 -190 -192 -190 -192 -194 -464 -1,422
Authority..............
Estimated Outlays....... 306 -84 -192 -161 -167 -160 -169 -179 -171 -164 -298 -1,141
Total Changes:
Estimated Budget -8,230 -2,580 -1,980 -1,600 -1,245 -1,115 -1,175 -1,240 -1,305 -1,330 -15,635 -21,800
Authority..............
Estimated Outlays....... -7,525 -2,100 -1,910 -1,605 -1,330 -1,155 -1,165 -1,230 -1,296 -1,355 -14,470 -20,665
--------------------------------------------------------------------------------------------------------------------------------------------------------
Memorandum: Baseline
Spending for Student Loans:
Estimated Budget 8,713 8,937 3,965 9,268 9,467 9,703 9,932 10,149 10,360 10,613 45,350 96,107
Authority..............
Estimated Outlays....... 6,482 7,297 7,443 7,760 7,991 8,484 8,740 8,979 9,169 9,363 36,973 81,708
--------------------------------------------------------------------------------------------------------------------------------------------------------

Borrower Interest Rate and Lender-Yield Formulas. The
legislation would change many of the formulas used to compute
what borrowers owe to lenders and what lenders receive from or
pay the government under the guaranteed loan program. (The
following table summarizes the current-law formulas and the
proposed changes.) Borrower rates on new student and parent
loans are scheduled to switch from a variable-rate formula to a
fixed rate (6.8 percent for students and 7.9 percent for
parents) in July 2006; the legislation would eliminate that
change and continue the current variable-rate formulas. The
rates on consolidated loans would change from a fixed rate
based on the weighted average of the loans being consolidated,
rounded up to the nearest one-eighth percent. Instead, the
borrower would be able to choose between a variable rate (91-
day Treasury bill rate plus 2.3 percentage points for students,
or plus 3.1 percentage points for parents) and a fixed rate
(set at the 91-day Treasury bill rate plus 3.3 percentage
points for students, or plus 4.1 percentage points for
parents). The borrowers of consolidated loans also would be
charged a new origination fee of 1.0 percent. The rates on all
student and parent loans would be capped at 8.25 percent and
9.0 percent, respectively.
The lender-yield formulas for student and parent loans
would continue to be based on a variable-rate formula, but the
legislation would no longer allow the borrowers' rates to serve
as the minimum for the lenders' yield. Under current law,
lenders receive the higher of the lender-yield formula or the
rate paid by borrowers, but the legislation would require
lenders to rebate the difference between the two rates to the
government when the borrower rate is higher.

TABLE 3.--COMPARISON OF FORMULAS FOR INTEREST RATES AND LENDER YIELDS UNDER CURRENT LAW AND SUBTITLE B
----------------------------------------------------------------------------------------------------------------
Current law: Loans Loans originating after June 2006
originating after -------------------------------------------------
Type of Loan December 1999 and
before July 2006 Current Law Proposed
----------------------------------------------------------------------------------------------------------------
BORROWER INTEREST RATES

Student loans:
In-school, grace, or deferment... Variable rate set Fixed rate at 6.8 Variable rate set
annually at 91-day percent. annually at 91-day
Treasury bill plus 1.7 Treasury bill plus 1.7
percentage points percentage points
(8.25 percent cap). (8.25 percent cap)
In repayment..................... Variable rate set Fixed rate at 6.8 Variable rate set
annually at 91-day percent. annually at 91-day
Treasury bill plus 2.3 Treasury bill plus 2.3
percentage points percentage points
(8.25 percent cap).. (8.25 percent cap).
Parent loans:........................ Variable rate set Fixed rate at 7.9 Variable rate set
annually at the percent. annually at 91-day
Treasury bill rate Treasury bill rate
plus 3.1 percent (9.0 plus 3.1 percent (9.0
percent cap). percent cap).
Consolidation loans:
Students......................... Fixed rate set at the Fixed rate set at the Choice of variable rate
weighted average of weighted average of set annually at 91-day
loans consolidated loans consolidated Treasury bill rate
rounded up to nearest rounded up to nearest plus 2.3 percent (8.25
\1/8\ percent. \1/8\ percent. percent cap) or fixed
rate set at 91-day
Treasury bill rate
plus 3.3 percentage
points.
Parents.......................... Fixed rate set at the Fixed rate set at the Choice of variable rate
weighted average of weighted average of set annually at 91-day
loans consolidated loans consolidated Treasury bill rate
rounded up to nearest rounded up to nearest plus 3.1 percent (9.0
\1/8\ percent. \1/8\ percent. percent cap) or fixed
rate set at 91-day
Treasury bill rate
plus 4.1 percentage
points.

LENDER YIELDS

Student loans:
In-school, grace, and deferment.. Greater of the borrower Greater of the borrower 3-month commercial
rate or 3-month rate or 3-month paper rate plus 1.74
commercial paper rate commercial paper rate percentage points.
plus 1.74 percentage plus 1.74 percentage
points. points.
In repayment..................... Greater of the borrower Greater of the borrower 3-month commercial
rate or 3-month rate or 3-month paper rate plus 2.34
commercial paper rate commercial paper rate percentage points.
plus 2.34 percentage plus 2.34 percentage
points. points.
Parent Loans:........................ Greater of the borrower Greater of the borrower 3-month commercial
rate or 3-month rate or 3-month paper rate plus 2.64
commercial paper rate commercial paper rate percentage points.
plus 2.64 percentage plus 2.64 percentage
points (only when the points (only when that
borrower rate is formula exceeds 9.0
capped at 9.0 percent). percent).
Consolidation loans:
Student loans.................... Regular formula less Regular formula less Regular formula less
1.05 percentage points. 1.05 percentage points. 1.05 percentage
points.
Parent loans..................... Regular formula less Regular formula less Regular formula less
1.05 percentage points. 1.05 percentage points. 1.05 percentage
points.
----------------------------------------------------------------------------------------------------------------

These changes in rates and yields would save an estimated
$5.9 billion in 2006, $11.2 billion over the 2006-2010 period,
and $18.1 billion through 2015.
Changes in ``9.5 Percent'' Loans. Another change in the
payment formulas for lenders would affect loans that are funded
with financing based on tax-exempt bonds issued between 1980
and 1993. Historically, these loans have had a different
formula for determining payments to lenders. Specifically, the
formula for the government's special allowance payments to the
holders of these loans was 50 percent of the sum of the 91-day
Treasury bill rate plus 3.5 percentage points or 9.5 percent,
whichever was higher. In recent years, the 9.5 percent rate was
higher. Consequently, these have come to be referred to as
``9.5 percent loans.'' Legislation enacted in 2004 modified
this policy for most new loans from tax-exempt lenders during
the October 2004 to December 2005 period, changing the lender
formula to conform to the rates paid to other lenders. Under
current law, the formula on new loans will revert back to the
pre-October 2004 structure. The legislation would continue the
practice currently in place (instead of allowing it to expire
at the end of December 2005), but expand its scope to include
all new loans supported with this type of financing. This
policy would save an estimated $850 million in 2006, $1.8
billion over the 2006-2010 period, and $3.1 billion over the
2006-2015 period.
Lender Fees. The legislation would increase two fees
currently charged to lenders. The first fee, which is charged
on all loans disbursed, would rise from 0.5 percent to 1.0
percent. The second, which is a fee charged annually on
outstanding consolidation loans, would be boosted from 1.05
percent to 1.30 percent, but only for those lenders for whom
consolidated loans constitute more than 90 percent of their
student and parent loan portfolios. CBO estimates that the
changes in these fees would save $520 million in 2006, $1.8
billion over the 2006-2010 period, and $3.1 billion over the
2006-2015 period.
Federal Lender Insurance. The legislation would reduce the
portion of defaulted loans for which lenders are reimbursed.
Under current law, lenders are generally reimbursed for 98
percent of the outstanding balances on loans that go into
default. Lenders that meet certain requirements are classified
as exceptional lenders and receive 100 percent insurance.
The legislation would reduce the 98 percent insurance level
to 96 percent, and would tighten eligibility for designation as
an exceptional lender. For those lenders losing exceptional
lender status, the insurance rate would drop from 100 percent
to 96 percent. CBO estimates that these changes would reduce
outlays by $385 million in 2006, $915 million over the 2006-
2010 period, and $1.7 billion through 2015.
The legislation also would reduce the rate at which the
federal government replenishes the student loan reserve funds
held by the various guaranty agencies. However, because those
funds are considered the property of the federal government,
such transfers are intrabudgetary transactions and have no
effect on total federal spending or revenues.
Funding for Mandatory Administrative Costs. Section 458 of
the Higher Education Act of 1965 specifies a direct
appropriation for the government's administrative costs
associated with operating the financial assistance programs for
post-secondary education students. The statute does not limit
the amount provided for those activities after 2002; thus, this
account is an uncapped direct spending program. CBO's baseline
assumes that the portion of the account that funds the
government's administrative activities would be equal to the
actual amount used in 2004, adjusted for anticipated inflation.
The other major component of this account is an account
maintenance fee paid to guaranty agencies, which equals 0.10
percent of the original principal on outstanding guaranteed
student loans.
The legislation would eliminate mandatory funding for the
section 458 administrative activities beginning in 2007, but
retain the mandatory funding for the account maintenance fees
through 2011. Section 458 funding in 2006 would be limited to
$820 million. CBO assumes that the entire amount of the fees
would be paid, but that a portion would be paid out of the
federal student loan reserve funds (the on-budget accounts held
by guaranty agencies) instead of section 458 funds. These
changes would increase direct spending outlays by $17 million
in 2006, but reduce them by $2.2 billion over the 2006-2010
period and by $6.0 billion over the 2006-2015 period, CBO
estimates. (The offsetting increases in discretionary spending
for administrative costs are discussed in the section on
spending subject to appropriation.)
Guaranty Agency Retention Allowance. The legislation would
reduce the share of collections on defaulted loans that
guaranty agencies are allowed to retain from 23 percent to 20
percent, and would increase the share retained by the
government commensurately. CBO estimates that this change would
reduce federal costs by $270 million in 2006, $495 million over
the 2006-2010 period, and $830 million over the 2006-2015
period.
Major Provisions Increasing Spending. The provisions in the
bill that would result in the largest increases in spending are
the changes to origination fees and insurance premiums paid by
borrowers and increases in loan limits. The estimated costs
resulting from these portions of subtitle B total $3.8 billion
over the 2006-2010 period and $13.3 billion over the 2006-2015
period.
Borrower Origination Fees and Premiums. The legislation
would gradually reduce borrower origination fees for both
subsidized and unsubsidized student loans, while at the same
time requiring guaranty agencies to charge all borrowers of
guaranteed student and parent loans the 1.0 percent insurance
premium now authorized. Currently, the origination fee for
guaranteed loans is 3.0 percent, and the insurance premium may
be as much as 1.0 percent. In the direct loan program, the
origination fee is 3.0 percent (although in practice, the
Department of Education generally charges 1.5 percent up front
and another 1.5 percent if the borrower fails to make timely
payments) and there is no insurance fee. The changes in the
bill would equalize the total fees charged to students in the
guaranteed and direct loan programs.
Total fees on student borrowers would drop to 2.5 percent
in July 2007, to 2.0 percent in July 2008, to 1.5 percent in
July 2009, and to 1.0 percent in July 2010. (A new origination
fee on consolidated loans of 1.0 percent would also be charged,
as discussed earlier.) These changes would reduce outlays by
$90 million in 2006 because the increased insurance premiums
are recorded more quickly than the reduced origination fees
(fees are tied to loan disbursements that often fall into a
subsequent year). CBO estimates that these changes would
increase outlays by $2.3 billion over the 2006-2010 period and
by $8.9 billion over the 2006-2015 period.
Increased Loan Limits. Subtitle B would increase the
maximum amount of subsidized loans for first- and second-year
students from $2,625 and $3,500, respectively, to $3,500 and
$4,500 beginning in 2007. In addition, the bill would increase
the limit for unsubsidized loans for each year of graduate
school from $10,000 to $12,000. To conform the aggregate
borrowing limits to the latter changes, the limit on
unsubsidized loans would be increased by $10,000. CBO estimates
these increases would boost aggregate student loan borrowing
from both the direct and guaranteed loan programs, and as a
result would increase spending by $1.6 billion over the 2007-
2010 period and by $4.4 billion over the 2007-2015 period.
Other Provisions With Measurable Effects. The legislation
contains numerous provisions that would have much smaller
budgetary effects than those described above. Among them are
changes in loan cancellation programs, borrower repayment
terms, and interest deferment eligibility. Other provisions
with some estimated budget effects during the 2006-2010 period
include changes in the income protection allowance for
dependent students, the restriction on eligibility for students
with certain drug-related convictions, the eligibility of
schools to participate on the basis of distance learning
programs, and the multiple disbursement requirements for
certain loans for schools with low default rates. Taken
together, CBO estimates that these provisions would cost $192
million in 2006, $409 million over the 2006-2010 period, and
$754 million over the 2006-2015 period.
Interactions. The overall spending reductions that the
legislation would yield are larger than the sum of the
individual provisions because many provisions interact. For
example, the lender-yield and borrower interest rate changes
save even more when the increased loan volume flowing from the
changes in loans limits is considered. However, those same loan
limit increases boost the costs of the provisions that reduce
borrower fees. As another example, the application of the
proposed lender yields and borrower interest rates to the 9.5
percent loans increases the savings when compared to that
provision alone. In total, the interactions among the various
provisions would generate additional estimated savings of $298
million over the 2006-2010 period and $1.1 billion over the
2006-2015 period.
Higher Education Relief. The legislation would provide
relief to certain student loan borrowers and educational
institutions that were adversely affected by Hurricanes Katrina
and Rita. CBO estimates that the total costs of this relief
would be $210 million in fiscal year 2006 (with no effect after
this year).
The largest portions of the costs are attributable to two
policies: (1) the cancellation of repayment for all student
loans that were disbursed for cancelled enrollment periods at
post- secondary schools that were closed, and (2) the
requirement that the federal government pay the interest for up
to six months on student and parent loans for borrowers
affected by the hurricanes. Based on data provided by the
Department of Education, CBO estimates that the costs of
cancelling repayments for the loans that had been disbursed for
schools that closed as a result of the storm would be $70
million.
CBO estimates that the interest payments on the loans for
borrowers affected by the hurricanes would amount to about $130
million. Data are not available to precisely estimate the
number of borrowers and amount of outstanding principal that
could be affected by this policy. CBO used demographic and
economic data from the Census Bureau for the jurisdictions
covered by the major disaster designation for Hurricanes
Katrina and Rita to estimate the potential number of affected
borrowers. CBO estimates that student loan indebtedness for
affected borrowers in the affected areas is roughly $5 billion.
The estimated gross costs were reduced to reflect the likely
use of existing authority for deferment of payments for
interest and principal for economic hardship.
The legislation would also waive the requirement for the
return of federal student aid in cases when the storm resulted
in a cancelled period of enrollment, and would exclude any
disbursements for cancelled enrollment periods from the
aggregate loan and grant aid limits for affected students.
Together, these two provisions would cost an estimated $10
million in 2006.

Subtitle C: Premiums charged by the Pension Benefit Guaranty
Corporation

The legislation would increase the per-participant premiums
charged to sponsors of defined-benefit pension plans, as well
as institute a termination premium, which would be charged to
sponsors whose plans are taken over by the PBGC as a result of
an involuntary or distress termination. These premium receipts,
which are shown in the budget as offsets to direct spending,
would total about $363 million in 2006, $6.2 billion over the
2006-2010 period, and $30.6 billion over the 2006-2015 period.
The higher premium receipts would eliminate the need for the
PBGC to increase the rate at which it reimburses itself from a
nonbudgetary fund where it holds the reserves of the pension
plans it has taken on. These reimbursements, that also show up
as offsets to spending, would decline by $7.4 billion during
the 2013-2015 period, thereby reducing the net 10-year savings
to $23.3 billion. These estimated changes are displayed in
Table 4 and discussed below.
Increase in Flat-Rate Premium for Single-Employer Plans.
Under current law, sponsors of single-employer, defined-benefit
pension plans insured by the PBGC are required to pay the
agency a premium of $19 per participant per year. The
legislation would increase the flat-rate premium to $30 per
participant in 2006 and index it to wage growth starting in
2007. The PBGC also would have the authority to further
increase those premiums by up to 20 percent each year if it
determined that such an increase would be necessary to achieve
an actuarially sound program. The PBGC has already incurred
substantial losses in recent years, and CBO anticipates further
losses in the future. (See CBO's recent report, The Risk
Exposure of the Pension Benefit Guaranty Corporation, issued in
September 2005.) Therefore, CBO believes that the PBGC would
need to raise premiums each year by the full 20 percent. If so,
the premium rate for single-employer plans would rise to
approximately $73 per participant in 2010 and $223 in 2015.
About 35 million people currently participate in tax-
qualified, single-employer pension plans. This figure includes
active workers, former workers who are vested but have not
started collecting retirement benefits, and annuitants. The
number of participants in single-employer plans insured by the
PBGC has remained nearly constant for the past decade, and CBO
assumes it would remain steady for the next 10 years.
The current premium of $19 per participant generates about
$650 million in premium income annually for the PBGC. CBO
estimates changes to the flat-rate premiums made by the
legislation would increase receipts by $5.2 billion over the
2006-2010 period and by $27.8 billion over the 2006-2015
period. Because the PBGC's premiums are recorded as offsetting
collections to a mandatory spending account, an increase in
premium collections is reflected in the budget as a decrease in
direct spending.
Premiums for Certain Terminated Single-Employer Plans. The
legislation would create a new premium for sponsors of plans
that the PBGC takes over on an involuntary or distressed-
termination basis. The required payments would be $1,250 per
plan participant for three years after the termination. For
sponsors whose plans were terminated while the program was
being reorganized under chapter 11 of the bankruptcy code, the
premium would be levied after the sponsor emerges from
bankruptcy. The premium would not apply to firms that are
liquidated by a bankruptcy court. CBO estimates that these new
premiums would total about $1.0 billion over the 2006-2010
period and $2.9 billion over the 2006-2015 period.

TABLE 4.--DIRECT SPENDING EFFECTS OF SUBTITLE B: PENSION BENEFIT GUARANTY CORPORATION PREMIUMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Outlays in millions of dollars, by fiscal year--
--------------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2010 2006-2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in Flat-Rate -327 -621 -966 -1,380 -1,863 -2,484 -3,277 -4,278 -5,520 -7,038 -5,155 -27,750
Premiums for Single-Employer
Plans.......................
Premiums for Certain -36 -109 -220 -298 -342 -354 -364 -375 -386 -398 -1,007 -2,883
Terminated Single-Employer
Plans.......................
Subtotal, Premiums....... -363 -729 -1,186 -1,678 -2,206 -2,837 -3,641 -1,653 -5,906 -7,436 -6,162 30,635
Changes in Transfers from 0 0 0 0 0 0 0 1,068 3,092 3,222 0 7,382
PBGC's Nonbudgetary Trust
Fund........................
--------------------------------------------------------------------------------------------------------------------------
Total Changes.......... -363 -729 -1,186 -1678 -2,206 -2,837 -3,641 -3,585 -2,814 -4,214 -6,162 -23,252
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: PBGC = Pension Benefit Guaranty Corporation.

Based on recent PBGC data on terminations, CBO estimates
that underfunded plans that will be terminated over the next
five years would contain about 120,000 participants per year,
with three-quarters of these terminations relating to
nonliquidation bankruptcy filings. CBO assumes that a year's
bankruptcy cases will emerge from bankruptcy over several years
following the filing date. The annual savings would grow
rapidly during the first few years because of the likely timing
of sponsors emerging from bankruptcy.
Transfers from PBGC's Nonbudgetary Trust Fund. The PBGC's
assets are held in two separate funds: an on-budget revolving
fund and a nonbudgetary trust fund.\1\ In its on-budget fund,
the PBGC receives premium payments and makes outlays for
benefit payments and administrative costs. The nonbudgetary
trust fund holds assets from terminated plans until they are
needed to help pay for benefits and other expenses. The PBGC
makes periodic transfers from the nonbudgetary fund to the on-
budget fund, where they are used to cover about half of all
benefit payments and most of the PBGC's administrative costs.
As with premiums, these transfers are offsetting collections to
a mandatory account, and so are reflected in the budget as
offsets to outlays.
---------------------------------------------------------------------------
\1\ The PBGC has several different on-budget revolving funds and
two nonbudgetary trust funds. For simplicity in budgetary presentation,
CBO combines the various on-budget and nonbudgetary funds into just two
funds.
---------------------------------------------------------------------------
In CBO's current-law projections, PBGC's increasing
liabilities and steady premium income will cause the agency's
on-budget fund to be completely exhausted in about 2013. No
precedent exists for how the PBGC would proceed if its on-
budget fund is depleted. However, CBO assumes that the agency
would cover its expenses by increasing the percentage of
benefits and other expenses being paid through transfers from
its nonbudgetary trust fund, thus increasing offsetting
collections above what they would have been if the fund had
remained solvent.
CBO estimates the increases in premium receipts would
improve the finances of the on-budget fund and would enable it
to remain solvent beyond 2015. As a result, the PBGC would not
need to increase the amounts transferred from the nonbudgetary
fund to help cover benefit payments and other expenses during
the 10-year projection period. By allowing the on-budget fund
to remain solvent through the next decade, the legislation
would reduce those transfers by $7.4 billion over the 2013-2015
period. Because this change would reduce an offset to mandatory
spending, it would result in a net increase in such spending.

Spending subject to appropriation

This legislation would amend and reauthorize the Child Care
and Development Block Grant Act of 1990, and would make changes
to the Temporary Assistance for Needy Families program,
including increasing work participation rates and establishing
a new program of grants to promote fatherhood. In addition, the
legislation would authorize appropriations for the
administrative costs of operating the student financial aid
programs. It also would expand eligibility for the
discretionary student loan forgiveness program to include early
childhood educators, nurses, librarians, first responders, and
others. CBO has not estimated how much this provision would
increase the program's authorization.
Subtitle A. This subtitle would authorize appropriations
totaling $2.3 billion in 2006 and increasing amounts in
subsequent years. Authorizations would total $13.6 billion over
the 2006-2010 period. CBO estimates that appropriation of these
amounts would result in additional outlays of $12.5 billion
over those five years.
Child Care. The legislation would amend and reauthorize the
Child Care and Development Block Grant (CCDBG) program. The
CCDBG program was authorized through 2002 by Child Care and
Development Block Grant Act of 1990 and has been authorized in
appropriation acts since then; it is currently authorized
through November 18, 2005, by Public Law 109-77. This
legislation would authorize appropriations of $2.3 billion in
2006, $2.5 billion in 2007, $2.7 billion in 2008, $2.9 billion
in 2009, and $3.1 billion in 2010. (Funding in 2005 was $2.083
billion.) If these amounts are appropriated, outlays from those
appropriations would total an estimated $12.4 billion over the
2006-2010 period.
The CCDBG program provides funding to states for child-care
subsidies to low-income families, improvement in the quality of
child care services, and other activities. It is one of the two
federal programs for child-care subsidies within a program
grouping often referred to as the Child Care and Development
Fund. The other program is the Child Care Entitlement to
States, a mandatory program that would not be affected by the
legislation.

TABLE 5.--DISCRETIONARY SPENDING EFFECTS OF SUBTITLES A AND B: TANF, CHILD CARE, AND HIGHER EDUCATION
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------
2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law (from existing appropriations):
Budget Authority...................................... 2,083 0 0 0 0 0
Estimated Outlays..................................... 2,116 614 113 21 0 0
Proposed Changes:
Child Care and Development Block Grant Program:
Authorization Level............................... 0 2,300 2,500 2,700 2,900 3,100
Estimated Outlays................................. 0 1,633 2,327 2,609 2,830 3,030
Fatherhood Grant Program:
Authorization Level............................... 0 20 20 20 20 20
Estimated Outlays................................. 0 2 12 22 23 22
Student Aid Administrative Costs:
Estimated Authorization Level..................... 0 0 646 665 684 705
Estimated Outlays................................. 0 0 345 549 640 689
Total Proposed Changes:
Authorization Level............................... 0 2,320 3,166 3,385 3,604 3,825
Estimated Outlays................................. 0 1,635 2,684 3,180 3,493 3,741
Total Spending Under the Legislation:
Authorization Level................................... 2,083 2,320 3,166 3,385 3,604 3,825
Estimated Outlays..................................... 2,116 2,249 2,797 3,201 3,493 3,741
----------------------------------------------------------------------------------------------------------------
Note: CBO has not completed its estimate for the expansion of a loan forgiveness program.

Fatherhood Grant Program. Section 105 would establish new
grant programs to promote responsible fatherhood and would
authorize appropriations of $20 million annually over the 2006-
2010 period. At least 65 percent of the funds would be allotted
for competitive grants to community entities and Indian tribes
to test the effectiveness of various approaches to promoting
responsible fatherhood. At least $5 million annually would be
directed to national organizations to test the use of economic
incentives to encourage noncustodial parents to enter the
workforce. The remainder could be used for other demonstration
projects or for program evaluations. CBO estimates implementing
the programs would cost $81 million over the 2006-2010 period.
Subtitle B. This legislation would authorize funding over
the 2007-2011 period for the administration of student
financial aid programs, as well as for an expanded program of
loan forgiveness. CBO estimates that appropriations for the
administrative costs, which are authorized at such sums as may
be necessary, would be $646 million in 2007 and $2.7 billion
over the 2007-2010 period, based on the current mandatory costs
for those activities. If these amounts are appropriated,
discretionary outlays would total $2.2 billion over the period.
CBO has not completed its estimate for the expansion of the
loan forgiveness program.
Estimated impact on state, local, and tribal governments:
The legislation contains no intergovernmental mandates as
defined by UMRA. It would significantly affect the way states
administer the TANF program, but because of the flexibility in
the program as a whole, the new requirements would not be
intergovernmental mandates as defined in UMRA.
In particular, this legislation would increase the work
participation rates required in the TANF program, prohibit
states from using funds from the TANF program to pay offshore
contracting expenses, and increase the proportion of Child Care
Development Block Grants that is used for earmarked purposes.
It also would authorize funding for child care programs and
fatherhood grants and would provide greater flexibility to
states through demonstration programs.
The legislation would provide assistance to institutions of
higher education affected by or serving students affected by
the recent hurricanes. It also would authorize funding for
student aid and higher education programs, much of which would
go to public institutions of higher education. Any costs to
those institutions or to state, local, or tribal governments
would result from complying with conditions for receiving
federal assistance.
Estimated impact on the private sector: Subtitle C would
make changes to the Employee Retirement Income Security Act
that would impose mandates on single-employer sponsors of
defined-benefit pension plans. Those changes would increase the
per-participant premium rates paid to the Pension Benefit
Guaranty Corporation and would create a termination premium for
sponsors whose plans are terminated by the PBGC on an
involuntary or distressed-termination basis. CBO estimates that
the cost of those mandates would total about $363 million in
2006 and $6.2 billion over the 2006-2010 period.
Subtitles A and B do not contain any private-sector
mandates as defined in UMRA.
Previous CBO estimates: CBO has transmitted a number of
cost estimates earlier this year for legislation that would
affect the TANF, child care, and higher education programs, and
the PBGC.
On March 16, 2005, CBO transmitted a cost estimate for S.
525, the Caring for Children Act of 2005, as ordered reported
by the Senate Committee on Health, Education, Labor and
Pensions. On March 25, 2005, CBO transmitted a cost estimate
for S. 667, the Personal Responsibility and Individual
Development for Everyone Act, as reported by the Senate
Committee on Finance. Those bills would set up several grant
programs and establish requirements for participation in work
activities that are different from those in this legislation.
S. 525 would authorize the same level of child care funding as
this legislation, but S. 667 would authorize fatherhood grants
at a slightly higher level.
For higher education programs, CBO has provided estimates
for H.R. 609 (as ordered reported by the House Committee on
Education and the Workforce) on September 16, 2005, and for the
reconciliation recommendations of the Senate Committee on
Health, Education, Labor, and Pensions on October 24, 2005.
This legislation contains many of the provisions of H.R. 609,
but adds changes to lender and borrower fees, mandatory
administrative expenses, and payments to guaranty agencies. It
differs from the Senate legislation (now embodied in S. 1932,
the Deficit Reduction Omnibus Reconciliation Act of 2005) with
regard to provisions governing borrower interest rates and loan
limits, mandatory administrative expenses, and payments to and
fees collected from guaranty agencies. This legislation also
does not include two new mandatory grant programs contained in
S. 1932.
CBO has provided the Congress with three cost estimates for
legislation that would affect the PBGC and private pension
plans. On September 26, 2005, CBO transmitted a cost estimate
for H.R. 2830, the Pension Protection Act of 2005, as ordered
reported by the House Committee on Education and the Workforce.
On October 5, 2005, CBO transmitted a cost estimate for S.
1783, the Pension Security and Transparency Act of 2005, as
introduced. Unlike the reconciliation recommendations of the
House Committee on Education and the Workforce, those bills
would require pension sponsors to meet stricter funding targets
and rules and to adhere to more stringent accounting rules. The
increase in PBGC premiums required by those bills would be
substantially less than those specified in this legislation.
The reconciliation recommendations of the Senate Committee
on Health, Education, Labor, and Pensions (which are included
in S. 1932) also include pension provisions. That legislation
would initially set the flat-rate premium at $46.75 in 2006 and
increase it with wage inflation thereafter. This House
legislation would set the 2006 rate at $30 and subsequently
index it; it would also authorize the PBGC to raise those
premiums by an additional 20 percent per year. In addition to
the increase for sponsors of single-employer plans, the Senate
legislation would increase the rate for multiemployer plans.
Both sets of reconciliation recommendations would require
sponsors who have terminated pension plans via distress or
involuntary terminations to pay an additional $1,250 annual
premium for three years.
Estimate prepared by: Federal Spending: TANF and Child
Care: Sheila Dacey. Education: Deborah Kalcevic, Chad Chirico,
and Justin Humphrey. Pensions: Geoffrey Gerhardt and Craig
Meklir. Impact on State, Local, and Tribal Governments: Lisa
Ramirez-Branum and Leo Lex. Impact on the Private Sector:
Nabeel Alsalam and Peter Richmond.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

COMMITTEE PRINT--THE PERSONAL RESPONSIBILITY, WORK AND FAMILY PROMOTION
ACT OF 2005

Committee Report

Purpose

The Committee Print, passed on October 20, 2005 entitled
the Personal Responsibility, Work, and Family Promotion Act of
2005, amends and improves the mandatory work requirements and
other work-related provisions of the Temporary Assistance for
Needy Families (TANF) block grant and reauthorizes the Child
Care and Development Block Grant through 2010. This legislation
enhances the opportunities of needy families to achieve self-
sufficiency and access quality child care. In addition, the
legislation creates new authority for States and localities to
conduct demonstration projects coordinating multiple public
assistance and workforce development programs to improve
services to needy families and working individuals.

Committee Action

107TH CONGRESS

Subcommittee hearings

On Thursday, September 20, 2001, the Subcommittee on 21st
Century Competitiveness held a hearing on Welfare Reform: an
Examination of Effects. The hearing addressed the general
effects of reform to date, with emphasis on efforts to assist
families, reduce welfare dependence, and increase job
preparation and work. Subcommittee Members heard views from
leading experts and practitioners on the successes of the
welfare reform law. The testifying witnesses were Dr. Ron
Haskins, Senior Fellow, The Brookings Institute, Washington,
DC; Mr. Joel Potts, Ohio Department of Job and Family Services,
Columbus, Ohio; Dr. Sanford Schram, Professor of Social Work,
Bryn Mawr College, Bryn Mawr, Pennsylvania; Mr. Robert Rector,
Senior Research Fellow, The Heritage Foundation, Washington,
DC; and Dr. Heather Boushey, Economist, Economic Policy
Institute, Washington, DC.
On Tuesday, October 16, 2001, the Subcommittee on 21st
Century Competitiveness held a second hearing, Welfare Reform:
Success in Moving Toward Work. The hearing was held to explore
the degree to which welfare reform's success has been the
result of the reform's emphasis on work. A panel of
researchers, business owners who have hired participants and
local welfare reform implementers offered perspectives on the
effects that the reform law's work requirements have had in
moving welfare recipients into employment. The testifying
witnesses were Dr. Lynn Karoly, Director of Labor and
Population Program & Populations Research Center, RAND
Institute, Santa Monica, California; Ms. Lashunda Hall, former
Wisconsin Works Participant, Milwaukee, Wisconsin; Ms. Martha
Davis, Legal Director of NOW-LDEF, New York, New York; Ms. Mona
Garland, Director of Opportunities Industrialization Center of
Greater Milwaukee, Wisconsin Works (W-2), Milwaukee, Wisconsin;
Mr. Rodney Carroll, President and CEO, The Welfare to Work
Partnership, Washington, DC; and Ms. Jennifer Brooks, Director,
Self-Sufficiency Programs and Policy, Wider Opportunities for
Women, Washington, DC.
On Wednesday, February 27, 2002, the Subcommittee on 21st
Century Competitiveness held a hearing on Assessing the Child
Care and Development Block Grant. The purpose of this hearing
was to provide information on the general operation of the
Child Care and Development Block Grant (CCDBG) in preparation
for its reauthorization as part of the Committee's welfare
package. Subcommittee Members heard from leading experts and
practitioners about the importance of child care as a support
allowing families to obtain and retain employment and the vital
role that the block grant plays in meeting that need. The panel
highlighted the importance of quality child care in promoting
healthy childhood development and school readiness, and offered
recommendations for improving access to child care for eligible
families. The testifying witnesses were Ms. Janet K.
Schalansky, Secretary, Kansas Department of Social and
Rehabilitation Services, on behalf of the American Public Human
Services Association, Topeka, Kansas; Ms. Helen C. Riley,
Executive Director of St. Michael's School and Nursery,
Wilmington, Delaware; Ms. Helen Blank, Director of Child Care
and Development, Children's Defense Fund, Washington, DC; Mr.
Douglas J. Besharov, Resident Scholar, American Enterprise
Institute, Washington, DC; and Ms. Karen Ponder, Executive
Director of the North Carolina Partnership for Children and
Smart Start, Raleigh, North Carolina.
On Tuesday, March 12, 2002, the Subcommittee on 21st
Century Competitiveness held a third hearing, Welfare to Work:
Ties Between TANF and Workforce Development. The hearing
focused upon the extent to which TANF work services are
provided through the One-Stop delivery system for workforce
development established through the Workforce Investment Act of
1998 (WIA) and how such linkages affect participants. The
General Accounting Office testified on the results to date of a
study the agency is conducting on this topic. In addition, the
Subcommittee members heard from a State and a local area that
successfully have integrated TANF work services into the One-
Stop delivery system. The testifying witnesses were Dr. Sigurd
Nilsen, Director, Health, Education and Human Services
Division, General Accounting Office, Washington, DC; John B.
O'Reilly, Jr., Executive Director, Southeast Michigan Community
Alliance, Taylor, Michigan; and, Greg Gardner, Acting Director,
Utah Department of Workforce Services, Salt Lake City, Utah.

Full committee hearing

On Tuesday, April 9, 2002, the Committee on Education and
the Workforce held a hearing on Working Toward Independence:
the Administration's Plan to Build upon the Successes of
Welfare Reform. The Honorable Tommy Thompson, then-Secretary of
the Department of Health and Human Services, testified on the
first panel regarding the Administration's proposal to promote
work and strengthen families. Jason Turner, Visiting Fellow,
The Heritage Foundation, Washington, D.C. and Wendell Primus,
Center on Budget and Policy Priorities, Washington, D.C.
testified on the second panel.

Legislative action

On Tuesday, April 9, 2002, Representative Howard ``Buck''
McKeon (R-CA), along with Representatives Boehner (R-OH), Petri
(R-WI), Hoekstra (R-MI), Greenwood (R-PA), Upton (R-MI),
Tancredo (R-CO), DeMint (R-SC), Isakson (R-GA), Keller (R-FL),
and Culberson (R-TX), introduced H.R. 4092, the Working Toward
Independence Act of 2002, a bill to reauthorize the Temporary
Assistance for Needy Families Block Grant (TANF) and the Child
Care and Development Block Grant (CCDBG) through 2007.
On Thursday, April 18, 2002, the Subcommittee on 21st
Century Competitiveness considered H.R. 4092 in legislative
session and reported it favorably, as amended, to the Committee
on Education and the Workforce. The roll call vote was 9-7. The
Subcommittee adopted two amendments, including a substitute
amendment offered by Representative McKeon.
On Wednesday, May 1, 2002 and Thursday, May 2, 2002 the
Committee on Education and the Workforce considered H.R. 4092
in legislative session and reported it favorably, as amended,
to the House of Representatives. The roll call vote was 25-20.
The Committee adopted six amendments, including an amendment in
the nature of a substitute offered by Chairman Boehner.
On May 15, 2002, Congresswoman Deborah Pryce (R-OH), along
with Chairman John Boehner (R-OH) and Subcommittee Chairman
Howard P. ``Buck'' McKeon (R-CA), introduced H.R. 4737, the
Personal Responsibility, Work, and Family Promotion Act of
2002. The bill incorporated H.R. 4092, as reported by the
Committee on Education and the Workforce, and H.R. 4090, as
reported by the Committee on Ways and Means.
On May 16, 2002, the House of Representatives passed H.R.
4737 by a vote of 229-197.

108TH CONGRESS

Legislative action

On February 4, 2003, Congresswoman Deborah Pryce (R-OH),
along with Chairman John Boehner (R-OH) and Subcommittee
Chairman Howard P. ``Buck'' McKeon (R-CA), introduced H.R. 4,
the Personal Responsibility, Work, and Family Promotion Act of
2003. The bill was substantially the same as H.R. 4737, which
passed the House in the 107th Congress.
On February 13, 2003, the House of Representatives passed
H.R. 4 by a vote of 230-192. Neither the Committee on Education
and the Workforce nor the Committee on Ways and Means
considered H.R. 4 in legislative session.

109TH CONGRESS

Subcommittee hearing

On Tuesday, March 15, 2005, the Committee on Education and
the Workforce, Subcommittee on 21st Century Competitiveness,
held a hearing in Washington, DC on ``Welfare Reform:
Reauthorization of Work and Child Care.'' The purpose of the
hearing was to review the Administration's proposal for
reauthorization of welfare and child care and to examine
successes and challenges in implementing the programs. The
Honorable Wade Horn, Ph.D., Assistant Secretary for Children
and Families, U.S. Department of Health and Human Services,
Washington, DC testified on the first panel. Curtis Austin,
President, Workforce Florida, Tallahassee, Florida; Larry Mead,
Ph.D., Professor of Politics, New York University, New York,
New York; Casandra Fallin, Executive Director, Baltimore City
Child Care Resource Center, Baltimore, Maryland; and Mark
Greenberg, Director of Policy, Center for Law and Social
Policy, Washington, DC testified on the second panel.

Legislative action

On January 4, 2005, Congresswoman Deborah Pryce (R-OH),
along with Chairman John Boehner (R-OH), Subcommittee Chairman
Howard P. ``Buck'' McKeon (R-CA), Congressman Joe Wilson (R-
SC), and Congressman John Kline (R-MN), introduced H.R. 240,
the Personal Responsibility, Work, and Family Promotion Act of
2005. The bill is substantially similar to H.R. 4, which the
House passed in the 108th Congress.
On Wednesday, October 19, 2005, and Thursday, October 20,
2005, the Committee on Education and the Workforce considered
in legislative session a Committee Print containing the
elements of H.R. 240 that are in the jurisdiction of the
Committee on Education and the Workforce and ordered it
favorably, as amended, to the Committee on the Budget by a vote
of 23-20. The Committee considered 19 amendments and adopted
the following four amendments:
1. The Committee adopted, by voice vote, an Amendment in
the Nature of a Substitute offered by Chairman Boehner (R-OH).
The amendment adds language from H.R. 3975, the Hurricane
Regulatory Relief Act, to ease federal requirements for state
administration of the CCDBG to give families affected by
Hurricanes Katrina and Rita easier access to child care
services. In addition, the amendment changes the effective date
and makes technical changes.
2. The Committee adopted, by voice vote, an en bloc
amendment offered by Congressman Luis Fortuno (R-PR). The
amendment requires State CCDBG plans to specify how the State
will coordinate child care services with services available for
infants, toddlers, and pre-school children through the
Individuals with Disabilities Education Act (IDEA) and to
require states to demonstrate in their CCDBG state plans how
they are addressing the needs of limited English proficient
families.
3. The Committee adopted, by voice vote, an amendment
offered by Congressman Rob Andrews (D-NJ). The amendment adds a
new prohibition regarding the use of TANF grants for
offshoring.
4. The Committee adopted, by voice vote, an amendment
offered by Congressman Danny Davis (D-IL). The amendment
creates economic incentive demonstration projects as part of
the fatherhood program of the Print.

Summary

The Committee Print makes substantial changes to the work
requirements of the Temporary Assistance for Needy Families
(TANF) block grant, increases the emphasis within the block
grant on moving participants into employment, provides new
flexibility to States, and encourages States to improve the
quality of child care available to low-income families. The
changes are consistent with the recommendations of President
Bush and the Department of Health and Human Services (HHS).

Title I--TANF Program

Universal engagement

The legislation creates a policy of universal engagement so
that all families must be in work or other activities leading
to self-sufficiency. Each family will have a self-sufficiency
plan, and each family's participation in activities will be
monitored. States will be penalized for failure to establish
self-sufficiency plans for families.

Work requirements

Work participation requirements will be increased from the
current requirement of 50 percent to 70 percent by 2010. The
current, higher participation requirement for two-parent
families will be eliminated so as not to discriminate against
marriage.
A modified caseload reduction credit continues so that
States' work participation requirements are reduced as their
caseloads decline, which encourages and rewards States for
diverting individuals from enrolling in cash assistance and for
moving families off the rolls into work. The current credit
rewards states for reductions below their 1995 caseload levels.
The updated credit phases-in a four-year look-back, so that by
2009 states get credit for reducing their caseload below 2005
levels.
All families will be required to be involved in activities
averaging 40 hours per week in order to be counted toward the
required participation rate, so that families are engaged in a
full work week of activities. Currently, single and two-parent
families must be engaged in work-related activities for 30 and
35 hours a week, respectively.
The Committee Print increases the number of hours that must
be spent in actual work, including unsubsidized employment,
subsidized private or pubic sector employment, on-the-job
training, supervised work experience, and supervised community
service, from 20 hours per week to 24 hours per week. States
will obtain pro-rata credit for families engaged in activities
less than full time as long as they meet the 24-hour direct
work requirement.
States' work participation rates will be based on the total
number of countable hours worked per month, rather than the
number of families meeting the participation standard.
Therefore, 160 hours of work per month will count as one family
fulfilling the full 40-hour work requirement. This allows for
easier calculation of the pro-rata credit for States.
States will define approved activities that will count
toward the remaining 16 hours of the work requirement, as long
as such activities help achieve a purpose of TANF. Such
activities could include education and training, activities
that promote child well-being, or activities that promote
healthy marriages. The Print eliminates the current
restrictions on the percent of the caseload that can
participate in vocational education; however, individuals will
be required to work part-time (averaging 24 hours per week)
while obtaining education.
In addition, the Print allows three months within any 24
consecutive months in full-time substance abuse treatment,
rehabilitative services, work-related education or training,
and job search to count toward the work requirement. States may
permit individuals to participate in four months of full-time
education or training in order to complete a certificate
program or obtain education necessary to fill a local job need.
The Committee Print maintains current law that gives states
flexibility in determining sanctioning policies, except that
States must continue assistance for single parents who have a
child under age six but who cannot obtain child care. In
addition, the Print requires recipients to engage in work
activities at least once during a two-month consecutive period
to remain eligible for TANF assistance, unless good cause is
shown.
Teen parents will either attend school or participate in
the full 40 hours of work and other activities, similar to
current law. States may continue to exempt parents with a child
under age one from the work requirements, but States still must
engage such families in constructive activities.

State plan requirements

States will describe in their State plan how they will
increase work and reduce dependence. In addition, each State
will establish specific work-related performance objectives and
measures. States will have complete flexibility to define their
measurement methodology, as long as they describe it in their
State plans.
States will describe in their State plan particular
strategies and programs they may be employing to address
important TANF challenges. Such challenges are employment
retention and advancement, including placement into high demand
jobs; services for clients with special needs; and program
integration with the Workforce Investment Act of 1998 (WIA).

Report on integration

The Committee Print requires the Secretary of Health and
Human Services and the Secretary of Labor to submit jointly a
report to Congress, within six months of enactment, describing
changes needed to the definitions, reporting requirements, and
performance measures in WIA and TANF to allow greater
integration between welfare and workforce development.

Title II--Amendments to the Child Care and Development Block Grant of
1990

Overview

The Committee Print reauthorizes the Child Care and
Development Block Grant (CCDBG) through 2010 and creates a
short title, the Caring for Children Act of 2005. The Committee
Print increases the amount of discretionary funding authorized
to $2.3 billion for fiscal year 2006, $2.5 billion for fiscal
year 2007, $2.7 billion for fiscal year 2008, $2.9 billion for
fiscal year 2009, and $3.1 billion for fiscal year 2010. The
current authorization is $1 billion, but the fiscal year 2005
appropriation is $2.1 billion.

Program goals

The Committee Print amends the existing goals to emphasize
that the block grant is intended to serve both low-income
working families who receive cash assistance and also those who
do not. This legislation also creates two new goals to
encourage States to improve the quality of child care and to
promote cognitive development and school readiness.

State plan requirements

The Committee Print modifies the State plan in several
ways. The legislation asks States to collect and disseminate
information to both parents of eligible children and child care
providers about: the quality and availability of child care
services; resources to assist families in obtaining child care;
research and best practices on children's development; and,
other programs and services for which families may be eligible,
including the food stamp, WIC, Medicaid and SCHIP programs.
This legislation requires States to describe partnerships
created with public and private entities to increase the supply
and quality of child care services, and to demonstrate efforts
to coordinate child care services provided by this Act with
other child care and early childhood education programs,
including Head Start, Early Reading First, Even Start, and
state-sponsored pre-kindergarten.
Beginning in 2007, State plans will be required to contain
an outline of the State's strategy to address the quality of
child care available to children in that State. States will
report on the use of quantifiable, objective measures for
evaluating the quality of child care services and progress in
improving child care quality.
Finally, States are asked to address factors that can make
finding care difficult for some parents. States would report in
their State plan how the State is working to meet the child
care needs of parents eligible for assistance who have children
with special needs, work non- traditional hours, or require
infant and toddler care.

Quality set-aside

The Committee Print increases from four to six percent the
amount of the total block grant that a State must spend on
activities to improve the quality of child care provided to
eligible families in that State, and establishes permissible
uses for those funds. The quality set-aside may be used to
support: programs that provide training, education, and other
professional development activities to enhance the skills of
the child care workforce, including informal caregivers;
activities to enhance early learning and foster school
readiness; initiatives to increase the retention and
compensation of child care providers; and, other activities
deemed by the States to improve the quality of child care
services provided in the State.

Federal eligibility guidelines

The Committee Print eliminates the Federal income limit for
eligibility, previously set at 85 percent of the State median
income. States must continue to prioritize families based on
need and serve both TANF and non-TANF families. Beginning in
2007 and biennially thereafter, the Secretary would provide to
Congress aggregated statistics on the supply, demand, and
quality of child care, early education, and non-school programs
available within States.

Hurricane response

In response to Hurricanes Katrina and Rita, the Committee
Print authorizes the Secretary to waive or modify certain
federal CCDBG requirements through June 30, 2006. The waivers
may be used to temporarily suspend income limitations on
eligibility to receive services; work requirements applicable
to eligibility to receive services; the application of the
quality set-aside in states affected by the Gulf hurricanes;
and any barrier to providing priority services to displaced
children provided that enrolled children residing in such state
do not lose eligibility as a result.

Title III--Broadened Waiver Authority

The Committee Print provides new authority for States to
apply to conduct demonstration projects coordinating two or
more public assistance, workforce development, and other
programs to support working individuals and families, help
families escape welfare dependency, promote child well-being,
or help build stronger families.
The administering entity must seek the waiver. If the
programs are administered by two different entities, such as
one State entity and one local entity, each must join in the
application to conduct the demonstration project. States and
localities will be able to seek waivers for activities funded
under the Wagner-Peyser Act (employment services), Title I of
the Workforce Investment Act (except Job Corps), activities
funded under the Adult Education and Family Literacy Act, the
Job Opportunities for Low-Income Individuals grant program, and
activities funded under the Child Care and Development Block
Grant.
Each Federal Secretary who administers a program that is to
be included in a demonstration project must approve the
request. Secretaries cannot waive certain provisions, including
civil rights, purposes or goals of any program, maintenance of
effort requirements, health or safety provisions, labor
standards under the Fair Labor Standards Act, or environmental
protections. In addition, a Secretary may not waive any
requirement that a State pass through to a sub-State entity all
or part of the funds it receives. In addition, the Secretaries
may not waive certain provisions of the Workforce Investment
Act.
The demonstration projects will be limited to five years,
and the State or local entities conducting the demonstration
project must evaluate the results. Waivers must be cost neutral
to the federal government. In addition, Federal Secretaries
will report to Congress on the success of any demonstration
projects awarded.

Title IV--Effective Date

The Committee Print makes changes effective on the date of
enactment, unless the Secretary of Health and Human Services
determines that State legislation is needed to change a State
plan under Part A of the Social Security Act. In such a case,
the effective dates shall be after the close of the first
regular session of the State legislature that begins after
enactment.

Committee Views

The Committee Print reauthorizes and enhances the work-
related provisions of the Temporary Assistance for Needy
Families (TANF) block grant through 2010. Enacted in 1996, TANF
revolutionized how States assist needy families by requiring,
for the first time, that welfare participants work for
benefits. The welfare reform law made the crucial difference in
maximizing opportunities for welfare recipients to participate
in the workforce.
Welfare reform has delivered unprecedented results and has
brought a whole new culture to the federal aid program. Welfare
caseloads reached their all-time high in March 1994 at 5.1
million families. Since then, caseloads have declined
approximately 60 percent to 1.9 million families in June 2004.
This represents a 55 percent decline since the enactment of
TANF. The total number of families receiving assistance is now
lower than at any time since 1970.
Employment among never-married mothers, who comprise the
population most likely to go on welfare, rose by 28 percent
between 1996 and 2003, from 49.3 percent to 63.2 percent. The
percentage of working welfare recipients has more than doubled
from 11.3 percent in 1996 to 25.3 percent in 2002.
In addition, according to U.S. Census figures, 1.6 million
children have been lifted from poverty. Child poverty rates
declined from 20.5 percent in 1996 to 17.9 percent in 2004.
Decreases in poverty have been significant among African-
American children, declining from 39.9 percent to 33.6 percent.
According to HHS, this rate is lower than at any time before
welfare reform was enacted, when child poverty rates for
African American children were 40 percent or higher. The
poverty rate among Hispanic children declined from 40.3 percent
to 28.6 percent.
Many have argued that the economy should be credited with
the caseload reduction and increase in work. However, that
claim easily is disputed by examining welfare caseloads in
previous times of economic growth. Not only did previous
periods of economic growth not result in lower caseloads, but
during two previous economic expansions (in the late 1960s and
the 1980s) caseloads actually increased. And, during the recent
recession of 2001, caseloads held steady and in some areas
continued to decline.
The Committee believes that the challenge for Congress this
year is to build on the unprecedented success of the 1996
welfare reform law--by putting even more Americans on the path
to self-reliance.
The Committee has modeled the Print after President George
W. Bush's welfare reauthorization and improvement plan, Working
Toward Independence, unveiled February 26, 2002. In addition,
the Print incorporates into the reauthorization of the CCDBG
key elements of President Bush's Good Start, Grow Smart plan to
improve early childhood education.

Title I--TANF Program

Given the great success of the 1996 welfare reform law, the
Committee believes that the basic structure of TANF should
remain intact, but the work rules should be strengthened to
increase opportunities for families to move to self-sufficiency
and make the program more responsive to disadvantaged families.
Universal engagement and family self-sufficiency plans
While TANF reforms significantly reduced welfare caseloads,
we still have work to do. According to the Department of Health
and Human Services' Temporary Assistance for Needy Families
Program Sixth Annual Report to Congress (November 2004), 58
percent of TANF adult recipients are not participating in work
activities as defined by federal law. Given the five year
lifetime limit on assistance that exists in the broader TANF
law, the Committee believes that it would be a disservice to
families not to engage them immediately in activities that
could assist them in achieving independence. Therefore, the
Print creates a policy of universal engagement to ensure that
all families are participating in work and other activities
that will lead to self-sufficiency.
Under current law, State plans must require that a parent
or caretaker engage in work (as defined by the State) after, at
most, 24 months of assistance. However, this requirement is not
enforced by a specific penalty. Currently, twelve States or
territories do not require TANF recipients to engage in work
during their first 24 months of receiving benefits.
States no longer will be permitted to wait 24 months before
requiring individuals to engage in work. The Committee Print
would repeal this allowance and replace it with a provision
requiring parents in families receiving assistance to
participate in work or other activities that lead to self-
sufficiency. While States currently have the option to develop
individual responsibility plans, the Print requires States to
create a self-sufficiency plan for each family. The Committee
Print requires the State to assess, in the manner deemed
appropriate by the State, each work-eligible individual before
preparing the plan.
The self-sufficiency plan must be established in
consultation, as the State deems appropriate, with the work-
eligible individual and specify appropriate direct work
activities to assist the family in achieving their maximum
degree of self-sufficiency. The State will monitor the
participation of individuals in the activities specified in the
plan, review the progress of the family toward self-
sufficiency, and revise the plan as the State deems
appropriate. The State will have sole discretion, consistent
with the work requirements of the law, to design activities,
monitor progress, and make modifications to the plans. Nothing
in the plan shall preclude a State from requiring participation
in work and other activities the State deems appropriate for
helping families achieve self-sufficiency and improving child
well-being. In addition, States may use job search or other
appropriate job readiness or work activities to assess the
employability of individuals and to determine future engagement
activities. The Committee intends that States will have sole
discretion to implement the self-sufficiency plans, as long as
they are consistent with this section and the work
requirements.
Plans must be developed within 60 days of opening a new
TANF case, or within twelve months for families enrolled at the
time of enactment. States face a penalty for failure to
establish self-sufficiency plans as part of the current penalty
for failure to satisfy state work

Work requirements

The Committee wants to ensure that all families are on the
path to their greatest level of independence. TANF includes
annual minimum work participation rate standards for families
receiving assistance. Currently, 50 percent of all families
receiving benefits are required to participate in federally-
recognized work activities for a minimum number of hours per
week, and 90 percent of two-parent families are expected to
engage in federally-recognized activities. However, the
national aggregate participation rate for FY 2000 was only 34
percent, according to HHS. Since then, participation in work
activities has dropped. Only 31 percent of all families
participated in the required hours of TANF work activities in
FY 2003. In addition, States are required to have a much higher
percentage of two-parent families participating in work--90
percent. Yet, for FY 2002, the national aggregate participation
rate was only 49.9 percent for two-parent families.
Certain families are exempt from required hours of working,
including, at a State's option, families with a child under age
one. The majority of exempt participants are child-only cases,
in which no adult is counted toward the family assistance
group.
The Committee prioritizes increasing rates of work
participation, since obtaining work experience has been shown
to be the most critical factor in helping families break the
cycle of dependency. Dr. Larry Mead summarized why work
participation is critical when he testified before the
Subcommittee on 21st Century Competitiveness on March 15, 2005
when he stated, ``The ideal in welfare reform is to link
benefits as tightly as possible to work. That requires a clear
work test that employable recipients must meet as soon as they
apply for aid, not sometime later.'' Therefore, the Committee
raises the rate of work participation. In FY 2006 the standard
is 50 percent, and it rises by five percentage points annually
so that 70 percent of a State's caseload must be meeting the
federal work standard in FY 2010.
As noted, current law has higher participation rates for
two-parent families. The Committee eliminates all separate,
higher requirements for two-parent families so as not to
discriminate against or discourage marriage. States will only
need to meet one work standard.
The Committee recognizes that some families may not be able
to meet the expected work standard. As noted, with this Print
States will be required to have 70 percent of their caseload
working by 2010. As a result, 30 percent of the caseloads will
not have to be meeting the federal work participation standard
(although States still must engage such families in activities
leading toward self-sufficiency as specified in their self-
sufficiency plans). People who care for disabled children or
have other significant barriers to work are some of the
populations the Committee expects States to classify into this
30 percent category. Therefore, the Committee does not carve-
out from the work requirement any groups of individuals that
may have barriers to work.
Current law reduces work standards by a caseload reduction
credit. For each percent decline in a State's caseload from the
fiscal year 1995 level, which is not attributable to policy
changes, the State's work participation standard is reduced by
one percentage point. This credit was given to encourage States
to move families off assistance and into work and to give
States credit for diverting cases from the rolls. States have
an incentive not to enroll families that may need only one-time
or short-term assistance to get back on their feet. However,
policymakers did not anticipate in 1996 the success that States
would have in reducing their caseloads. As a result of this
success, the existing caseload reduction credit reduced States'
annual work rates substantially. The average effective minimum
work participation requirement in FY 2002 was only 4.5 percent
for all families and 20.6 percent for two-parent families. In
FY 2002, 21 States had sufficient caseload reduction credits to
reduce their effective all-parent required rate to zero. Only
twelve States faced an effective minimum standard greater than
ten percent.
While reductions in caseloads were one of the intended
effects of the law, the current caseload reduction leaves
little incentive for States to continue to move individuals
into work and off the welfare rolls. Therefore, the Committee
has updated the credit to reward States for further reductions,
which will reduce the effective state work participation rate
target for States with falling caseloads while requiring more
of the remaining caseload to participate in work. For FY 2006,
the credit is based on the percent decline in the caseload from
FY 1996; for FY 2007, the base year is 1998; for FY 2008, the
base is FY 2001. Thereafter, the base year is the 4th preceding
fiscal year. For example, the credit in FY 2010 is based on the
caseload decline from FY 2006. So, if a State's welfare
caseload declines by 20 percent between fiscal years 2006 and
2009, its effective work participation requirement for the
remaining caseload in FY 2010 would be 50 percent, given the
updated credit for net caseload reduction.
Members have stressed the importance of emphasizing the
need not simply to cut people off the welfare rolls but to move
TANF participants into work. Such case closures will be
rewarded in this credit as long as they contribute to an
overall net caseload reduction.
The Committee Print includes a new ``superachiever'' credit
for States that have reduced their caseloads by more than 60
percent since 1995. The value of the credit would be equal to
the number of percentage points above 60 percent in caseload
reduction that occurred between 1995 and 2001. The
superachiever credit may reduce a State's work participation
rate only to 50 percent, although any future caseload reduction
also may be applied to the work participation rate the State
must achieve, after calculating the superachiever credit, in
order to encourage further caseload reduction.
Seventeen States achieved caseload declines of more than 60
percent between fiscal years 1995 and 2001. These States would
receive percentage reductions in future work requirements as
follows: Colorado is eligible for a maximum 12 percent credit
against future rates; Florida, 15 percent; Georgia, 4 percent;
Idaho, 20 percent; Illinois, 14 percent; Louisiana, 9 percent;
Maryland, 5 percent; Michigan, 4 percent; Mississippi, 10
percent; New Jersey, 2 percent; North Carolina, 6 percent;
Ohio, 3 percent; Oklahoma, 9 percent; South Carolina, 5
percent; West Virginia, 2 percent; Wisconsin, 16 percent; and
Wyoming, 20 percent. The credit recognizes the challenge that
these States might have in further reducing caseloads, which
would otherwise reduce the rising work requirements.
Under current law, adults generally are required to
participate in 30 hours of work activities, of which 20 hours
must be in priority work activities per week. For two-parent
families the standard is 35 hours per week, with 30 hours in
priority work activities. For a single parent of a child under
age six, 20 hours of work participation satisfies the
requirement. States may exempt the parent of a child under age
one from work and exclude them from the calculation of work
participation rates.
Current priority work activities include unsubsidized jobs,
subsidized private sector employment, subsidized public sector
employment, work experience, on-the-job training, job search
for up to six weeks, community service, vocational education
for up to twelve months, and providing child care for other
TANF recipients. Three other activities can count under certain
circumstances: job skills training directly related to
employment, and, for high school dropouts or students,
education directly related to work and completion of secondary
school. Participation in education, including vocational
education and students finishing high school, may account for
no more than 30 percent of persons credited with work for
purposes of satisfying the state work participation rate. Teen
parents are deemed to meet the weekly hour participation
standard by maintaining satisfactory attendance in secondary
school.
The Committee Print revises the work requirement for
participants. Under the 1996 reform, as stated, families were
required to work only 30 hours a week in order to receive TANF
benefits. In today's American workforce, employers almost
always require at least 40 hours of work per week. In order to
help individuals become prepared for the standard workweek, the
Print increases the average weekly work requirement to 40 hours
for work-eligible individuals. Work-eligible individuals are
individuals who are married or are single heads of household
and whose needs are included when determining the amount of
assistance to be provided to the family.
In order for a work-eligible individual's hours of work to
be able to count toward the participation rate calculation, the
individual must participate in at least an average of 24 hours
of direct work activities per week in a month. Direct work
activities include unsubsidized employment, subsidized private
sector employment, subsidized public sector employment, on-the-
job training, supervised work experience, or supervised
community experience. As noted above, participants now
generally are required to work 20 hours in these direct work
activities, so this is an increase of four hours of direct work
per week.
As under current law, teen parents still will be able to
comply with the work requirement by attending school.
The remaining 16 hours of the 40-hour workweek of
activities can be in any constructive activity a State
determines to be appropriate for the family. The Committee
expects such activities to be consistent with the purposes of
TANF. Such activities could include education and training,
structured activities with a family's children that will
promote child well-being, parenting education classes, basic
adult education, classes to learn English as a second language,
substance abuse treatment, and more.
The Head Start program provides comprehensive early
childhood development, educational and other services to low-
income preschool children and their families. The Committee
recognizes that many TANF participants have children enrolled
in the Head Start program. Head Start strongly emphasizes the
involvement of families in the program to ensure that programs
are responsive to the unique needs of the community and to help
improve conditions necessary to prepare children to succeed in
school. As part of the program, parents are strongly encouraged
to participate in Head Start Centers as volunteers. Such
interaction is beneficial for both the parent and the
participants. The Committee encourages States to tailor their
TANF work programs so that parents can participate in their
children's Head Start experience while also engaging in
activities that will lead to family self-sufficiency. The
Committee believes that parents volunteering in Head Start
Centers qualifies as supervised community service and therefore
may count toward the 24 hours of direct work activities. In
addition, a State may count participation in Head Start toward
the 16 hours of other constructive activities, as such
participation would be a structured activity that promotes
child well-being.
In addition, the Committee believes that parents must be
actively involved in their children's education to help their
children succeed. Therefore, the Committee Print requires work-
eligible individuals to visit the schools of their children at
least twice per year, as long as the family continues to
receive TANF assistance. States will be required to verify such
visits through documentation of their choice. The Committee
envisions that such visits should include parent-teacher
conferences. If a school does not have such conferences twice a
school year, other examples of parental involvement in schools
could include volunteering in a child's classroom or on a class
field trip. Such activities could count toward the required 16
hours of weekly constructive activities, as they promote child
well-being. Not only will this provision allow parents to track
their children's academic and social progress, but it also will
give parents an opportunity to meet their children's teachers--
and vice-versa. At a time when Congress and President Bush are
placing such a premium on parental involvement in their
children's education, this provision will help ensure that low-
income children are not left behind in this respect.
The Committee has changed the methodology for calculating
the work rates. Currently, to calculate monthly participation
rates, the number of families receiving assistance who are
meeting the work standard is divided by the number of countable
families receiving assistance. Under the Print, the calculation
of the monthly participation rates changes to the total number
of hours worked during the month by work-eligible individuals
in allowable activities divided by 160 times the number of
families receiving assistance. In both circumstances, child-
only cases are excluded. States also continue to have the
option, on a case-by-case basis, to exclude work-eligible
individuals who have children under one year old and certain
sanctioned families. States also have the option to exclude
from the work requirements families during their first month of
assistance.
Basing the calculation on 160 hours of countable work
activities assumes that the work-eligible individual will
participate in an average of 40 hours of activities for four
weeks per month. However, since most months are longer than
four weeks, the calculation actually equates to an average of
37 hours per week. Therefore, the calculation includes some
flexibility for States to ensure the families' work weeks match
those of individuals not receiving assistance. This flexibility
allows states to accommodate an individual that works in
unsubsidized employment and whose business closes for national
holidays or other occasions. The Committee does not expect
States to find alternative placements for individuals if their
place of work is closed for a day.
The new methodology for calculation of the work
participation rates increases States' flexibility in how they
can meet the participation rate. Under current law, in order to
be counted toward the work rate, families must be participating
at least 30 hours in federally countable activities. Now,
States will receive credit for hours work-eligible individuals
spend in work activities, as long as at least a minimum of 24
hours are spent in direct work activities.
For example, without considering the impact of the caseload
reduction credit, a State could reach a 60 percent
participation rate in a multitude of ways. Assuming a
hypothetical caseload of 100 families, a State could reach a 60
percent participation rate if 60 families have a parent who
works 40 hours per week, including 24 hours of direct work
activities. Or, 80 families could have a work-eligible parent
who works 30 hours per week, including 24 hours of direct work.
A variety of combinations could be developed, as long as the
work-eligible individuals participate in at least 24 hours of
direct work. A State may count more than 40 hours worked by one
family, as long as the additional hours are done by work-
eligible individuals in direct work activities. For instance,
both parents may be working in a married family. Unlike the
flexibility in the new formula for calculation of work rates,
under current law there is only one way to achieve a
hypothetical 60 percent participation rate in a 100 family
caseload (without counting the caseload reduction credit),
which is for 60 families to have a parent who works at least 30
hours per week in allowable activities.