[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

                              ----------                              
                                                                   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

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                        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

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. 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

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                     20. Johnson

                               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.
